The Cost of the Baltimore Bridge Collapse

Contingency plans.

Companies who are members of the Customs-Trade Partnership Against Terrorism (CTPAT), or foreign companies who participate in their respective supply chain security programs (Authorized Economic Operator/AEO, etc.) should have already made contingency plans for a port closure. That is the point behind the development of supply chain security as a field.

After the attacks of 9/11, US Customs was concerned that the next threat to the US would come in the form an explosive device inside a container on a container ship bound to a US port. Imagine a cell phone connected to a string of batteries, connected to a detonator. One phone call and “boom.” No one dies, but the disruption is phenomenal.

The bad guys know they cannot invade the US, but they can still pose a threat. Shutting down a port will incur significant economic hardship to the US for weeks (at least).

If the containership above was one mile—or less—outside of port, the US government’s immediate response would be to shut down the port. And perhaps one port on the left and one port on the right, if that decision was supported by intelligence. But even if they shut down only one port, the damage to the US economy—measured in hundreds of millions of dollars per day—will add up quickly.

As one of its benefits to participants, the CTPAT provides front-of-the-line processing for members in the event of a port disruption—either manmade or natural. The port of Baltimore is shut down to all inbound and outbound traffic. This is precisely the type of disruption anticipated and, ideally, accounted for in supply chain security contingency plans.  

Let’s break down the types of challenges and possible responses.

• Inbound traffic halted on vessels outside of port.
  • Response: diversion to an alternative port. Possible lying at anchor outside an alternative port, waiting for dockage.  
  • Result: delay, and its related costs.

• Inbound traffic, heading to dockage, caught inside the collapsed bridge.
  • Ideally, they have dock space reserved and will continue to their assigned space for unlading if space is empty. Trucks and rail can still move freely and will deliver the imported cargo as usual. The vessel (and crew) are stuck in port until the bridge is removed and the waters are freely navigable.

• Outbound traffic outside of the collapsed bridge
  • Result: likely nothing. Vessel movement continues as planned.  No delays.

• Outbound traffic stuck inside of collapsed bridge.
  • Response one: full stop. Search for space at a dock/wharf/quay to wait for either unlading of cargo to be moved to a new port of export, or simply keep the cargo onboard. In lieu of that, drop anchor in the harbor.
  • Response two: mid-stream unlading of cargo, to be moved to a new port of export. Vessel and crew sit and wait until the waters are freely navigable.
  • Result: delay, diversion, and their related costs.

• Freight on the road headed to the port of Baltimore to be dropped off at the port/container yard.
  • Response: likely continue as usual if there is space for drop-off. Otherwise, either return the cargo to the shipper or divert it to another port for export.
  • Result: delay and diversion, and their related costs.

• Congestion at nearby ports due to increased demand for their capacity.
  • Response: hopefully, no price gouging by those ports on port feel/terminal handling charges
  • Result: delay, and its related costs.

Costs

Inventory holding costs are a theoretical measure of the price for keeping a certain amount of either materials or goods in inventory, expressed as a percentage. 25% is not unusual. This means it may cost $25 per year to keep $100 in inventory of finished goods.

This metric can also be used for measuring the cost of inventory in transit.  If (per Forbes),  around $219M per day of foreign goods move through the port of Baltimore, and if those goods are held in place for an extra two weeks, the cost of that delay would be $1.5M per day. How much is that for 14 days? You do the math.

They say “time is money,” but I always say that money is cheaper. 

Photo Credit: Reuters