Why are cargo ships waiting to be unloaded at the ports?
West Coast ports were barely keeping up with the growth in freight before the pandemic and had no ability to absorb disruption, said an associate professor at American University’s Kogod School of Business. The pandemic has only worsened the situation, including a shortage of trucks to haul cargo containers to their destinations.
There were 64 ships in a holding pattern near the ports of Los Angeles and Long Beach Thursday.
Some trucking industry executives blame higher federal unemployment benefits, which ended in September, for the driver shortage. The benefits might have contributed to the problem in the early months of the pandemic, but the issue now is competition coming from transportation start-ups hungry for market share. Drivers come and go at trucking companies at an alarmingly high rate — turnover was more than 90% at large firms in the last quarter of 2020.
Without enough trucks to carry them off, containers piled up on docks, and more kept coming — each new ship brings in 10,000 to 21,000 containers. And with the ports of Los Angeles and Long Beach unable to handle the growing number of ships, vessels were spending about as much time waiting to anchor and unload — about two weeks — as it would take a ship to cross the Pacific.
Compounding the problem is the lack of transparency and information sharing, which makes it impossible for the manufacturers and importers who rely on the ports to see problems developing in advance and route around them.
How is this affecting me?
Prices are higher for many things. The shortages and the heavy demand for shipping have combined to cause freight costs to skyrocket; the cost to move a container from China to the U.S. West Coast is four times what it was a year ago, and more than 10 times what it was before the pandemic.
Manufacturers have passed their higher costs on to consumers, though that hasn’t seemed to stem the demand for goods. The increase is hitting not just the teak furniture you bought, imported from Indonesia, but also the running shoes and dress shirts you bought from a local retailer.
Goods are taking longer to arrive. Some retailers are urging consumers to buy their holiday gifts now, while there’s still plenty of time for them to be delivered.
Some items are becoming harder to find. Although we’re not seeing as many empty store shelves as we did in the early days of the pandemic, shortages are cropping up in unexpected places. For example, printers, game consoles and rental cars are harder to come by, all thanks to the semiconductor drought.
More price inflation is expected. You have this constant pressure of not having enough resources, strong demand.
How long will it last?
Experts say it will take a while — maybe six months, maybe more than a year — before the supply chain can work its way through the backlog.
“We have these orders coming in, we can’t work them off because we’re facing these labor shortages.”
“Unless they stop coming in, it doesn’t allow us the time to get it through.”
Some companies have even tried to hedge their bets by placing multiple orders for the same products from different factories. But that still requires shipping capacity to get the products to store shelves on time.
How will this be resolved? Some economists argue that the convulsions in the shipping market will encourage U.S. manufacturers to shift more of their outsourced work from Asia to Mexico. But that’s a long-term fix. In the near term, experts say that repairing the supply chain will require addressing every part of it and not focusing on just one part of the process.
For example, factory employees who work on manufacturing and raw materials processing need to be vaccinated to stop outbreaks.
Ports need to expand hours so that more containers can be offloaded. U.S. has announced a move in that direction, saying the Port of Los Angeles would start operating around the clock, similar to moves made at the Port of Long Beach.
The supply chain is just like a symphony, in which every piece must play its position for the whole ensemble to be successful.
“We’re doing this in a silo — one touchpoint at a time — rather than as a system.”
“It needs to balance this out.”