Are current supply chain bottlenecks a bigger deal than normal?
In an example of delayed fallout from the pandemic, the nation’s ports in recent months have been struggling with congestion and container shortages. The circumstances could lead to long delivery waits and higher consumer prices in the months ahead.
American imports from China have been surging since June and ports have been striving to play catch-up after initial pandemic-driven lockdowns. Imports have remained elevated as stay-at-home consumers have been snapping up Chinese-made furniture and appliances, toys, exercise equipment, bicycles and other items. The uptick is being traced in part to money being diverted from vacations, movies and dining out towards goods to use around homes.
Many factories in Asia that normally close for Chinese New Year this month are remaining open to keep up with demand.
Unfortunately, the import surge has led to congested marine terminals, equipment shortages and longer-than-usual truck-turn times. A shortage of dock workers amid coronavirus outbreak threats is further complicating port operations.
In a February 8th statement, NRF predicted the nation’s largest container ports would continue to set new monthly records for imports into the summer, citing as evidence 25 to 30 ships waiting to dock at the ports of Los Angeles and Long Beach.
Port backups in Southern California as well as East Coast and European ports are leading to a scarcity of empty containers, escalating freight prices. According to the Wall Street Journal, container rates from Asia to the U.S. West Coast are almost four times higher than in March 2020. Container rates to the East Coast have more than doubled.
Alternative delivery options are limited. For instance, air freight often travels in the belly of planes and passenger air travel remains restricted. Retailers may be able to leverage connections, tap data analytics and machine learning to forecast future demand, and book cargo space in advance.
The disruption nonetheless is driving commodity prices up and may contribute to accelerating inflation, with energy prices also rising. The higher shipping and warehousing costs may have to be passed on to consumers until typical buying patterns return.
Lars Jensen, CEO at SeaIntelligence, a maritime consultancy, told the Washington Post, “There’s only one thing that can fix this and that’s time.”
- Retail imports expected to hit repeated monthly records after record year in 2020 – National Retail Federation
- Shipping Container Shortage Gives Commodity Prices Extra Boost – The Wall Street Journal
- Global supply chains choke under tsunami of freight – Freight Waves
- Retailers to face continued pandemic-induced supply chain pain well into 2021 – S&P Global
- An ‘aggressive’ fight over containers is causing shipping costs to rocket by 300% – CNBC
- Record port backups hit California as U.S. consumers supercharge purchases – Marketplace
- Pandemic aftershocks overwhelm global supply lines – The Washington Post
- Congestion Worsens at Southern California Ports – Transport Topics
DISCUSSION QUESTIONS: Do you see current supply chain bottlenecks as a bigger problem than in the past? What options do retailers have to address these challenges?