Cyber threats are not been the only problem for supply chains this past year. The physical problems of moving large quantities of goods in a reasonable time period are turning into an equally insurmountable problem for all supply chain members. All consumers will be paying higher prices for nearly every product. US rail yards, ports, and warehouses are choked with freight, with too few people to move it quickly, causing delays and rising prices for companies and consumers.
California ports in Long Beach, Los Angeles, and Oakland reported delays earlier this year, and this month the Union Pacific (UP) and BNSF railroads made it clear that the problem had reached inland. UP halted freight shipments and BNSF began metering them as the railroads moved to purge their metro Chicago rail yards of containers, which has been rendered inaccessible.
Manufacturers are adding shipping surcharges and complaining of lost business, with industrial conglomerate Honeywell International blaming supply chain difficulties for a revenue hit of up to $200m. Retailers are scrambling to secure enough products to sell for the holiday season, with big chains ordering larger amounts of inventory than normal, hoping at least some of it arrives on time.
“The global supply chain was not built for this,” said the chief growth officer at Seko Logistics in suburban Chicago. “They were built for seasonal surges of demand annually. When you have 12 peak seasons in every mode, things begin to break down.” I don’t think there’s a port in the country that hasn’t been touched by congestion.[1]
A transportation analyst with FTR Intelligence CH Robinson, a Minnesota-based logistics company, said the over-ordering has exacerbated shipping disruptions. Goods coming from China are delayed by 15 to 20 days after their arrival at US ports, and up to a quarter of intermodal shipping containers are unavailable because some are being used as temporary storage.
Ports on both US coasts are straining. Long Beach moved more than 907,000 containers in May 2021, the highest number since 1995. Nine out of the port’s 10 busiest months in the past quarter-century have all come in the past 12 months. Across the country, the port at Savannah, Georgia moved 5.3m containers for the 12 months ending 30 June 2021, a record for the port and 20 percent more than the previous fiscal year. “I don’t think there’s a port in the country that hasn’t been touched by congestion,” said the transportation analyst with FTR.
At the railroads, aggressive furloughing has left companies without the necessary staff to handle the surge in demand. Rates have risen commensurately, with shipping prices up to 15 percent higher than they were a year ago. The forecasted increase will slow in the second half of the year and in 2022, “it’s not going to be, by any stretch of the imagination, a shipper’s market.” Shoppers already are feeling the pinch. With costs on the rise, companies that make everything from tissues to salad dressing have been raising prices to help make up the difference.
US consumer prices in June 2021 jumped 5.4 percent from a year ago, a fresh 13-year high after rising 5 percent in May 2021, according to the US Bureau of Labor Statistics. Procter & Gamble, the company behind Tide detergent and Gillette razors, plans to raise prices on some of its products after warning of a $1.9bn after-tax hit in the year ahead from higher commodity and freight costs. Colgate-Palmolive is also charging more. “Logistic networks are taxed, whether it’s the trucking and warehousing here in the US or ocean freight coming from Asia to the rest of the world,” its chief executive said last week.
General Mills, known for Cheerios cereal and Haagen-Dazs ice cream, has said it is boosting prices across most of its grocery categories and global markets, citing in part the rising cost of shipping. Price increases have also been implemented by Conagra, the company behind Chef Boyardee pasta and Orville Redenbacher popcorn, toymaker Hasbro, and motorcycle manufacturer Harley-Davidson, which added a 2 percent surcharge to cover freight costs.
Kleenex parent Kimberly-Clark said it “moved decisively” to raise prices in June 2021 and the early part of the third quarter to offset inflationary pressure, having previously announced that it would increase prices on a range of its consumer goods like baby care products and Scott toilet paper. In some cases, the company raised prices by double digits. The chief executive at Kimberly-Clark said it is facing “significantly higher” costs, which the company attributed to higher prices for materials such as pulp and distribution costs. “Since we spoke in April 2021, commodity inflation has spiked higher and our supply chain has been challenged,” the company told analysts on an earnings call.
While strong demand has given companies the leeway to raise prices, it remains to be seen how long people will be willing to pay up. Other industries have observed a reduction in spending, which could leave customers with some extra money in their wallets for consumable goods. However, “consumers are facing broader inflation in this environment across all categories beyond consumer packaged goods,” a trend that “makes it a little more challenging.” Conagra’s chief executive said the “ubiquity” of price increases in grocery stores and restaurants could soften the blow to demand.
For some shippers, the math is simple. A shipping container fits 79 electric fireplaces. A year ago, it cost $4,500 to ship. Now if his company can even secure one, $20,000 is a good deal. That is nearly $200 more per fireplace. “So you mark up to your customer, and it becomes a trickle-down effect,” they said. “It really is a problem for everybody.”
At Red Sky Alliance, we can help cyber threat teams with services beginning with cyber threat notification services, and analysis. We can help protect supply chain companies to avoid any network disruptions, which will only compound the already escalating shipping prices.
Red Sky Alliance is a Cyber Threat Analysis and Intelligence Service organization. For questions, comments or assistance, please contact the lab directly at 1-844-492-7225, or feedback@wapacklabs.com
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[1] https://www.ft.com/content/03a693a7-0445-41dd-a7f3-c1b6f162e5ef
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