Chain of Thought

The Attack of the Gypsy Moths—and other Supply Chain Frights

1950s science fiction movies had an effect on me, as evidenced by the above headline. But it’s not a far stretch of the truth to say that moths could delay shipments this year. Inchcape Shipping Services announced a little while back that U.S. and Canadian authorities intercepted a large number of ships infested with Asian gypsy moth (AGM) egg masses arriving in North America last year. That inspired the U.S. Department of Agriculture and Canadian Food Inspection Agency to issue regulations for vessels arriving at North American ports this summer from Far East Russia, Japan, Korea and Northern China.

Vessels arriving without the required AGM documentation—or if they’re found to be infested—could cause significant delays in cargo loading or discharging. Although it is the responsibility of the shipping lines to meet all requirements for entry to the U.S. and Canada, it’s good for you to be mindful of yet another potential bug in your supply chain’s clockwork. 

Of course even moth-free ships could have a hard time entering some U.S. ports thanks to another invader. Muck.

A recent Associated Press story reported that water levels on the Great Lakes are so low that shippers are being forced to leave as much as 15 percent of their cargo behind. The ships carrying their freight need enough water volume to navigate freely, and if ports and waterways are not sufficiently dredged this could end up being a very costly supply chain problem for shippers—particularly in Great Lakes ports.

It’s a particularly scary problem because it involves politics. There’s a continual battle for funding. Michigan Gov. Rick Snyder won a victory by signing legislation providing $21 million in emergency funds to dredge state harbors that are in danger of becoming impassable. The legislation is good for 58 dredging projects.

In Georgia, Gov. Nathan Deal won an extra $50 million in waterway deepening funds. So far Georgia has allocated $231.1 million toward the state’s portion of the Savannah Harbor Expansion Project (SHEP), which is deepening the Savannah Harbor from 42 to 47 feet. This will help accommodate an increase in the number of super-sized container vessels that will be going through the Panama Canal after its 2015 expansion completion.

A U.S. Army Corps of Engineers study showed that SHEP will reduce shipping costs for private companies by at least $213 million a year.  What’s scary about that? Projects like these are subject to approval by federal agencies, including the Environmental Protection Agency, the Fish and Wildlife Service and the National Marine Fisheries Service. They approved this one, but waterway maintenance is more a slog than a sail.

The federal tax on freight shipped at U.S. ports raises about $1.5 billion a year for dredging and harbor maintenance. The problem is, politicians often divert those funds for other purposes. That leaves it up to the U.S. Army Corps of Engineers (USACE) to prioritize its dredging project list while a variety of interests struggle to get their attention, including commercial and recreational bodies.

According to USACE, for every dollar spent on harbor deepening, the nation gets $5.50 in benefits.  Will the powers that be start using all that money collected from the Harbor Maintenance Tax on dredging?  Maybe. The Water Resources Development Act of 2013 is working its way through Congress. But with Washington being as divided as a jigsaw puzzle on everything, especially spending in this season of the Sequester, shippers shouldn’t be waiting for politicians to save them from the moths and the muck. A regularly revisited supply chain strategy is your best defense against fear sourced from uncertainty.

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