Supply Chain Crisis – update

You’ve probably noticed, things on the supply chain front haven’t improved. More than one hundred container ships await entry into southern CA ports, responsible for offloading half of all incoming goods to the U.S.

The cause of the backup, say port officials, is strictly enforced Covid restrictions at ports, including those in Asia, as well as unprecedented demand for goods from China, South Korea, and other Asian exporting countries. Despite the ports’ best efforts to offload, it can take 8 days or more for a ship to gain entry. Analysts don’t see a quick fix to improve the movement of goods. Why?

#1 COVID…is ongoing
Covid protocols on the docks, cleaning equipment, daily health screenings and social distancing measures adds up to operational inefficiencies.

#2 Consumer Demand
As the U.S. began opening in the late spring, consumer confidence and spending increased significantly, resulting in a backlog in Asian manufacturing facilities. Still reeling from the pandemic, factories were slow to start up to meet demand. Shipments of goods, once delayed, have arrived in an overabundance. Retailers such as Walmart, Target and Home Depot have taken to chartering their own smaller ships able to docks in smaller ports to ensure product reaches consumers before the holiday season.

#3 Bigger Ships
Today’s ocean-going ships carry approximately 30% more containers than they did years ago. Consequently, it takes more equipment, more longshoremen, and more time to offload the cargo.

#4 Labor shortages, limited warehouse space and trucking issues
Containers are sitting on ships longer before unloading due to lack of personnel. Docks are crowded because of limited warehouse space. Long haul drivers are scarce with the demand for transportation at an all time high.

It will take months, if not a year or more, for the supply chain to stabilize. In the meantime, the impacts of the backup have already been felt across the global supply chain, with long waits and higher costs for certain products required by businesses and wanted by consumers.