Crisis and problems in US supply logistics

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Supply logistics
Loading cranes stack cargo ship containers at a terminal in the port of Long Beach, California. © TonelsonProductions

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Committed supply logistics

Supply logistics – Continued global supply chain disruptions caused by the COVID-19 pandemic and an increase in container volumes since July 2020 highlight the need for the United States to renew policies regarding supply chain logistics, speakers said during an online webinar yesterday.

During an Auto Care Association webinar, a panel discussed global supply chain disruptions, movement of goods and ways to mitigate disruptive supply chain movements in the future.

Noel Hacegaba, deputy executive director of administration and operations for the Port of Long Beach, Calif., called for a US national freight plan. “Canada has one, Mexico has a structure,” he noted. “We desperately need the federal government to have a strategy that integrates all of the nodes in the supply chain and addresses the movement of goods in a very holistic way. I think it’s the only way we can move our supply chain forward.”

Peter Tirschwell, vice president of maritime and commercial at IHS Markit and editor of the journal Journal of Commerce, noted that port systems in the US are completely decentralized. “They are administered by municipalities and by states, and they compete with each other,” he said. “The decentralized nature of the system has long resisted central planning. And as a result, the federal government over many years has been able to ignore the systemic problems that exist. The situation needs to be analysed, evaluated and resolved, at least at the national level”.

Weston LaBar, head of strategy at Cargomatic, a technology company for the transportation market, echoed the need for policy reform. “The policies that regulate our industry haven’t been updated since 1998, and the industry has changed a lot,” he said. “Therefore, we need to ensure that policies designed to encourage the movement of equipment and cargo do that.”

Container Shippers Have The Most Profitable Period

According to Tirschwell, ocean container carriers are profiting heavily from the circumstances. “They are on the right track for perhaps the most profitable period in their entire history,” he said.

“Everyone who is a customer of container carriers knows why they are making so much money.” He explained that this is related to how individual containers today are sometimes priced above $15,000 or $20,000. “The numbers are scattered across the map,” he said. “One thing they have in common is that they are two, three, four, five times bigger than they used to be.”

While that means shipping carriers are having a great year financially, he said the situation makes customer service a challenge. “In my experience, like any other service company, they want to do a good job, they want to support their customers and create value in the supply chain for them, and they’re having a hard time doing that right now.”

The shipping container is very difficult to find now, he noted. “The reason is that as containers flow, they move around the world,” he explained. “The entire circulatory flow of the containers has decreased, due to some main reasons. One is that there are ships anchored in ports and they cannot move. The containers were brought to the distribution centers, but they cannot be unloaded”.

He added that these distribution centers are often completely full because their volumes exceed the limit or because COVID restrictions limit the actual productivity of the warehouses.

Unprecedented volume causes imbalance

Meanwhile, the increase in container volumes arriving in the US remains unprecedented, he said, including double-digit percentage increases in volumes from Asia for each month since July 2020.

“We are seeing double-digit increases during a normally slow period, but now the normal peak container flow time will come, which is the second half of the year,” he says, from July-August until October. “It means that, with the conditions we’re seeing, it’s really hard to imagine any kind of significant relief from this extremely difficult situation that we’re in towards the end of the year.”

Hacegaba said the pandemic had triggered an imbalance in system-wide container flow, which was then exacerbated by a global increase in shipping since July last year. “We currently have 22 ships docked and all of our berths in San Pedro Bay are in use,” he said. “We’ve never seen a wave like this. In fact, since July of last year, we’ve been setting records month by month. I think it’s safe to say that every port, no matter where in the US, is dealing with some kind of congestion.”

He said that the port of Long Beach, since the first effects of the pandemic in early 2020, has started a task force for business recovery. Its only mission is to solve, mitigate, anticipate and apply solutions to ensure that the port serves these ships as quickly as possible.

Actions included maximizing gate hours for inland terminals at the port and chassis suppliers injecting additional resources. A chassis is a trailer with rubber tires under the frame, onto which a container is mounted for transport by road or road.

“Today, there are more than 90,000 chassis circulating in the complex to service the Southern California gateway,” said Hacegaba. “Given the volumes, we’re dealing with, even 90,000 chassis isn’t enough.”

Another change is that the port’s railways are relaxing restrictions on the number of wagons needed for the exit of containers from the terminals. “This is allowing them to get more boxes via rail faster from our terminals,” he added.

Demand much greater than supply

LaBar said one of the main issues affecting supply logistics is scarcity. “No matter where in the supply chain you are trying to move cargo, there is more demand than supply,” said LaBar. “This is true for road transport, and obviously with rail transport, and it is true for sea transport as well.

He noted a co-dependency across the entire supply chain. “When something looks broken, people get together and try to fix the problem,” said LaBar. “But you can’t plan for things like the weather in the Midwest that creates an outage that leads to an 11-12 day rail stay, when it’s usually two to three days at a maritime terminal.”

He said that it takes up space, makes it difficult to return empty containers and does not release the chassis so that imported cargo cannot be collected. “We’re all so codependent on each other, and if one area is struggling, it quickly snowballs to all the others,” he said. “That’s why it’s so important that ports take a leading role”

Comprehensive Macro Strategies

He emphasized the need for an impartial body that brings together supply chain stakeholders and focuses on the need to move the collective load of its customers efficiently. “We need to come up with long-term, comprehensive macro strategies that fix the systemic problems we’ve been facing for some time,” said LaBar. “We simply haven’t seen a peak season that lasted 18 months in the history of ports.

We’ve seen these types of outages happen every time there’s a sudden load increase – you usually don’t see this for more than a few weeks or a few months at most.”

He also emphasized the need for supply chains to move to virtual integration, where logistics providers have the ability to share data and facilitate the transfer of that data from one segment to the next.