Top 10 Logistics & Transportation Stories of 2008

2008 was a year extremes in the supply chain with commodities prices, foreign exchange rates and oil prices reaching record highs and lows with an unusually compressed period of time. The logistics industry has been significantly impacted by many of the macroeconomic forces, but it also has struggled with a number of unusual challenges throughout the year.  I thought I would recount the ten I found most interesting – most of what were blogged about by myself or one of my GXS colleagues earlier in the year.

1. Snowstorms in China – It was a year of extremes for China.  Beijing captured the center of the world’s attention for the two week period during the Summer Olympics. However, a number of unforeseen logistical challenges made the headlines as well.  In late January, heavy snowstorms in Northern and Central China led to power outages across the country.  Shortages of coal were cited as the root cause for the brown outs that affected half of the 31 provinces.  Disruptions to ground and air transportation were after effects of the inclement weather and energy shortages.

2. Heathrow Terminal 5 – In late March on the opening day of the new terminal, the baggage handling system at Heathrow’s new Terminal 5 failed leaving thousands of passengers without luggage and resulting in the cancellation of dozens of flights.  The root cause of the meltdown at Heathrow was that the baggage handlers IDs were not recognized by computers.   Eventually the system became overloaded and checking of baggage was suspended.  Passengers along with cargo freight were delayed for several days until the baggage systems could be corrected.

3. American Airlines MD-80s – Air freight was impacted again in early April when American Airlines cancelled approximately half of its scheduled flights due to concerns over a potential wiring issue in MD-80 passenger jets.  American is also one of the largest air freight carriers in the world providing a range of transportation services to shippers.  Thousands of businesses were impacted by the cancelled American flights as cargo freight had to be re-routed onto different planes.

4. Oil at $150/barrel – It is hard to believe that just a few months ago the world was struggling with record oil prices, which peaked at over $150 per barrel.  Some predicted that the price of oil would continue to rise indefinitely, potentially reaching $500 per barrel.  As transportation costs climbed everything became more expensive, which forced many supply chain planners to seek methods to reduce costs.  Those with Transportation Management Systems fully deployed had an advantage of those who did not.   TMS enables transportation managers to reduce expenses by enabling assessments of total landed costs per shipment; identifying opportunities for load consolidation; and measuring carrier performance.  Software-as-a-Service (SaaS) models gained in popularity as faster method for achieving ROI from TMS applications

5. Potential US Port Strike – Negotiations between the Pacific Maritime Association, which operates most of the West Coast Ports in the US, and the International Longshoreman and Warehouse Union, which represents the dockworkers, failed to meet their contract renewal deadline of July 1st.  Mutually agreeable terms were reached shortly thereafter.  However, for several weeks there loomed the threat of a major disruption to goods flowing into US ports from Asia, particularly China.  Major US importers began "port diversification" strategies to minimize the impact of a West Coast shutdown.

6. China Olympic Shutdown – To reduce pollution in the greater Beijing area during the Olympic Games, Chinese officials have placed temporary restrictions on the operating hours of nearby power plants and manufacturing facilities.  Transportation capacity was limited in the city of Beijing to minimize congestion and smog.  Exporters purchasing from Beijing and surrounding provinces were concerned that the shutdowns may result in supply chain disruptions.

7. 10+2 – is a new regulation developed by the US Customs and Border Patrol.  It is one of many Homeland Security strategies designed to secure US ports through better levels of supply chain security.  The 10 and the 2 refer to the numer of data elements that the importer and transportation carriers must submit for each cargo container shipped to the US.

8. Atlanta Gas Shortage – In October, major Southeastern US cities such as Atlanta, Charlotte and Nashville experienced a week-long gasoline shortage.  The supply challenges were an after effect of the hurricanes (Ike and Gustav) which caused oil refineries along the coast of the Gulf of Mexico to be shut down or operate at reduced capacity.  Retailers in the food service, convenience and apparel sectors suffered from reduced sales as consumers avoided store visits in an effort to conserve fuel.  The situation could have been much worse if a diesel shortage occurred impacting the flow of critical supplies into the region.

9. Pirates and the Supply Chain – There have been approximately 100 incidents of pirate attacks off the Somalian coast in 2008.  If the frequency of pirate attacks continues at its current rate of growth it could pose a formidable challenge to international trade in 2009. The East African coast is host to a key international trade lane between Asia and Europe as it is the entry path to the Suez Canal.  The ramifications of a slowdown in commercial transportation through the Suez are significant both to European and American interests.

10. Oil at $40/barrel – As we close the year, oil prices have declined to relatively low rates of less than $40 per barrel.  I purchased gasoline the other day in Virginia for $1.50 per gallon.  Suddenly, the cost of transportation in the supply chain has become cheap again.  Unfortunately, the widespread financial crisis has curbed consumer and commercial demand for products in nearly every sector.