By The Washington Post
This article was published in The Washington Post September 24, 2021. There is no end to the number of stories circling right now about the ongoing supply chain crisis and staggering port congestion. Last week, The Port of New York and New Jersey reported the highest number of container ships at anchor for all of 2021. Off the coast of New York, approximately 24 cargo ships and oil tankers were stuck waiting to dock due to a surge in demand for consumer goods and short-staffed ports. At the same time, 67 container ships were stuck at anchor or in drift areas at the Ports of Los Angeles and Long Beach. On September 20th, the ports reached an all-time record of 70 container ships stuck at anchor.
However, we are sharing this article because it outlines the U.S. government's attempt to address the issue.
The Biden administration is struggling to ease congestion in the nation’s freight system, as mounting backlogs threaten to dash the president’s hopes for a smooth economic recovery with higher prices and spot product shortages. The worst choke point is in Southern California at the ports of Los Angeles and Long Beach, where 62 container ships carrying toys, electronics, furniture and other goods lie at anchor waiting for an unloading berth. The floating queue, virtually unknown before the coronavirus pandemic upended global supply chains, has doubled since mid-August.
Onshore, docks and railroad terminals are jammed with shipping containers amid an epic buying spree by companies racing to keep pace with consumer demand. Trucking companies and warehouses complain they can’t find enough workers to keep freight moving, leaving Americans waiting for products such as Honda auto parts, Lands' End clothing, Fancy Feast cat food and Peloton exercise gear.
To unscramble the cargo mess, the White House last month named as its “ports envoy,” John Porcari, a former Obama administration transportation official. Last week, he helped push the Southern California port complex, the nation’s top import gateway, to add night and weekend hours for trucks to collect shipping containers.
Porcari told reporters on Thursday that the move was a key step toward 24/7 operations along the entire freight pipeline. But getting terminals, truckers, railroads and warehouses all to operate on that schedule will not be easy.
Porcari, former chairman of the Maryland Port Commission, spoke days after Wall Street economists warned that the supply ills are escalating. Analysts and industry executives say there is little chance the federal government can untangle the cargo snarl before the financially critical holiday shopping season.
“It takes time to unwind that kind of congestion and we don’t have time. These are the kind of actions that should have been taken months ago,” said Stephen Lamar, president of the American Apparel and Footwear Association. “This needs to be treated as the crisis that it is.”
Companies are struggling to bring products into the country and face soaring freight costs when they can, Lamar said. His group has called on the president to authorize the use of U.S. Navy facilities to unload commercial cargo and to provide financial relief by canceling tariffs on Chinese products.
The mismatch between surging import volumes and an overwhelmed transport network is dogging the recovery. Citing supply chain issues, Goldman Sachs this month cut its fourth-quarter economic growth forecast from 6.5 percent to 5.5 percent. Retailers’ inventories are near a 30-year low and toymakers are urging consumers to shop months early for holiday gifts.
Sluggish freight channels also are fueling inflation, now at an annual rate of 5.3 percent. Federal Reserve Chair Jerome H. Powell said this week that widespread supply problems, particularly in the auto industry, which lacks enough imported semiconductors, have been “larger and longer lasting than anticipated,” forcing the Fed to raise its estimate of future price gains.
“We are seeing upward pressure on prices particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term,” Powell told reporters.
Commerce Secretary Gina Raimondo on Thursday discussed the semiconductor shortage in a White House meeting with executives from companies such as General Motors and Apple.
Porcari told reporters he aims for “measurable specific results” in improving cargo flows and overhauling an outdated government regulatory setup.
“We’re pushing very hard for improvements,” he said.
Still, many of the measures that Porcari is promoting — such as the enhanced use of data to optimize cargo movements — will take time to implement. Some infrastructure projects will take years to pay off.
The current supply snafus will only ease when consumers resume pre-pandemic patterns, spending less money on tangible goods and more on services, such as restaurant meals, sporting events and travel. That will take “at least” until the second half of 2022, according to economists at Oxford Economics.
Porcari works with the president’s supply chain disruptions task force, headed by the secretaries of transportation, commerce and agriculture. Over the past three months, administration officials have convened meetings of industry executives, focused on four areas with acute supply issues: home building, semiconductors, transportation and agriculture.
But reflecting the limits of federal authority over the mostly private-sector freight system, the White House has emphasized government monitoring and information-gathering rather than dramatic initiatives.
To clear the supply chain blockages, Porcari is chipping away at an Everest of problems. Within days of assuming his new role, he convened a 60-person Zoom call with executives from across the supply chain to discuss potential reforms.
On Thursday, he promised short-term gains as well as a goods-moving system equipped to handle even larger cargo volumes in the future.
“We’ve got to change,” said Jonathan Gold, vice president of supply chains and customs for the National Retail Federation. “We can’t keep doing the same things we’ve been doing for decades. The supply chain just can’t keep up.”
Yet even the longer operating hours in L.A. and Long Beach have received mixed reviews.
Truckers did not take full advantage of the previous shorter schedule, leaving almost one-third of the L.A. port’s nighttime appointments unused, according to Gene Seroka, executive director of the port. Filling those slots would mean an additional 1,800 trucks going in and out of the port each night, he said.
But the truckers have their own complaints.
They say there is no point collecting a container late at night if the customer’s warehouse isn’t open to receive it. Plus, many terminals often require truckers to return an empty container when they collect a full one, but often insist on empties that belong to specific companies.
Or, a terminal that is already jammed with containers may prevent truckers from dropping others. And if the trucker is forced to hang onto the empty, it likely will sit on a truck chassis, occupying equipment that is needed to move other cargo.
“No matter how many more hours we throw at this, unless we address some of the systemic issues that have been gumming up the works for years, they’re just going to keep gumming up the works moving forward,” said Matt Schrap, CEO of the Harbor Trucking Association, whose members service the ports.
The president also has targeted a lack of competition as a factor in soaring freight costs. Three shipping alliances, including nine cargo carriers, account for more than 80 percent of the global market for oceangoing vessels. And the United States now has just seven major railroads, down from 33 four decades ago, according to the White House.
Some shippers complain that carriers and rail lines often present them with take-it-or-leave-it deals. But a lack of competition is not the principal explanation for today’s problems, according to many analysts.
“This is the result of market forces. There’s no evidence that suggests otherwise,” said Sanne Manders, chief operating officer of Flexport, a San Francisco-based freight forwarder.
Current supply woes cap years of strain on U.S. companies’ global production networks.
Starting in 2018, President Donald Trump’s trade and tariff wars meant abrupt changes in the cost of imported materials for manufacturers.
Disruptions from a rolling series of factory closures that began last year in China and spread to Europe and the United States triggered an even larger supply shock. Trapped at home by pandemic shutdowns, Americans ordered enormous quantities of goods from China, flooding traditional trade routes.
Freakish February weather, including a historic deep freeze in Texas, sidelined petrochemical plants that produce resins needed for an array of products. One month later, a giant cargo ship lodged itself in the Suez Canal, blocking a key trade artery for nearly a week.
Then as the U.S. economy gradually reopened, businesses coped with an unpredictable supply landscape by ordering more and more products. That erased the normal seasonal ups and downs for ports, railroads and truckers, requiring them to move peak volumes month after month.
Through August, the port of Los Angeles has processed 30 percent more containers than during the same period last year.
The record volumes mask a dysfunctional system that leaves businesses and consumers facing the likelihood that they will not be able to obtain precisely what they want precisely when they want it.
Fresh coronavirus outbreaks that closed ports and factories across Southeast Asia in recent months have kept logistics managers on edge.
White House officials have no easy solutions.
“I don’t think there are levers the administration can pull,” said Carl Bentzel, a commissioner with the Federal Maritime Commission. “It really is a supply and demand issue.”