MHI Solutions Improving Supply Chain Performance
Ships sit for days offshore as they wait for an open berth at their destination port. Terminals and warehouses are stacked with containers with no one to pick them up. Shippers get turned away for service by overwhelmed, understaffed carriers. The disruptions in the supply chain that have made it so challenging to keep up with the American consumer’s robust appetite for goods have now endured for well over than a year, and the challenges continue to frustrate those involved throughout the supply chain process.
A host of causes have contributed to a stark capacity shortage that has made it challenging to move goods. The problems start offshore and continue once containers are offloaded in the ports. The initial pain points were in Southern California, where the Port of Los Angeles and the Port of Long Beach are the busiest and second busiest ports in the country, but now they can be found throughout the country.
In an October press conference, John Porcari, port envoy to the Biden administration’s Supply Chain Disruptions Task Force, said the pandemic’s unprecedented volumes and new buying patterns effectively upended the global supply chain and “laid bare a system that really needs to be modified.”
Congestion at the ports has made the most headlines, and the intermodal category has been at the forefront of the delays. The dwell times for containers at 11 major railroad depots reached an average of 9.8 days in September, according to Hapag-Llloyd, one of the world’s largest container carriers. The wait at the Port of Los Angeles was 16 days. The volume of imports is the source of the challenge.
“The throughput that’s being required of the ports, the throughput that’s being required of the trains is in excess of what has ever been seen before,” said Rick LaGore, CEO of InTek Freight & Logistics.
Todd Tranausky, vice president for rail and intermodal at FTR, said people mistake the congestion challenges as just a port issue, but the problems extend up and down the supply chain.
“It’s an entire supply chain issue,” Tranausky said. “You have issues at the ports. You have issues with labor. You have issues with rail service. You have issues at rail terminals, getting chassis capacity, getting enough labor capacity to be able to both load and offload the trains, as well as flip containers through the stacks when a trucker shows up to pick up a box. So, shippers that are using intermodal are feeling it at every point in the supply chain.”
The great imbalance
LaGore said shippers initially put the brakes on their distribution when COVID-19 first arrived from early March into May. Ever since then, though, “things basically skyrocketed,” he said. The stop-then-start aspect was a major contributor to the sudden, overwhelming onrush of demand.
“We literally started the economy from zero last year, and we’ve never done that before,” Tranausky said.
The ease of spending made possible by e-commerce, stimulus payments, unexpected savings on travel and entertainment, and the widespread promises of rapid delivery prompted consumers to spend heavily on goods. Even as daily life has grown more normal, retail numbers have remained high, LaGore said.
The problem, experts agree, is the imbalance that has resulted. Imports into the United States have risen sharply, while exports have declined precipitously. For instance, Gene Seroka, executive director of the Port of Los Angeles, said that the Port of Los Angeles has been on “a cargo run that is quite remarkable” and averaged 17 ships at berth daily in September—70% higher than pre-pandemic. However, he said, exports have declined 31 of the past 35 months in Los Angeles, resulting in the port’s lowest export numbers since 2002. The 6-1 ratio of imports to exports in September is the highest in memory at the port, Seroka said.