Week One Discussion 1 Replies. Please respond to the TWO students discussion posts.

Reply to the TWO students' discussion posts.

Contributions must display original thinking and good knowledge of the subject matter, including links and references to sources used to back up your arguments.

1. Your contribution must be a Substantial Contributions.  A Substantial Contribution is a posting that adds value to the conversation by providing relevant different views or a personal relevant experience.  A point of view from an authority on the subject is also a substantial contribution.

2. Postings such as:  I agree with Joe, ……… and  repeating what Joe has already said…are not substantial contributions and do not add value to the discussion. This person in simply using someone else's contribution, not her/his own. If you agree with someone, explain why and provide new information.

3. Provide links and references of resources used. Expert sources add credibility to your statements and provide new views on the subject.

4. This is a business course. Use professional business language. Provide facts and quantitative information such as figures (numbers), statistics, charts, graphs, to justify your arguments

Clarence Burton

Class,

The disruption in the Strait of Hormuz shows how a problem in one part of the global supply chain can have a ripple effect throughout the entire system. Reuters reported that oil prices increased as shipping through the Strait slowed, with only five commodity vessels passing through on Saturday and none on Sunday, compared with 31 the previous weekend (McCartney & Mukherjee, 2026). This matters because about one-fifth of the world’s oil and liquefied natural gas supplies moved through the Strait before the conflict. The bigger issue is not just the war or higher oil prices. When a major transportation route becomes unreliable, companies have to adjust how they keep products and resources moving.

These adjustments affect firms and transportation companies in different ways. Transportation companies may face higher fuel costs, longer or different routes, and changes in the amount of available capacity. Firms using those transportation services then have to decide whether to absorb the additional costs or adjust their supply chains. Novack et al. (2019) explain that transportation costs are part of a product’s landed cost and that transit time and reliability can affect inventory and safety stock requirements. A firm may respond by carrying additional inventory, finding another supplier, changing transportation routes, or using a combination of these options. The problem is that none of these choices are free.

A specific example of this adjustment is South Korea’s GS Caltex. Before the Iran war, Asia received more than half of its crude supply from the Middle East. With shipping through Hormuz restricted, several Asian refiners started purchasing more U.S. crude. GS Caltex purchased two million barrels of U.S. Mars crude from Shell for November delivery (Liu, 2026). I do not necessarily think relying heavily on Middle Eastern suppliers was a bad decision at the time. However, this disruption shows the risk of depending too heavily on one region or transportation route. Having alternative suppliers gives companies another option when their normal supply chain is disrupted, although changing an established system can increase costs and lead times.

Ultimately, those additional costs create a ripple effect throughout the supply chain. Producers, transportation companies, and other firms may absorb some of the costs, while customers may eventually absorb some through higher prices or changes in service. My biggest takeaway is that supply chains do not simply stop when there is a major disruption; they adjust. Companies that plan for disruptions and have alternative suppliers, transportation options, and inventory strategies are in a better position than companies trying to figure everything out after the disruption has already occurred.

References

Liu, S. (2026, August 14).  Asian refiners buy more US crude as Hormuz remains blocked, traders say. Reuters.  https://www.reuters.com/business/energy/asian-refiners-buy-more-us-crude-hormuz-remains-blocked-traders-say-2026-08-14/

McCartney, G., & Mukherjee, A. (2026, August 17).  Oil settles up over $2 as Iran war stalemate stokes supply concerns. Reuters.  https://www.reuters.com/business/energy/oil-treads-water-us-iran-peace-talks-stall-hormuz-shipping-slows-2026-08-17/

Novack, R. A., Gibson, B. J., Suzuki, Y., & Coyle, J. J. (2019).  Transportation: A global supply chain perspective (9th ed.). Cengage Learning.

Kristine Nicolas

The current oil shock shows how quickly a disruption can affect the entire supply chain. Reuters reported that Brent crude settled at $90.87 per barrel and West Texas Intermediate at $84.50 on August 17 as concerns grew over the U.S.-Iran conflict and oil movement through the Strait of Hormuz. Because the strait is a major route for global energy shipments, disruptions can increase fuel and transportation costs far beyond the region. (Reuters, 2026).

From a supply chain perspective, an oil shock is not just an energy issue. Because transportation links every part of the supply chain, higher fuel prices quickly impact all stages. Trucking, ocean, and air carriers all see increased costs, forcing companies to choose between absorbing expenses, accepting lower margins, or raising prices. Shipping delays and longer routes can disrupt deliveries, and businesses may build up extra inventory to avoid shortages, raising holding costs and tying up capital.

FedEx is a good example. The company adjusts fuel surcharges based on diesel and jet fuel prices, meaning higher energy costs can directly increase shipping expenses (FedEx, 2026). In 2026, FedEx and UPS increased fuel surcharge rates as diesel and jet fuel costs increased, adding pressure to companies already dealing with higher logistics expenses (Supply Chain Dive, 2026). For a retailer that depends on FedEx for inbound replenishment or direct-to-consumer delivery, higher transportation costs can raise the total landed cost of inventory. The retailer may eventually respond by increasing product prices, raising shipping fees, changing order quantities, or adjusting its inventory strategy. 

Oil shocks demonstrate how interconnected supply chains are. A disruption in crude oil availability can affect transportation costs, lead times, inventory decisions, production schedules, and customer prices. Companies operating with lean or just-in-time inventory systems are exposed because they have less inventory available to absorb unexpected delays. Increasing safety stock can provide protection, but it also increases inventory carrying costs. Businesses should balance lean inventory practices with enough safety stock, supplier flexibility, and transportation alternatives to remain resilient during unexpected disruptions.

References:

FedEx. (2026). Fuel surcharge.  https://www.fedex.com/en-us/shipping/fuel-surcharge.html

Reuters. (2026, August 17). Oil treads water as U.S.-Iran peace talks stall, Hormuz shipping slows.  https://www.reuters.com/business/energy/oil-treads-water-us-iran-peace-talks-stall-hormuz-shipping-slows-2026-08-17/

Supply Chain Dive. (2026). How FedEx, UPS shippers can limit fuel surcharge pressures.  https://www.supplychaindive.com/news/fedex-ups-postal-service-fuel-surcharge-reduction-tips/816330/