Guest Post: Shipping Risks in the Supply Chain

Prof. Howard Weiss shares his insights with our readers monthly.

Table 11.3 in the Supply Chain Management chapter in your Heizer/Render/Munson textbook discusses supply chain risks and tactics to minimize the risks. One of the risks that is mentioned is that distribution containers can be damaged, delayed or lost at the following points:

• Sitting at a container yard
• Handling at a container yard
• Loading or unloading onto/from truck, train or ship
• Enroute on truck, train or ship

Consider the three major modes of shipping – sea, rail and road and their associated risks. Many trillions of dollars in goods are transported via all modes annually.

Maritime Shipping. Currently there are about 6,000 container ships in operation globally. The largest of these can carry 24,000 twenty-foot containers or 12,000 forty-foot containers.

During the last decade an average of 1,300 containers were lost at sea. In 2022, 661 containers were lost. In 2024,  576 containers that were lost. A notable cause of container loss is severe weather. In the 2024, three incidents off the Cape of Good Hope resulted in losses of 99, 44, and 46 containers, respectively. The region is known for its rough seas. However, due to Houti terrorists in Yemen, more ships are rerouting around Africa instead of passing through the Red Sea, increasing exposure to such risks. (About 1/3 of lost containers are eventually recovered).

Trucking. Every year in the U.S., 3.5 million truckers travel 200 billion miles carrying $720 billion worth of goods. This is more than any other mode of shipping. Shipping containers by truck presents a different risk profile. While containers are rarely lost entirely, they are susceptible to damage and may be involved in traffic accidents, potentially causing property damage or hazardous material spills. There has been an average of 100,000 truck crashes per year.

Train Transport. Rail freight in the U.S. accounts for $210 billion worth of goods each year. The risks when using rail transportation are very similar to those with trucks. The key risks are derailments leading to significant damage and delays, cargo damage or release of hazardous materials and logistical disruptions due to infrastructure failures or collisions. The average number of rail accidents over the past decade has been 1,850.  

Regardless of the mode of transportation, most containers are insured against loss and salvage operations will be conducted especially when hazardous materials are involved.

Classroom discussion questions:

1. What was the most expensive shipping disaster in the past decade?
2. What can be done to lessen trucking losses?