Supply Chain News Roundup: Assessing the Impact of the California Wildfires
As businesses and consumers in California and beyond were evaluating the supply chain ramifications of the devastating wildfires in the Los Angeles area, authorities warned on Monday that another round of strong winds will heighten fire risk.
The six major wildfires — including Palisades, Eaton, Kenneth and Hurst — have swept through over 40,000 acres, killed at least 24 people, destroyed more than 12,000 homes and other structures and could account for as much as US$275 billion in damages and economic loss, according to an analysis by AccuWeather.
Extreme fire danger will continue thru Wed. PDS Red Flag Warnings are for the extreme of the extreme fire weather scenarios. In other words, this setup is about as bad as it gets. Stay aware of your surroundings. Be prepared to evacuate. Avoid anything that can spark a fire.#cawx pic.twitter.com/JedMNHvygB
— NWS Los Angeles (@NWSLosAngeles) January 13, 2025
While there have been no significant supply disruptions as of Monday, authorities and organizations continue to monitor the situation. Two fuel lines from Southern California to Las Vegas were shut down in the immediate aftermath, but service has since been restored. Other West Coast ports have prepared for extra traffic if inbound transportation from the Ports of Los Angeles and Long Beach becomes restricted.
Meanwhile, some stores in the Phoenix area have limited purchases of such items as toilet paper, KSAZ TV reported. Eugene Schneller, Ph.D., professor of supply chain management at the W. P. Carey School of Business at Arizona State University (ASU) in Tempe, Arizona, told the station that the restrictions are likely due not to a shortage of supplies, but a reallocation to help meet needs in California.
“If you can think of 10,000 homes that are suddenly gone, and those folks have to go shopping in different places, or they need to go to different food stores,” said Schneller, who is also co-interim Executive Director of CAPS Research, the Tempe, Arizona-based organization in strategic partnership with Institute for Supply Management® (ISM®) and ASU. “I think a lot of the suppliers are going to have to rethink where they send the materials, the food and other kinds of things that they used to have.”
Schneller told KSAZ that while he does not expect long-term supply chain impacts, he added, “I think maybe the lesson for all of us is, to be prepared that this can happen, whether it's this kind of a natural disaster or something else, and we need to prepare for it.”
Dockworkers Avoid Strike, but Labor Still Flexing
Last week, unionized dockworkers at ports on the U.S. East and Gulf coasts reached a tentative six-year contract agreement with port employers and shippers, preventing a potential strike that could have harmed the American economy.
While in most cases, potential strikes have been averted or quickly resolved in the U.S. and Canada in recent years, unions figure to keep flexing the extra muscle they’ve built since the start of the coronavirus pandemic.
“I don't believe a labor action would go longer than a week or two before the government has to take action,” says Erik Mattson, a Chicago-based partner at AlixPartners, a global management consulting firm. “We saw that (with the railway strike) in Canada. I believe unions are utilizing (potential strikes) as an effective negotiating tactic, as long as they have the public on their side.”
The agreement between the International Longshoremen’s Association and port employers, reached a week before the Wednesday deadline, depended on resolving concerns about automation, particularly semi-automated cranes replacing human workers. Economists noted that a strike would have shut down ports and could have started to damage the economy if it lasted more than a week.
“If the strike lasts longer than a week, we will see upstream impacts at exporting ports in Asia and Europe that need to hold containers — this will drive up shipping costs further in a similar way that we saw during pandemic-era port congestion.” Michael Watt, Miami-based regional managing director of integrity due diligence for Latin America at Kroll, told Inside Supply Management® in October.
Other News and Notes
- China’s exports increased 5.9 percent last year, including $525 billion worth of shipments to the U.S. that helped swell the country’s trade surplus to almost $1 trillion, according to Beijing’s General Administration of Customs. In December, exports to the U.S. were up 16 percent compared to the same month in 2023, a sign that American buyers were getting a jump on likely tariff increases from the incoming Trump administration.
- The White House announced new restrictions on the sale of advanced artificial intelligence (AI) chips by Nvidia Corp. and its peers, but implementation and enforcement will be up to the Trump administration, and industry opposition is fierce. The rules, effective in one year, cap the computing power sold to most countries, but businesses can bypass these limits by adhering to security and human rights standards.
- Navigating supply chain risk amid an ever-changing global landscape will be the focus of a CAPS Research webinar at noon ET on January 29. The speakers are ASU faculty members Adegoke Oke, Ph.D., professor of supply chain management, and Gregory Collins, MBA, assistant teaching professor of supply chain management.
(Photo credit: Getty Images/Frozen Shutter)