Global supply chain affected by CrowdStrike IT outage, with air freight facing recovery time of days or weeks.

• The CrowdStrike software-induced global IT outage has affected Union Pacific's freight network differently, but most major U.S. railroads are functioning normally.
• Temporary container terminals in Houston and Los Angeles were shut down overnight, but were mostly operational by early morning, ports from New York reported.
• Some companies at Rotterdam's terminal were affected.
• The global air cargo system is facing a recovery period that could last days or weeks, with many airlines grounding flights, particularly those involving air freight.

The CrowdStrike software bug that caused the largest IT outage in history also affected global air freight systems, resulting in disruptions at U.S. and international ports, with logistics experts reporting the heaviest impact on highly complex air freight systems, leading to the grounding of flights worldwide.

"IT failure can make our ocean and air supply chains vulnerable, as Niall van de Wouw, chief air freight officer at supply chain consulting firm Xeneta, stated in a CNBC statement. Planes and cargo are not in their intended locations and resolving the issue may take days or even weeks."

Numerous flights were halted or delayed at the biggest air cargo centers globally, located in Europe, Asia, and North America.

The global supply chain is facing a new challenge as global demand continues to rise, with shipments increasing by 13% year-over-year in June. While air freight supply has increased by only 3% year-on-year, this has already resulted in higher costs for shippers due to the limited capacity. According to Xeneta, shippers had concerns about air freight capacity due to the huge increases in demand in 2024, driven largely by the growth in e-commerce goods being exported from China to Europe and the U.S. With available capacity already limited, airlines are likely to struggle to move cargo tomorrow that should have been moved today.

Pete Buttigieg, the U.S. Secretary of Transportation, stated on CNBC on Friday morning that the government is closely monitoring the situation and looking for any "ripple or cascade effects" that may arise as the networks are restored to normal.

"These systems and flights operate so closely that even after a root cause has been identified, the effects can still be felt throughout the day," Buttigieg stated.

The FAA's operational systems, including air traffic control and systems within the U.S. Department of Transportation, as well as major urban transit systems like New York City's MTA, are operating, but there may be "spot" issues throughout the day. However, airlines can expect more challenges, according to him.

FedEx announced that it has implemented backup measures, but warned that "delays may occur for Friday's package deliveries."

UPS stated that its airline is operating effectively and drivers are on the roads delivering for customers, despite computer systems in the U.S. and Europe being affected. "We are working to resolve all issues as quickly as possible; there may be some service delays," UPS stated.

Ports, freight rails, report some issues, but normal operations

Most rails and ports were faring better after some early morning disruptions.

One major U.S. freight railroad, Union Pacific, reported issues related to the IT outage, with varying levels of impact across its network.

Union Pacific stated in an emailed message that our backup protocols allow us to communicate with our teams and dispatchers. We are doing everything we can to keep freight moving, but there have been some delays in processing customer shipments due to targeted areas affecting our network. We will keep our stakeholders informed of the outage over the next 24 hours.

Other major freight operators, including CSX, Norfolk Southern, and BNSF, a subsidiary of Berkshire Hathaway, stated that their operations are not currently affected.

Buttigieg stated that small problems at the ports can escalate, even with ships and cranes functioning, gates were impacted, preventing trucks from entering or exiting, resulting in port delays. However, he emphasized that the ports are now operational and open for business.

The Port of Houston, the fifth-largest port in the U.S., reported "major system outages" overnight but stated that all systems are now operational with "minimal delay to operations."

The Port of Los Angeles, the largest port in the US, temporarily shut down one of its terminals, APM Terminals, but it was back up in the early morning. APM, a subsidiary of Maersk, informed trucking clients that the port was able to recover quickly and restarted operations around 2 a.m. Drivers who were unable to complete their pickups were instructed to contact the company's import group to secure a new appointment for a demurrage waiver for those containers.

The Port of Long Beach's executive director, Mario Cordero, stated that some of its terminals experienced minimal impacts, and systems are currently being restored or are already operational.

The two terminals at the Port of New York and New Jersey experienced a delay in their opening, but later resumed operations within a few hours.

"Bethann Rooney, port director at the Port Authority of New York and New Jersey, stated that the Port Authority has been collaborating with affected terminal operators since the onset of the issue, providing support in their recovery while also disseminating updates to the port's extensive network of stakeholders. She added that the port was able to promptly and effectively address the situation, enabling cargo to resume movement once more."

The Port Authority agency was not affected by the outage, as all marine terminals were open by 8 a.m.

The Port of Savannah and the Port of Virginia are reporting "normal operations" despite not using systems that incorporate CrowdStrike software.

Xeneta senior shipping analyst Emily Stausbøll informed CNBC that the IT outage could lead to significant disruptions at ports if ships are unable to unload and load containers, which could have a ripple effect on the supply chain.

If truck and rail services cannot pick up and drop off cargo at the port, there will be knock-on impacts across inland supply chains, according to Stausbøll.

In May, Charleston Port on the U.S. East Coast shut for two days due to a software failure, resulting in a port congestion increase of 200%. "Port congestion has been a major problem during 2024. While it is now easing, there is no slack in the system and any disruption will push the needle back into the red," she said.

According to Kpler, early indications suggest that the global IT outage has affected operations at ports worldwide, including Gdansk in Poland and Dover, Felixstowe, and Liverpool in the U.K.

Despite some disruptions at Rotterdam, Europe's largest port, critical operations of the Harbour Master Division and nautical service providers are still operational. However, some companies in the port, including a container terminal, are facing issues due to the disruption and have adjusted their processes. They are currently working on finding a solution.

According to Matt Wright, senior freight analyst at Kpler, the outage at the affected ports may result in some delays. However, with Microsoft and Crowdstrike reporting a fix being implemented, it is unlikely to cause any significant backlog, and normal operations will resume later today.