Global commerce depends on the smooth, reliable movement of materials, parts, and finished goods through their respective supply chains. However, as supply chains become more globalized with longer distances and lead times, there are greater possibilities for a shipment to be in transit longer than its expected delivery time. Sources of transport delays range from issues such as capacity constraints, missed transshipments, or lengthy customs processing, to natural disasters or terrorist attacks.
The impact of transport delays can be far reaching, with operational and financial costs on the immediate parties involved and ripple effects extending to unrelated parties. Successful businesses attempt not only to address the causes of transport delays, but also to build buffers in their systems and to develop contingency plans so that they can continue business operations with minimal effects.
Industry statistics reveal that transport delays are a common occurrence, although differences between transportation modes are considerable. Ocean freight is the most prone to delays. Analyzing the schedule reliability of ocean freight liner services, Drewry Shipping Consultants found that 21 percent of vessels arrived one day late, 8 percent arrived two days late, and 14 percent arrived three or more days late. Comparing individual shipping lines, performance ranged from an on-time arrival rate of only 4 percent to over 90 percent for the best performing carriers. Road and air freight typically experience the least delay. Cargo 2000, an air freight industry association, reports that approximately 90 percent of air shipments are “flown as planned.”
Causes Of Transport Delays
Many causes of transport delays are chronic in nature. Examples include congestion, weather changes, missed connections, or security and customs processing. Limited port capacity can cause port congestion, forcing cargo ships to wait days to be unloaded. Likewise, roads and rail lines may be inadequate to meet demand, particularly during peak periods. For major U.S. road corridors, the Federal Highway Administration calculated buffer time indexes of 5–45 percent, indicating how much extra transit time should be allowed because of system variations caused by traffic congestion, weather, incidents, and work zones. Similarly, a transit time analysis for trucks in southern India found average delays of over 30 percent. Poor coordination presents additional problems.
For example, European industry data on combined transport trains showed that the major causes of delays were missing locomotives or staff at handover points along the route. These delays can be compounded by each connection or segment in a shipment’s transport. One day’s delay can result in a container missing its transshipment to another vessel, train, or truck. In the case of ocean liner services, it could be a week or longer until the next scheduled vessel.
Other transport delays are triggered by unusual events or circumstances. Examples include the September 11, 2001, terrorist attacks in the United States, which led to a disruption of air traffic for many days, as well as long delays for trucks at border crossings. Natural disasters such as the 2004 southeast Asian tsunami or Hurricane Katrina in 2005 also disrupted supply chains. Likewise, the 2003 West Coast port strike led to extensive delays that disrupted the holiday shopping season for U.S. retailers and customers, and impacted unrelated parties when cargo ships could not maintain their schedules. In other cases, a confluence of factors can create unexpected delays, as happened in 2008 at the Panama Canal when maintenance work, high demand, and labor slowdowns combined to delay cargo ships as long as 10 days.
Impact And Prevention
Transport delays can have a major impact on a firm’s costs and its ability to maintain high customer service levels. In time-sensitive industries, serious delays may cause products in transit to spoil or depreciate in value by the time they are delivered. The industry trends of Just-in-Time and lean manufacturing aggravate a supply chain’s vulnerability to transport delays, as a late shipment can leave a retailer’s shelves empty or shut down a manufacturing plant if it runs out of a needed part. To guard against delays and other disruptions, firms typically hold extra safety stock inventory as a buffer. However, extra inventory comes with high holding costs. One case study showed potential differences in inventory holding costs of $0.4 million to $3.1 million annually because of unreliability in liner schedules for a company making regular shipments between Brazil and South Africa. Delays may also compel a firm to pay higher costs to expedite a shipment to keep needed items in stock.
At the macro level, transport delays can be reduced by identifying and addressing bottlenecks in transportation infrastructure. This requires a systems approach, as increasing a port’s capacity to relieve congestion will have limited effect if inland carriers also lack sufficient capacity. Customs and security screening procedures can be streamlined to facilitate timely processing. By providing early notice of a shipment’s contents to relevant government agencies, advance manifest initiatives allow clearance processes to begin even before arrival. Free trade agreements and common markets also minimize procedural delays. The European Union, for example, has eliminated almost all border clearance requirements within its 27 member countries.
At the firm level, shippers and carriers can analyze their processes to identify and address the causes of delays, as well as develop contingency plans for dealing with late shipments. When choosing carriers, firms should compare carriers’ on-time reliability and recognize that the savings in transport costs for a less-reliable carrier may be negated by higher costs from stockouts, expediting, or increased inventory safety stock.
- Peter Brucker, Sigrid Knust, T. C. Edwin Cheng, and Natalia V. Shakhlevich, “Complexity Results for Flow-Shop and Open-Shop Scheduling Problems With Transportation Delays,” Annals of Operations Research (v.129/1–4, 2004);
- Richard T. Hise, “The Implications of Time-Based Competition on International Logistics Strategies,” Business Horizons (September–October, 1995);
- Scott Johnson and Joanne Sedor, “Reliability: Critical to Freight Transportation,” Public Roads (v.68/3, 2004);
- Bert Vernimmen et al., “Schedule Unreliability in Liner Shipping: Origins and Consequences for the Hinterland Supply Chain,” Maritime Economics & Logistics (v.9, 2007).
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