This week’s supply chain risk news
They said to impose tariffs first and ask legal questions later. Well, now it’s later…
Were all of those tariffs U.S. President Donald Trump set earlier this year exactly legal? That’s the question lawyers debated in front of the country’s Supreme Court this week.
The U.S. Constitution gives Congress – not the president – the power to “regulate Commerce with foreign Nations,” and to “lay and collect Taxes, Duties, Imposts and Excises,” funky capitalization choices notwithstanding.
A lawyer for the Trump administration told the Court an exception exists in a 48-year-old law meant to help address emergencies. But so far, lower courts have found Trump’s use of that law to impose sweeping tariffs overstepped his authority. This week a New York Times analysis found nearly half the goods entering the U.S. are now subject to tariffs.
While not all of them hinge on the case, the Court could strike many of them down. This could potentially lead to refunds for businesses in the order of hundreds of billions of dollars. And maybe lower prices for consumers too. However, it’s not clear how soon the Court might hand down a ruling.
A tragedy in Kentucky
In a typical day, the United Parcel Service facility in Louisville, Kentucky processes some 2 million packages. Located at Muhammad Ali International Airport and known as Worldport, it’s the multinational company’s largest package delivery hub.
Tuesday, however, was not typical.
Just after 5 p.m. local time, the left wing of a UPS cargo plane caught fire shortly after takeoff. An engine reportedly then fell off before the plane crashed, killing at least 11 people. Dozens of federal agents are now investigating what happened. The facility, where 300 flights normally take off and land each day, cancelled all departures. Package sorting was also halted.
While UPS says it has contingency plans in place, the full extent of the supply chain ramifications is unknown. Experts anticipate delays and disruptions. UPS could potentially shift some flights to regional hubs, which are “going to take on a greater burden until that critical operation in Louisville gets back to the full capacity,” one professor told the Associated Press.
In the meantime, our thoughts are with those affected by the crash and their families.
It’s not the type of record you’d brag about
This week, the U.S. government shutdown became the longest in the country’s history, surpassing the 35-day record set during President Trump’s first term.
As we’ve noted in our Risk Center, the shutdown effectively means some 13 thousand air traffic controllers and 50 thousand transportation security agents don’t know when their next paycheck is coming, but they still have to go to work. Unsurprisingly, some have opted to call in sick. And perhaps, for Halloween last week, to don masks and take their kids trick-or-treating.
In New York, roughly 80 percent of the Air Route Traffic Control Centers workforce was reportedly absent on Halloween. Between the staff shortages and high winds, John F. Kennedy Airport grounded flights.
Recent days have also seen staffing issues, delays, and intermittent headaches at numerous other airports. On Wednesday, the U.S. transportation secretary said federal officials could soon cut air traffic by 10 percent in some 40 “high volume markets” as a result. Details like exactly which airports will be affected and the impact on international flights were murky. But we’ll be keeping an eye on it.
Calmer seas ahead?
The headline item from last month’s trade talks between the U.S. and China was a one-year pause on additional U.S. tariffs and Chinese rare earth export controls. But the agreement also suspends fees on foreign vessels entering ports, which is big news for ocean carriers. One Chinese shipping firm reportedly ran up $42 million in such fees in a single week.
Still, companies are wary of the tariffs that remain. Some stacked up plenty of inventory before costs went up. That means container spot rates and volumes across the Pacific may well decline into the first half of next year.
And although long waits are still a slight issue in some European ports, as we detail in our Risk Center, they’ve somewhat stabilized. That’s as workers at the Port of Antwerp in Belgium have suspended their strike until November 30 while negotiations proceed.
Elevated wait times are also an issue Asia and Oceania, in some cases due to the aftermath of a typhoon. In North America, higher rail dwell times are also delaying cargo processing, particularly in places like Vancouver and Houston.
Return on investment: Three common pitfalls in supply chain resilience
It’s one thing to understand the case for supply chain risk management, but quite another to translate those efforts into measurable returns. So what are some missteps to avoid?
One common misconception among companies that lack visibility into their supplier network is the idea that risk management only enters play once their supply chain is mature. Not so. Thinking in terms of SCRM early on can inform how you develop your supply chain.
Be careful also not to mistake redundancy for resilience. Amassing spare components in a warehouse is often less useful than agility, or the ability to move faster than the competition. Doing so lets you more readily recover from disruptions and potentially gain market share.
Third, don’t think your work is done once you’ve identified and assessed the possible disruptions your company faces. Real value hinges on taking concrete steps to mitigate and manage those risks.
The payoffs here can include not just avoiding production stoppages and lost revenue, but lower insurance premiums. Indeed, dedicated SCRM efforts can even strengthen your sales conversations. We discuss these benefits—and how to realize them—more on our blog.
Other stories we’re reading and monitoring
Recent drone strikes have damaged industrial sites and key infrastructure in Russia and Ukraine as negotiations stall. We have the details in our Risk Center.
Canadian authorities have stepped up efforts to get forced labor out of supply chains—and say companies doing business there need to check their compliance efforts accordingly.
Plans to modernize the Panama Canal include two new container terminals, as well as infrastructure to move cargo across the isthmus of Panama even when the rainfall doesn’t cooperate. The total price tag? A mere $8.5 billion.
