Global IT outage disrupts supply chains

On Friday, a faulty update to Microsoft software by cyber-security firm Crowdstrike, saw global supply chain operations significantly disrupted, with the fallout expected to take weeks to fully resolve.

Thousands of flights were grounded or delayed at major air freight hubs in Europe, Asia, and North America, creating severe impacts on the complex air supply chains.

Experts warn that planes and cargo are not where they should be, leading to extended recovery times and depending on the scale of the IT failure and current market conditions, these disruptions could take much longer to resolve than the duration of the outage itself.

This situation is further exacerbated by limited airfreight capacity, with global demand increasing by 13% in June compared to 2023, with the surge in demand largely driven by traffic from China to Europe and the US, putting additional strain on already limited available capacity.

While sea port operations were less affected, initial disruptions were reported in several European container terminals, including Poland’s Baltic Hub, Felixstowe and Rotterdam. These ports have since recovered, but the main issues could lie inland with truck and rail services, potentially increasing congestion if containers cannot be moved in or out of the ports efficiently.

Some air cargo operations are gradually returning to normal, with ground handler Swissport and Lufthansa Cargo reporting only minor impacts. However, Schiphol Airport and US airlines such as Delta, United, and American Airlines faced significant disruptions, with hundreds of flights cancelled or delayed, including 700 cancellations by Delta on Monday.

While most airlines have resumed operations, residual delays are anticipated due to the sheer number of disrupted flights.

Supply chain experts are concerned about the long-term effects of the Crowdstrike outage on global deliveries. The Chartered Institute of Export & International Trade warned that the disruption could create further problems in planning and scheduling for importers, exporters, and consumers globally. Time-sensitive air freight is particularly affected, with one thousand flights cancelled worldwide, by mid-morning on Friday.

Although a fix has been deployed by Crowdstrike, the full resolution of the outage issue may take some time, as IT staff may need to access individual machines to remove the faulty update.

The fallout from the outage has once-again highlighted the vulnerability of global supply chains and as the industry works to recover, the importance of robust contingency plans and marine insurance cannot be overstated, ensuring protection against financial risks and maintaining supply chain resilience in the face of unforeseen challenges.

To learn how we can develop and support your supply chain resilience or for more information about our Marine Insurance products, please EMAIL our Chief Commercial Officer, Andy Smith.