Thinking Citizen Blog — Supply Chain Problems: Port Congestion, Truck Driver Shortages, Warehouse Capacity
Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day
Today’s Topic: Supply Chain Problems: Port Congestion, Truck Driver Shortages, Warehouse Capacity
If only there were just one supply chain problem! But there are many and they “are feeding on one another.” (first link below) “Part of the problem is a global economy that is out of sync on the pandemic, restrictions and recovery. Factories and retailers in Western economies that have largely emerged from lockdowns are eager for finished products, raw materials and components from longtime suppliers in Asia and elsewhere. But many countries in Asia are still in the throes of lockdowns and other coronavirus-related restrictions, constricting their ability to meet demand. Meanwhile, global labor shortages, often the result of people leaving the workforce during the pandemic, are throwing further obstacles in the way of producers.” Today, a few more excerpts from another article plus two charts. Experts — please chime in. Correct, elaborate, elucidate.
ORIGINS PRE-DATE COVID — Trade tensions between the US and China
1. “Trade tensions, particularly between the U.S. and China, escalated under President Trump with the introduction of unprecedented tariffs and sanctions on Chinese companies.”
2. “Beijing retaliated, targeting U.S. agriculture exporters. This created volatility in supply and demand as companies on both sides of the globe rushed to stock inventories ahead of the implementation of tariffs.”
3. “The unexpected shift in trade put the initial stress on global logistics.”
THEN COMES COVID AND THE LOCKDOWN — loss of predictability and precision; skyrocketing container costs
1. “From a logistics perspective, restarting the manufacturing machine after the lockdown turned out to be quite difficult. The complex system that moves raw materials and finished products around the globe requires predictability and precision. Both had been lost.”
2. “A shortage of shipping containers emerged, shipping rates for certain routes skyrocketed, congestion developed at international ports that then spread to railroads and inland rail terminals, exasperating the trucking and chassis shortage that was already in place. U.S. importers experienced delays in receiving key manufacturing components and exporters faced challenges accessing containers and getting bookings on shipping vessels. The chain had broken.”
3. “The average price for a Chinese-made standard 40’ container is approaching $6,000, more than double what it was in 2016. The post-lockdown jump in demand, combined with lower container turnover, caused prices to rocket higher. Thousands of containers are still stuck in the wrong place.”
TRUCK DRIVER SHORTAGE, WAREHOUSE CAPACITY
1. One truck driver for every 9 job postings. “Trucking is the primary source o container transport once the cargo is unloaded at a port. A shortage of drivers across the country means much of the container volume sits idle at capacity-constrained facilities. Frustration with employment prospects, safety concerns, expanded unemployment benefits and having kids at home have contributed to drivers leaving the industry. “
2. “Warehouse capacity is an often overlooked component in the supply chain. Many containers are unloaded at distribution centers, and if there is no available space, it adds to the container circulation problem.”
3. Growing e-commerce demand, especially post-COVID, created a shortage of warehouse space, leading to higher warehouse rental rates, which, in turn, is beginning to pass through into consumer prices.”
YOUR TURN — Please share:
a.) the coolest thing you learned this week related to business, economics, finance.
b.) the coolest thing you learned in your life related to business, economics, finance.
c.) anything at all related to business, economics, finance.
d.) anything at all