Potential Disruptions are Looming for U.S. Imports
While there is usual uncertainty with freight rates, what happens when weather meets contracts expiring? You might have to plan from another point of view to survive possible supply chain disruptions in 2024. You might say, “There are always disruptions.” However, these disruptions call for a different kind of contingency plan.
Regarding contingency planning, you might wonder, “What will the 2024 freight rates be? Will reliability and transit times improve? Will there be capacity shortages in location X on rail/road/port?” Yet, there are two significant reasons U.S. shippers should shift their perspective when making a plan:
- Weather in the Panama Canal.
- The International Longshoremen’s Association (ILA) contract is expiring.
Below are some reasons U.S. Shippers should look at their contingency plans for 2024:
The Panama Canal
An unprecedented drought fell upon Panama in June, and El Nino could send 2023 or 2024 into the warmest year on record. What does this mean for the supply chain? According to the Panama Canal Authority, leading authorities may impose surcharges and weight limits on ships traversing the global trade route. This adds cost and time to your 2024 shipping manifest. Ultimately, this also means there could be a limit on the number of transits, further escalating the concern.
The International Longshoremen’s Association (ILA) Contract
Another notable concern when developing a contingency plan for 2024 involves the ILA negotiations. While they are fast-tracking labor talks, the contract expires on September 30, 2024. The Journal of Commerce says, “Technically, the current contract includes a no-strike clause. But realistically, a standoff could lead to many other issues, including a work slowdown that effectively has the same effect as a strike. A potential supply chain disruption along the East Coast in September 2024 would hit at the height of the peak season for cargo loaded in July in Asia.”
Five Ways To Build Up Your Contingency Plan
- Stakeholders should brainstorm a list of potential company risks and conduct risk analysis. You only need to create a risk management plan for threats your decision-makers assess as highly likely and potentially impacting normal business processes.
- Business impact analysis (BIA) is critical to understanding how the different business functions of an enterprise will respond to unexpected events. If the BIA indicates a high percentage of revenue is at risk, the company may want to prioritize a contingency plan for this business risk, according to IMB analysts.
- Next, you’ll want to list why your plan would need to go into action. For instance, a tropical storm is approaching with the potential to turn into a CAT4 before hitting. When do you implement your plan before it hits? 100 miles out? 200 miles? Ensure your team knows precisely when they need to implement the plan.
- Now that the threat you have prepared for has arrived, your protocols and instructions should be clear, concise, and easy to follow. Stakeholders should also be in close contact to communicate the plan’s efficiency with the team.
- Contingency planning is successful project management. All duties should be delegated well before you have to implement any plan. Test and reassess your plans regularly. One tool to use is RACI (responsible, accountable, consulted, and informed.) This tool is used in crisis management to help teams and individuals delegate responsibility and react to crises in real time.
Shippers concerned by the scenarios above should contemplate shifting part of their supply chain back, well before the peak season, from the East Coast to the West Coast, where possible. Need a solid distributor? All PCX processes are continuously re-evaluated and upgraded to reflect changing customer expectations, ensuring only the highest quality of products and services are delivered to them. Contact us today for a quote.