Roundup: Post-COVID-19 supply chain disruptions cause massive delays, loss of multi-bln USD in U.S.
0 Comment(s)
Print
E-mail Xinhua, September 24, 2021
by Peter Mertz
DENVER, the United States, Sept. 23 (Xinhua) -- America's West Coast is under siege by massive container ships, and the number of ships is growing each day. But American consumers can't wait, and all agree, the supply chain is to blame.
"Everything's broken," supply chain expert Dan Hearsch told the Atlantic on Tuesday, of the recent, historic disruption to the world's economic superhighway.
Zachary Rogers, founder of the Logistics Managers Index (LMI) that has been analyzing data from more than 100 top-level supply chain industry directors since 2016, called the situation a "growing pain."
From Seattle and Tacoma in America's Northwest, through northern California's port city Oakland, and into the country's two biggest seaports - Los Angeles and Long Beach - massive container ships, measuring up to 400 meters in length and packed with goods from Asia - are waiting.
That wait is hurting Americans, causing inflation, delays for products, price increases, and empty store shelves - that ultimately cost billions of U.S. dollars. With 85 percent of U.S. shipping imports coming from China, disruptions in the supply chain are costly.
SUPPLY CHAIN
"Every morning I get an email from the port of Los Angeles - here's the one they sent me today," Rogers pointed at his computer.
In an exclusive interview with Xinhua last Friday, Rogers, a supply chain expert and assistant professor at Colorado State University, explained why a record number of containerships are sitting off the California coast waiting to be unloaded.
"Infrastructure," he began.
"The consumer has changed after COVID, but we do not have the infrastructure to support that change," he said, noting that e-Commerce had exploded 40 percent in just one year, and that huge economic segments had shifted due to the pandemic and restrictive trade practices, that had affected costs across the supply chain.
"We do not have enough warehouses in the suburbs of LA or Denver to get stuff same day, or next day, to everybody yet; we don't have enough trucks on the road to move things around; it will take time for us to adjust," said Rogers, who earned his PhD in Supply Chain Management at Arizona State University.
Rogers pointed again at his computer: "look, imports coming in are huge, but we can't move the goods fast enough."
America's two largest ports had a record 73 cargo ships waiting in anchor or drifting off ports of Los Angeles and Long Beach on Sunday, with a total capacity of over 432,909 twenty-foot equivalent units (TEU). And the number was just reduced to 62 Wednesday.
One Twitter observer said, "it looks like a video game, where hundreds of dots are surrounding a major city," but this traffic jam is on the U.S. side.
"The Tender Rejection Index (TDI) is at 25 percent," Rogers said. "That means for every four truckloads, there's only space for three - we need more trucks."
"The irony is that we do not have semi-conductors to build trucks," said Rogers.
"There are about 150 semiconductors in a Class A truck - we don't have enough semiconductors because we don't have enough supply chain capacity - it's sort of a negative feedback loop," he told Xinhua.
ECONOMICS
"The last time we saw any warehouse capacity was August of last year. Inventory has been growing more slowly than any of our metrics," Rogers said.
However, pricing, usually moving in consort with inventory, suddenly exploded.
"What has happened is that inventory is moving at such a high rate of velocity - we are not holding much stuff in storage because it's moving through so quickly," Rogers noted.
Rogers told Xinhua that inventory to sales ratios are currently extremely low, whereas one year ago, they were at record highs - the most the index had ever moved in a year.
"Warehouses are full, and inventory is at record levels, growing steadily at about 5 percent, but sales are up 50 percent," he said, explaining the kink in the supply chain.
"We were completely stopped. and then hit the gas like never before," Rogers said.
According to Rogers, in April 2020, the LMI for inventory was at 1.67 percent, the highest it has ever been. But a year later, in April of this year, it was 1.07, the lowest it has been since 1992.
"When capacity goes down, price and utilization go up - price of inventory is dictated by the price of moving it around and storing it, in many ways," he said. "We are not holding onto much storage."
"We have never had more imports coming in from China than we do right now," he added.
Rogers, who analyzes data each day on the three most salient components of the supply chain: warehousing, transportation, and capacity, said that "pre-Covid and post-Covid infrastructure has changed."
Indeed, U.S. trucking companies and ports are scrambling to hire employees and get more equipment. In February, Oakland was desperately, installing "the world's biggest cranes," to unload the Asian import tsunami, according to the Oakland Port Authority.
Rogers pointed to another bar chart: "One year ago, China to North America was 3,800 USD a container. Now it's 20,000 USD. Traditionally it was 15-hundred bucks, and last year, when it jumped to 3,000, we were alarmed. Look at it now."
"With the average cost of goods inside a container worth between 50,000 and 100,000 (U.S. dollars), a 2,000 transportation cost used to cost only four percent, but now it's 40 percent," Rogers said, a shift that affects pricing across the board.
More significantly, Rogers pointed to data from the Port of Los Angeles. "The average anchorage time is 8.67 days."
Up and down America's West Coast, the average waiting time to unload huge cargo ships has never been greater, in transportation history. "A parking lot," Oakland's KPIX-5 TV channel described.
MOVING AHEAD
"I think the current administration is paying more attention to this than any other I can remember," Rogers said, citing U.S. President Joe Biden's newly created "Port Envoy" and "Supply Chain Disruption Task Force."
"I think people now understand that supply chain is important," Rogers added.
Bigger ships may be on supply chain's menu, but Rogers cautioned they take years to build.
Currently, seven of the world's 10 largest container vessels, each surpassing 20,000 TEUs, were made in South Korea, according to Marineonsite.com.
This week, the HMM Oslo, was being filled with containers at the world' biggest seaport - the Port of Shanghai.
The HMM Oslo is one of two ships measuring 400 meters in length, the sister ship to the HMM Algereicas, the world's largest container ship with a 24,000 TEUs capacity.
The Oslo is expected to be stacked with containers soon, and on its way back to Los Angeles, to wait in line with the rest of Asia's cargo importers.
Rogers noted that while the U.S.-China trade relationship was the "most important in the world," he had seen increased, anticipated manufacturing participation from Vietnam and other south Asian economics with "low margin" products. Enditem
Go to Forum >>0 Comment(s)