Industry Insights

How Does a Government Shutdown Affect Supply Chain?

While the United States can rest a little easier now that the White House calmed nerves by informing us that the Internal Revenue Service (IRS) will still be issuing tax refunds amidst the partial shutdown, there are still plenty of other vital operations disrupted.

The partial shutdown, now in its 18th day, has affected over 800,000 federal workers, as well as operations at nine departments. Some affected groups include Homeland Security, Justice, State and Treasury, and agencies like the Environmental Protection Agency and NASA.

But are the country’s supply chain management leaders affected? Let’s first look at some of the groups affected.

Transportation Security Administration workers who are responsible for screening passengers and baggage have been calling in sick.

 The U.S. Department of Commerce is now closed. According to its website, “The Department is prepared for a lapse in funding that would necessitate a significant reduction in operations and is currently implementing its plan.”

According to the Associated Press, the USDA issued a statement reassuring farmers that payments that were initiated in order to compensate for the loss of revenue as a result of retaliatory tariffs imposed on U.S. agricultural products by China will still continue to go out, but payments to farmers who have not certified production would be on hold until the government shutdown ends.

Some programs remain unscathed as they are deemed essential for safety and emergency. Ultimately, it depends on the source of each agency’s funding. For example, the U.S. Army Corps of Engineers, responsible for projects at cargo ports, has been unaffected.

The Federal Highway Administration (FHWA) and the National Highway Traffic Safety Administration (NHTSA) are still operating normally.

Since much of the Department of Transportation is still operating regularly, there have not been threats to U.S. Domestic Truckload and Intermodal Freight, but there could be delays experienced when it comes to air and ocean freight.

Ultimately, there is no direct and initial impact felt by supply chain operations, but many fear the long-term its caused by the disruptions, but there could certainly be some headaches and delays that transportation professionals can prepare for now. Processes will definitely slow down and at this point have the potential to affect all imports.

In addition, Jonathan Starks, an analyst/forecaster for heavy-freight and truck equipment markets, brings up a good point in his latest Tweet regarding the shutdown: visibility within the supply chain. When data is delayed, so is the vital visibility that ensures a smooth process.

We’d love to hear from you. Have you felt the direct effects of the government shutdown on your supply chain?