Earl Boyanton recently retired from the post of assistant deputy under secretary of defense for transportation policy, which he held from 2001 to 2008. In this position, he was the DOD's senior official focused on transportation in the Office of the Secretary of Defense, spanning all DOD passenger and cargo transportation. He had oversight responsibility for the biggest transportation operation in the world.
A 17,000-ton container ship loaded with food and relief supplies might seem an unlikely setting for high drama on the open seas. But that's precisely what the cargo ship Maersk Alabama became last April when four heavily armed Somali pirates boarded the vessel using ropes and grappling hooks. The story that unfolded over the next five days is well known: Within hours of the attack, the crew took back control of the vessel, but the pirates escaped, taking the ship's captain hostage. For four tense days, the captain and his captors bobbed about the Indian Ocean in an orange lifeboat, until U.S. Navy SEAL marksmen ended the standoff and rescued the captain.
Seven months later, the incident may have faded from the headlines, but pirate attacks along Somalia's coast haven't abated. In fact, they appear to have escalated. According to the latest quarterly report from the International Maritime Bureau, 147 incidents were reported off the Somali coast (including the busy Gulf of Aden) in the first nine months of this year, compared with 63 in the same period the previous year. And the threat is unlikely to subside anytime soon.
Piracy, and the threat of piracy, has serious implications for maritime commerce—and for a maritime nation like the United States that depends on oceangoing vessels to deliver everything from oil and petroleum to low-cost Asian-made goods. And it's not just about the potential to snarl global supply chains and drive up costs. What's at stake here is nothing less than freedom of the seas.
Millions in ransom
Although piracy isn't limited to Africa's East Coast, the escalating activity around the Gulf of Aden is a particular concern because it's part of one of the world's most vital sea lanes—the channel connecting Asia to Europe and the United States via the Suez Canal. If a ship transits the Suez Canal, it must transit the Gulf of Aden. In total, 20,000 vessels sail through the Gulf of Aden each year, according to Reuters. That includes approximately 12 percent of the world's petroleum traffic as well as large quantities of bulk and containerized dry cargo, the International Maritime Organization told the U.N. Security Council in a November 2008 appeal for help combating Somali pirates.
Last year, pirates attacked well over 100 vessels in the region, capturing 42 of them, according to press reports. Ransoms paid out to obtain the release of crews, passengers, vessels, and cargo totaled $30 million. In response, marine insurance brokers have added $20,000 per voyage through the Gulf of Aden, according to underwriter Hiscox. To no one's surprise, ocean carriers are passing those costs right through to shippers. As of the middle of 2009, Maersk Line had raised charges for customers whose cargo is handled by East African ports by $50 or $100 per container. For cargo on vessels that merely travel through the Gulf of Aden to another destination, Maersk added "war risk charges" of $25 for each 20-foot container and $50 for each 40-foot container.
Some shipping companies have decided to avoid the Gulf of Aden altogether, rerouting their vessels around the Cape of Good Hope on Africa's southern tip rather than sail through the Suez Canal. Even before the Alabama incident, Maersk had rerouted certain vulnerable ships, mostly petroleum tankers, away from the area.
That traffic diversion is reflected in the Suez Canal's activity reports. Traffic moving through the Suez Canal in January 2009 (1,313 transits) was down 22 percent from January 2008 levels (1,690 transits). Tonnage represented by the January 2009 transits was the lowest in 30 months. Although the maritime journal Lloyd's List notes that worldwide economic conditions contributed to the decline, the rerouting of ships is widely considered to be a significant factor in the drop-off.
But rerouting comes with costs of its own. Sailing around the southern tip of Africa adds 5,000 miles and three weeks or more to a voyage—and serious dollars to the trip's cost. Longer transit times have implications for fuel consumption and inventory as well.
Military might
The pirate attacks haven't gone unnoticed by world governments. In response to the rising piracy threat in Somalia's waters, a consortium of naval powers, including India, China, Great Britain, Japan, France, Sweden, and the United States, have stepped up patrols in the Gulf of Aden and the East African Coast.
But surveillance is difficult and patrols are widely spaced, even with increased numbers of combatant vessels augmented by airborne and (presumably) space-based assets. According to the United Kingdom's Ministry of Defence, the area to be patrolled and protected measures over 1 million square miles—an area four times the size of Texas.
As of late spring 2009, the multinational consortium's gunboat flotilla numbered only about 30 ships. Think about it: On any given day, 30 patrol vessels are trying to find five guys in a Zodiac with some grappling hooks, automatic rifles, and maybe rocket-propelled grenades in a vast expanse of ocean. Even when the warships concentrate on the principal sea lanes, it's not always possible for them to respond quickly enough to thwart a pirate attack. Spread 30 patrol cars across an area four times the size of Texas, and you don't have much of a deterrent …and a patrol car is a lot faster than a warship.
Furthermore, even though more than 16 nations have joined in the naval counter-piracy operation, there is one important player missing: Somalia. Somalia, in diplomats' language, is a "failed state"—one without a functioning government—which means there simply isn't a Somali national authority to appeal to. Piracy, at its core, is a land-based problem because the pirates' bases are located on shore. As long as there's no government to crack down on their activities, the pirates will have a safe haven in Somalia, and they will continue to operate with impunity.
With little hope of a political solution anytime soon, commercial shipping lines are taking added steps to protect their vessels, like installing barbed wire around the deck's edges and, in some cases, deploying armed guards. In addition, the multinational naval consortium has established a special sea lane for commercial ships, which allows it to keep a closer protective watch over vessels transiting the area. These measures appear to be having some effect. The Associated Press reports that they've cut down on the number of successful Somali pirate attacks. In 2008, 42 successful pirate attacks were reported; as of August 2009, the total was only 28.
It's all in a day's planning
As sensational as it may be, piracy, when looked at purely from a supply chain perspective, is but another form of disruption. And disruption is something logistics professionals deal with—and plan for—on a routine basis, identifying threats, quantifying and ranking them, and then coming up with ways to mitigate the damage.
In this regard, piracy is no different from any other risk—say, a hurricane, port congestion, or a business failure by a supplier. It's a threat that can be rationally evaluated and addressed as part of the contingency planning process (risk mitigation measures might include upping insurance coverage, identifying alternative suppliers, and creating contingency freight routing plans with associated decision triggers).
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.