Thu, April 25, 2024

Baltimore Port Closure: Impact on the CSRA

In both my undergraduate and graduate Operations and Supply Chain Management courses, I ask my students to post links on our course website that relate directly to the topic we will discussing in class that day. In my undergraduate class, this assignment is entitled, “Real-Time Examples,” while in my graduate class, the assignment is entitled, “Ripped from the Headlines,” a nod to the long-running television show, “Law & Order” (a personal favorite!), and highlighting the currency and relevancy of the requested examples. While there is no good time for a tragic accident such as the container ship crashing into the Francis Scott Key Bridge in Baltimore that occurred on Tuesday, March 26, it was the day before we were discussing supply chain management in-depth in my graduate class and eight days before such a discussion was scheduled in my undergraduate class. This was indeed a real-time example of a supply chain disruption that became national and international news.

Our Augusta University public relations office interviewed me shortly after the incident and its press release was picked up by a local television station and two national trade publications who also wished to interview me about its impact on supply chains. Specifically, WJBF interviewed me on the local impact (see https://www.wjbf.com/news/port-of-baltimore-closure-and-how-it-could-affect-the-csra/ for article and accompanying video segment) which I would like to address and expand upon in this column for both businesses and consumers.

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We can start first with what is happening in Baltimore and then look at the ripple effect in our supply chains that will impact CSRA businesses and consumers. Once the container ship crashed into the bridge, the primary disruption was to the Port of Baltimore, the tenth busiest port in the United States and the fifth busiest on the East Coast. Since the debris from the fallen bridge is blocking the primary channel in and out of the port, the port will remain closed until the debris can be removed. Heavy-duty cranes are on location now, but optimistic estimates are that the port will remain closed until at least late May. That means, the ships currently in the port cannot leave, and more importantly, no additional ships can access the port. Therefore, shipments that are or were en route and those scheduled well into May will have to be diverted to other East Coast ports.

These delays will be particularly impactful to the auto industry as the Port of Baltimore has the largest inbound volume of automobiles and light trucks of any port on the East Coast. Unfortunately, for Baltimore and the surrounding area, there will be a significant economic impact. The Port of Baltimore drives so much of the local economy between dock workers, trucking, and the service industries which support the Port and its workers that this will hurt the area significantly for at least the next couple of months.

However, while the impact of the closure of the Port of Baltimore will not be as strong or as immediate here in the CSRA, we will still feel it, both as businesses and consumers. The impact will be felt in terms of the availability and timeliness of deliveries from suppliers to businesses, the availability and timeliness of certain brands and items for consumers, and potentially (likely), higher costs to be experienced by both businesses and suppliers.

The primary reasons for these issues are the diversion of shipments that are currently en route and the rerouting of future shipments to other ports. For consumers, particularly those who are looking for European automobiles, may find some makes and models unavailable. While BMW and Mercedes produce some of their models in this region, their other models and most other European auto brands are produced in Europe and typically come through Baltimore. Ports that can handle autos are somewhat limited on the East Coast, with the Port of Brunswick (Georgia) being the most capable, but may be constrained by the number of vehicles that can transport these inbound autos. While this scarcity may not be felt immediately due to current inventories, some brands and models may be unavailable in a few months.

However, beyond automobiles, there are still significant issues for businesses and consumers. Items that were originally planned to arrive in Baltimore will now take longer to reach their destinations as ships will have to go to other ports (e.g., New York/New Jersey, Virginia, Charleston, Savannah) and then transportation will have to be arranged from those alternative ports to their original destinations. Most, if not all items that were originally being shipped to Baltimore were sent there because it reduced both the time and the cost to get the supplies and/or products to market. Until the Port of Baltimore reopens, a sub-optimal transportation route will have to be used, which will increase the capacity utilization at other ports and incur additional costs to transport the items.

Baltimore is an attractive location due to it being the furthest inland of the East Coast ports and having excellent access to railroads and regional trucking. While this issue will not be as burdensome as the pandemic, it will still cause prices to rise as logistics costs will increase due to additional transportation and handling. These higher costs will likely be passed on to retailers by manufacturers and will ultimately be at least partially passed on to consumers. In this time of “sticky” inflation, the last thing we needed was another reason for higher prices. The good news for us in the CSRA is that the effect on us will be less than those areas closer to Baltimore and there appears to be significant urgency both in Maryland and the federal government to open the port as soon as possible

While my classes will likely benefit from the ability to discuss these “real-time” supply chain issues, most businesses and consumers will not see a benefit from this event. Hopefully, businesses can learn to mitigate such issues by having multiple suppliers and varied transportation routes. Unfortunately, it is difficult to anticipate these difficult situations.

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