Everyone’s talking about supply chain breakdowns from the dinner table to the mainstream press. Images of 96 ships waiting to unload containers at ports with stacks of containers – some piled up as high as four containers each waiting to be picked up for delivery – and empty shelves are being shared across social media, in publications and news outlets. Today we are seeing a combination of the COVID-19 pandemic and ongoing issues that built up for the past 15 to 20 years within the supply chain and have never been fully resolved.
Beginning in China, manufacturing is not fully operational, running anywhere from 60 to 80% capacity due to sporadic outbreaks of COVID, intermittent blackouts, raw material shortages, and in some cases, not enough workers. Other Asian countries such as Vietnam, Indonesia, and Malaysia are also experiencing sporadic outbreaks of COVID, impacting manufacturing.
As products are finished and ready to export to the U.S., available containers have been short supply. Emptying these containers in a punctual manner has been a time-consuming chore for some shippers and logistics providers, particularly as transportation delays ripple through the supply chain, from port to distribution center to front door.
The delays shift from Asian manufacturers to U.S. ports, particularly those in Los Angeles and Long Beach, California, which combined handle close to half of all Asian imports coming into the U.S. As lines of ships unload at these ports, temporary space is tight for containers waiting to clear customs and to be picked up by trucks. As a result containers have been allowed to be stacked from the usual two high to four high at the Port of Long Beach. However, this presents safety concerns for port workers and additional time needed to locate and load containers onto trucks.
But, some of the supply chain issues that are occurring have been around for years and are exacerbating the current situation. For example, appointment setting and honoring appointments are obstacles for truck drivers, particularly when they must wait hours to pick up or drop off containers at ports and wait to deliver to or pick up from warehouses. As a result, many of truck drivers are leaving these roles and some are transporting goods in other ways, such as by sprinter trucks and cargo vans. Meanwhile, frustrated port workers contemplate potential strikes.
Even though ports and warehouses have invested in technology and automation to improve this situation, the long wait times and appointment setting challenges still have not been solved. The record volumes entering U.S. ports have made it challenging to maintain on-time performances for all supply chain providers. More technology is needed to provide deeper visibility into where goods are located throughout the supply chain and to help speed up delivery processes.
It’s become a vicious cycle, as shippers wait to receive products while at the same time struggling to keep up with consumer demand. According to the U.S. Census, retail sales are up almost 20% year-over-year and year-to-date through October, as consumers “revenge shop” in stores and online. There is no silver bullet to fix these supply chain breakdowns, and they’ll certainly not be resolved overnight. Ports operating 24/7 are helpful, but in some ways are almost meaningless, particularly when warehouses do not operate on the same schedule.
How much longer these supply chain issues last remain to be seen. According to some retailers, improvements are expected by the end of the first half of 2022, while some industry analysts don’t expect progress until 2023.
Despite supply chain issues continuing for at least several more months, some green shoots of hope emerge. Demand for certain products is slowing. Despite this small glimmer of hope, capacity across the supply chain remains tight and has driven up transportation rates and fees for services like detention and demurrage. However, shippers are currently more concerned in meeting customers’ demands and filling empty shelves, and therefore, willing to pay the higher rates, which, in tur negatively impacts retailers’ financial ledgers.
Supply chain breakdowns will take time to unravel. In the meantime, shippers will need to manage shipments closely through cloud-based visibility tools and transportation management systems, and – it cannot be emphasized enough – communicate with supply chain partners and customers on an ongoing basis. It could mean becoming a shipper of choice or gaining a new customer based on an existing customer’s recommendation.