The Long Haul: Midwest flooding's supply chain impact
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Strictly speaking in terms of supply chain disruption, you’d probably think the earthquake and subsequent tsunami that rattled Japan in March were more disruptive than the severe flooding that affecting the United States in late spring.
And while a case can certainly be made for the Japan disaster’s breadth of impact, one lawyer that’s worked extensively with the floods that impacted the Midwest thinks the two natural disasters can be differentiated.
FLOODING STRIKES IN MEMPHIS
“While the Japan disaster had a much more severe impact on certain industries like the automotive sector, the Mississippi River flooding has had a more broad impact industry-wise,” Gilbert LLP lawyer Jonathan Cohen said.
The extent of damages from this year’s floods closely compare to the Great Mississippi and Missouri Rivers Flood of 1993, which caused $15 billion in damages and affected 320,000 square miles.
The flooding has caused a major supply chain disruption throughout the middle of the U.S., and while the worst is probably over, Cohen said that he could see supply chain disruptions “potentially” spilling into 2012.
Illinois, Tennessee, Missouri, Arkansas, Mississippi and Louisiana were the hardest hit from the floods, but the natural disaster’s impact is being felt further away than that.
“I keep hearing about concerns as far up as Minnesota,” Cohen said. “This affects companies very broadly, because the Mississippi River serves as a supply chain transportation vehicle for companies that reside on the river. What we’re seeing could have a very serious affect not only in the U.S. but also beyond.”
Cohen admits that farming and agricultural concerns “jump to the top of the list” when discussing the flood’s industries that are suffering the greatest impact, but every major company near the Mississippi River that sources or ships is potentially affected.
“Shipping down the Mississippi River is relatively inexpensive compared to shipping by truck or train,” Cohen said. “Companies from many industries are spending on mitigation costs.”
Many companies have insurance policies against such natural disasters as a sort of risk management, but, as Cohen points out, “Insurance companies have the tendency to not immediately write a check when a claim is made.”
History tells us that this will happen again, so what can companies do to better protect themselves? According to Cohen, the best place to start is by understanding your insurance policy, and having systems in place to track all costs and damages incurred by a natural disaster.
Having a sound plan and all the information in place could make all the difference in being compensated or not compensated by a supply chain disaster in the long haul.
“Contingent business interruption coverage isn’t an area where there has been a lot of litigation,” Cohen said. “The case law is relatively light, so companies should be prepared for that.”
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany