The supply chain for so many of the things we buy is messed up at every step of the logistics system. Former CEO of Walmart pointed out the steps in the supply chain that are tangled up:
- Loading ships at ports in Asia.
- Ships are stuck in the water waiting to unload.
- Unloading at ports in the US is another chokepoint.
- There are not enough truck drivers.
- Not enough labor and the various points in the distribution system inside the United States.
- Shortage of people to put stuff on the shelves.
Essentially every stage of the distribution channel is tangled up. Biggest thing that could be done to get things moving normally would be more people to work at every step of the distribution system. Labor shortages, in other words.
This post discusses two articles:
- California has imposed restrictions on trucking which has drastically reduced the number of trucks which can be operated in the state.
- One article provides us a survey of a dozen other articles, each of which describes a different aspect of the supply chain disaster.
Part one of this series can be read here. Part two here.
The Last Refuge – 10/14/21 – The California Version of The Green New Deal and an October 16, 2020, EPA Settlement With Transportation is What’s Creating The Container Shipping Backlog – Working CA Ports 24/7 Will Not Help, Here’s Why – Author spent three days researching reasons for the backlog of containers here in California. Checking resources, researching details, and other research showed some surprising things.
Biggest issue on the backlog, according to the author, is rules intentionally adopted by the state of California.
Surprise!
Stringent emissions requirements implemented in 2020 keep trucks older than 2010 off the road in the state. About half the trucks in the country can no longer go to the ports at Los Angeles and Long Beach, pick up a container, and delivered it anywhere in the country.
Essentially all owner/operator rigs have to stay out of the state and around half of the trucks that are part of the big shipping companies must also stay out.
One workaround is transportation companies have been using qualified trucks to carry containers across the border into Nevada and then transfer the trailer to a truck that cannot cross the border.
There are so many containers waiting for a truck that storage space in Los Angeles and Long Beach is almost full. An increase in the offloading of ships will not do any good because that will merely increase the already huge stack of containers waiting for a truck. The ports are just about out of space to store containers.
Lawrence Person’s BattleSwarm Blog – 10/11/21 – Supply Chain Disruption Update for October 11, 2021 – Article takes us on an extended tour of all a host of places where there are disruptions in the supply chain. There are links to over a dozen articles with quotes from eight of them.
Here is my condensed description of the highlights, or rather lowlights, of the supply chain mess:
An article in The Atlantic notices a large number of disruptions in the port situation. Blog points out that the article in The Atlantic never mentioned the word “vaccine.”
Guess what other word the article never mentioned? “Mandate.”
Not mentioning those two words make sense since that would cut against the political agenda and political orientation of the magazine. The author and magazine don’t dare point out those issues.
Article says flood of federal dollars has left hundreds of billions sitting in checkbooks of Americans who can’t go out much or travel, so they are getting durable goods much of which has to be imported from Asia. Delta variant is hitting Asia hard, shutting down semiconductor factories and other sundry manufacturing.
Huge number of ships are parked off the coast of Los Angeles and Long Beach ports. The flood of goods demanded by American consumers has run into a shortfall of port workers, trucks, and truckers according to the article.
Article asserts the cost to ship a container from Asia to the West Coast of the US is sitting at $25,000. (That is up from the $20K price I saw mentioned most recently.) The extreme prices are motivating shippers to send containers to Asia empty in order to rack up another $25K of income. This means American exports are held low. The shortage of containers to ship things out of the United States is leaving full railcars sitting in California awaiting shipment, so those railcars unavailable to move goods out of California.
There is a nationwide shortage of truck drivers due to a list of reasons such as poor recruiting, cancelled classes to train those few people wanting to get into trucking, and early retirements.
Quoted portion of the article says there’s a shortage of containers, warehouses, ports, and then railroads and trucks to get stuff out of the ports.
Another quoted article says there is a shortage of paints and plastics.
Several weather hits in Texas have limited petrochemical processing, meaning there’s a shortage of a variety of things, including PVC which is needed to process just about anything that involves plastic.
The results?
PVC costs are up 70% from a year ago. Resins up 170%. Ethylene up 43%.
I mentioned in a previous post the largest port operator in Dubai thinks supply chains will be tangled up well into 2023.
Energy problems are getting bad.
Separate articles indicate cost of marine fuel is running at a seven year high, India has started rolling blackouts due to a shortage of coal, Brazil is importing a massive amount of natural gas, and rolling blackouts are common in China.
Expect home heating costs to skyrocket this winter. Natural gas is up 130% in a month across Europe. Article says that is an increase by a factor of eight since a year ago.
Another article says there shortages for steel, roofing supplies, and insulation for construction. Steel costs are up 123% in the last year with plumbing fittings up 45%.
Next article says HVAC parts are getting scarce. The microchip shortage is a problem in heating because there are several chips that go into the thermostat and the furnace in your house. Freight costs are skyrocketing.
One HVAC contractor says to counter the apparently random shortages he has radically increased his inventory. He has up to a years supply of some parts because he doesn’t know which part is going to disappear from the supply chain next. That dramatic increase in inventory is of course increasing pressure on the entire supply chain.
Next article says the cost of oats is up dramatically because of poor harvest in the US. Canadian out harvest is an 11 year low because of higher than average heat. Low supply and high prices will work its way into breakfast cereal prices.
Final article I will mention says that retailers are expecting to have a lot of empty shelves for Christmas shoppers. Causes mentioned in the quoted article include:
- Ports are overloaded.
- Not enough containers.
- Not enough ships.
- Not enough trucks.
- Not enough trains.
- Contracts with transportation carriers are getting canceled.
- Retailers are competing with each other to get their goods onto containers in Asia.
- Retailers to consumers and wholesalers of everything are pushing the orders forward to try and build up inventory (this is in part two meet increased demand in part fear that something is going to go stock out.
Demand from consumers is unusually high which might have overloaded the supply chain in any event but with disruptions everywhere due to government ordered shutdowns the impact is multiplied.