How CrowdStrike IT outage is hitting global supply chain

The CrowdStrike software bug that crashed Microsoft operating systems and caused the largest IT outage in history caused disruptions at U.S. and global ports, with highly complex air freight systems suffering the heaviest hit, according to logistics experts, as global airlines grounded flights.

“Planes and cargo are not where they are supposed to be and it will take days or even weeks to fully resolve,” Niall van de Wouw, chief air freight officer at supply chain consulting firm Xeneta, said in a statement shared with CNBC. “This is a reminder of how vulnerable our ocean and air supply chains are to IT failure.” 

Thousands of flights were grounded or delayed at the world’s largest air freight hubs in Europe, Asia and North America.

The new issue for the global supply chain comes amid a rise in global demand, with shipments up 13% year over year in June. Air freight supply has increased, but only by 3% year-on-year, already causing higher costs for shippers due to the limited capacity, according to Xeneta. “Shippers already had concerns about air freight capacity due to huge increases in demand in 2024, driven largely by the extraordinary growth in e-commerce goods being exported from China to Europe and the U.S.,” Van de Wouw said. “Available capacity in the market is already limited so airlines are going to struggle to move cargo tomorrow that should have been moved today.

Pete Buttigieg, U.S. Secretary of Transportation, told CNBC on Friday morning that what the government is watching for over the course of the day, as the issue has been identified, is “the kind of ripple or cascade effects as they get everything back in their networks back to normal.”

“These systems, these flights, they run so tightly, so back to back that even after a root cause has been addressed you can still feel those impacts throughout the day,” Buttigieg said.

He said the FAA’s operational systems, like air traffic control or most systems within the U.S. Department of Transportation, as well as major urban transit systems, such as New York City’s MTA, were operating though there could be “spot” issues throughout the day. But “as far as the airlines themselves we are going to definitely be expecting more there,” he said.

FedEx said in a statement that it has activated contingency plans, but added that “potential delays are possible for package deliveries” expected Friday.

UPS said in a statement that computer systems in the U.S. and Europe were affected, but its airline continues to operate effectively, and drivers are on the roads delivering for customers. “We are continuing to work 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.

Only one major U.S. freight railroad reported issues related to the IT outage, with Union Pacific confirming in an email to CNBC that it had varying levels of impact across its network.

“Our backup protocols enable us to communicate with our teams and dispatchers. We are doing everything possible to keep freight moving, but there have been some processing delays in customer shipments as we address targeted areas impacted on our network. We will continue to keep our stakeholders updated as we address the outage over the next 24 hours,” Union Pacific said in the emailed statement.

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

Buttigieg said that at the ports, small issues can turn into a big issue, noting that even with ships and cranes operational, gates were affected, which meant the trucks couldn’t come in or out, which led to delays at certain ports, but they are “up and running and open for business today,” he added.

The Port of Houston, the fifth-largest port in the U.S. posted a notice to its website saying the port’s Barbours Cut and Bayport Container Terminals were closed on Friday morning, but it did anticipate being able to open gates later in the day.

The Port of Los Angeles, the nation’s largest port, confirmed to CNBC that one of its terminals, APM Terminals, was down temporarily, but came back up in the early morning. In an email to clients, APM, a subsidiary of Maersk, notified trucking clients that the port was “able to recover rather quickly,” and it restarted operations around 2 a.m. Any drivers not able to complete their pickups were told to contact the company’s import group so they could secure a new appointment to have a demurrage waiver for those containers.

Mario Cordero, executive director of the Port of Long Beach, said there were minimal impacts to some of its terminals, but systems are up or in the process of being restored.

The Port of New York and New Jersey reported a delay in the opening of two terminals, but within a few hours, the terminals were back up and running.

“The Port Authority has been working closely with impacted terminal operators since the overnight hours, assisting in their recovery while also communicating updates through a multitude of channels to the port’s vast community of stakeholders,” said Bethann Rooney, port director at the Port Authority of New York and New Jersey. She said the port was able to initiate “a quick and efficient response to get cargo moving again.”

All marine terminals were open by 8 a.m. The Port Authority agency was not impacted by the outage.

Not all ports use systems that incorporate CrowdStrike software, with the Port of Savannah and the Port of Virginia both reporting “normal operations.”

Emily Stausbøll, Xeneta senior shipping analyst, told CNBC that the IT outage has the potential to cause significant disruption at ports if ships are prevented from offloading and loading containers, and that can cascade through the supply chain.

“There are also knock-on impacts across inland supply chains if truck and rail services are unable to pick up and drop off cargo at the port,” Stausbøll said.

She noted that In May, Charleston Port on the U.S. East Coast shut for two days due to a software failure, which resulted 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.

Maritime intelligence company Kpler told CNBC early indications showed the global IT outage affecting operations at global ports including Poland’s Gdansk, and Dover, Felixstowe and Liverpool in the U.K.

Rotterdam, the largest port in Europe, informed customers on its website of possible disruptions, but In an email to CNBC, a port spokesman said critical port operations of the Harbour Master Division and nautical service providers remain operational. “However, some companies in the port, including a container terminal, are experiencing issues due to the disruption and have adjusted their processes. They are working on a solution.”

Matt Wright, senior freight analyst at Kpler, said the outage could lead to some delays at the affected ports, but with Microsoft and Crowdstrike reporting a fix being implemented, resumption of normal operations later today would mean it is unlikely to cause any significant backlog.