A key force driving US supply chain problems is the lack of warehouse space combined with a dramatic increase in consumer demand in the states.
On November 5, the National Conference of State Legislatures held a summit meeting to discuss supply chain issues. Ray LaHood, co-chair of Building America’s Future, said people ordered 28% more goods during the pandemic. This rising demand means that ships sit in front of ports off the coast, waiting to be unloaded. And despite the cooperation between ports, railways and freight forwarders, the crisis is likely to last for months.
The Morning Wire: Keep up to date on Washington State politics, politics, and personalities.
“They are trying to find a solution,” said LaHood. “The bottom line is that this will probably not be resolved until the first quarter of next year.”
The warehouses and freight forwarders, which were used to moving and storing a certain amount of goods, are not prepared for the increasing demand, said Susan Gardner, senior director of operations and projects at the Georgia Ports Authority.
Contributing to this lack of capacity is the fact that the US economy relies on a just-in-time model of goods delivery, said Chris Jones, president of Florida Economic Advisors. Most retailers are used to receiving their goods hours before consumers look for them, thanks to complex algorithms that help predict demand. While this helps keep overheads down and reduces the need for inventory, it also means that any interference between the manufacturer and the consumer cancels them out.
“If you don’t have a cushion, if you don’t have excess inventory to handle this surge in demand, you have a problem,” said Jones.
As evidence, he cited the port of Long Beach in California, the second largest port in the country, which the previous week had stated that about 60% more tonnage was waiting to be offloaded than the facility could handle. Developing an infrastructure to cope with an increase in volume will take time and money.
For LaHood, the infrastructure bill passed in Congress last week offers hope to address the issues in the future. That includes millions of dollars to improve port infrastructure. It is a departure from the status quo, he said.
“At the federal level, there was never really any money to upgrade ports,” LaHood said. “Now there will be.”
A White House breakdown of the $ 1 trillion infrastructure bill says it will invest $ 17 billion in port infrastructure and waterways, and $ 25 billion in airports to clear back repair and maintenance debts.
In Washington state, the Seattle Times reported in mid-October that about 15 cargo ships were waiting for their berths in either the Seattle or Tacoma ports.
Your support counts.
Public service journalism is still important today. If you receive any of our coverage, please consider making a donation to support our work. Thanks for reading our stuff.