Supply Chain Problems and Shipping Delays Aren’t Getting Better. Here Are Some Solutions

As of Friday morning, approximately 70 ships filled with cargo were anchored outside the ports of Los Angeles and Long Beach, which are the points of entry for more than 40 percent of US imports. This backlog is a clear reminder that there aren’t enough workers or facilities to take in all the products that are being shipped to the United States right now. But even as supply chain problems continue to pile up, experts say progress is possible.

The pandemic has exposed the fragility of the US logistics industry. Manufacturing bottlenecks and shipping delays have resulted in cargo piling up not only in port terminals but also in rail yards and warehouses. Critical equipment, like shipping containers and truck chassis, is unavailable, causing distribution centers to develop deep backlogs. Meanwhile, a surge in demand has strained the system even further.

The consequences of the logistics crunch are far-reaching. Shipping problems have made it harder to import medical supplies and export crops. Supply chain workers, including truck drivers and warehouse workers, are taking on grueling extra hours. Extra activity at the ports has driven up emissions and worsened the air quality for the communities that live in the surrounding areas. At the same time, small businesses are worried that, without supplies, they’ll lose critical holiday season sales to larger retailers like Home Depot and Walmart, which have chartered private cargo ships. There’s also growing concern that logistics issues are driving up prices on all sorts of everyday products.

Right now, the main thing domestic logistics companies need is time to catch up to the pace of manufacturing, which may happen when the holiday season ends (consumers can help by buying less stuff). But there are other ways we could improve the country’s approach to shipping and delivering products, like boosting conditions for supply chain workers and building a little more slack into the system. Even changing the US Department of Transportation’s age- and drug-testing rules for truck drivers could make taking these jobs easier.

Recode asked more than a dozen supply chain leaders and experts how to fix US logistics in the coming months. While they don’t all agree on the details, they said that the country’s ongoing shipping problems are far from intractable. Here’s how it could start.

Unclog the ports and free up shipping equipment

We need to unclog the ports. The global logistics network is running low on shipping containers because hundreds of thousands of them are stuck on ships waiting to dock. Even more shipping containers are stacked in storage areas across the Long Beach-Long Angeles port complex, which intakes much of US shipments coming from Asia.

The same problems have shown up elsewhere, including at the Port of Savannah, where there are more than 20 ships at anchor. A shortage of chassis, the load-bearing metal frame with wheels that truck drivers use to transport shipping containers, has made this problem worse.

In a bid to get cargo moving more quickly, the Long Angeles and Long Beach ports now plan to charge shipping companies a $100 fee for every container that isn’t unloaded after eight days, and the fee will increase by $100 for every day after that. The new policy follows a collaboration between retailers, shipping companies, and port workers to keep the Port of Los Angeles operating on a 24/7 basis.

But there may be better ideas. Some supply chain experts have suggested rerouting more cargo to other ports on the West Coast, like the Port of Oakland, Port of Vancouver, and Port of Manzanillo, though companies would need to find drivers to pick their cargo up in a new location. Several ports, including the Port of Oakland and the Port of Jacksonville, have even volunteered to take in more cargo.

Another proposal is to facilitate truck drivers entering port terminals who can pick up a new container and drop off an empty one at the same time. Others think the ports should put a hold on loading new cargo and focus first on loading empty containers onto ships that are returning to Asia.

The chassis shortage is somewhat of a different story. Almost half of the chassis at the Los Angeles-Long Beach port complex are operated by private leasing companies. These companies only keep enough chassis to support average shipping volume, and not, as DeFrancesco puts it, “Easter Sunday.”

Chassis are also at the center of a bitter trade dispute between American manufacturers and China International Marine Containers (CIMC), a Chinese chassis company based in Shenzhen. Federal trade authorities issued a tariff on chassis produced in China last year after US manufacturers accused CIMC, which is the world’s largest chassis-maker, of unfairly selling chassis below the market rate.

Now trucking operators as well as the Port of Los Angeles are arguing that President Biden should rescind this tax and exclude chassis from tariffs in order to alleviate ongoing shipping issues. US manufacturers insist they can make more chassis by themselves, especially if the government steps in by offering tax incentive programs and speeding up work visa processing times, among other forms of assistance. Still, both sides seem to agree that making more chassis available would help.

The warehouse shortage is a labor problem

The unloading of cargo ships is only the first step on a complex route that carries products from ports to stores and storage facilities. But right now, those facilities are packed to the brim, in part because of an ongoing challenge to find workers.

“The reason containers are piling up at the port terminals is because of the warehouses and the distribution centers,” said Noel Hacegaba, the deputy executive director and chief operating officer at the Port of Long Beach. “It’s the backlog that begins in the interior of the supply chain.”

Expanding space in storage facilities is pivotal to clearing up these supply chain backlogs. Right now, warehouse vacancy rates are just 0.7 percent throughout the Inland Empire, the group of California cities within 100 miles of the Port of Los Angeles that serve as the country’s largest distribution center. Retailers have also stockpiled inventory and reserved extra storage because of the recent surge in consumer demand, which has restricted the overall supply of warehouse space.

Part of the solution involves finding more room for cargo. Last month, California Governor Newsom issued an executive order directing the state’s agencies to find temporary spaces to store cargo on both public and private land. The Transportation Department has also offered California an up to $5 billion loan to improve its logistics infrastructure, including building more warehouses.

Still, one of the easiest ways to increase warehouse capacity is to move these facilities to a 24/7 schedule, which would help the ports offload even more cargo. To make that happen, each of these warehouses needs to hire enough workers to staff an entire additional shift. Improving the quality of and pay for warehouse jobs should also help, as would making the jobs easier to find.

Right now, these jobs are primarily seasonal and involve a high level of turnover, as well as long hours, a lot of manual labor, and the risk of injury, including the risk of catching Covid-19. At the same time, many of the areas throughout the Inland Empire have already hired a record number of people for warehousing jobs, and there may not be a huge supply of new workers in the surrounding area left to hire.

“Part of the conversation for some of these types of facilities is really, ‘Do we need to start thinking about slightly different locations that make it easier to get labor?’” said Jason Miller, a supply chain management professor at Michigan State University. “One of the first steps with this is for the logistics field to stop complaining about labor shortages and start figuring out what to actually do about it to make work attractive and to attract people.”

Make it easier to be a truck driver

Truck drivers are crucial to US shipping. They transport goods between ports, warehouses, rail yards, distribution centers, and retailers, and carry more than 70 percent of cargo traveling throughout the country. But right now, the country may be short as many as 80,000 drivers, according to the American Trucking Association, a trade body for the industry. Even lower estimates still put the shortage in the tens of thousands.

One way to fix this problem would be to make it easier to become and be a truck driver. While truck driver pay has gone up, bonuses and increased salaries haven’t been enough to woo workers to take on an otherwise very difficult job.

One step to address the labor shortage would be to change the federal government’s approach to drug testing truck drivers. Right now, Department of Transportation regulations don’t allow commercial truck drivers to use cannabis, even if those drivers use the drug in their off-hours and live in states where it’s legal. Most of the tens of thousands of drivers who have lost access to their commercial driver’s licenses over the past two years have tested positive for cannabis, which is why some supply chain experts think it’s time to relax the rules.

Some experts think younger drivers could also help, especially as older truck drivers retire in record numbers. Right now, federal law forbids people between 18 and 20 years old from driving commercial vehicles across state lines, even if they have a commercial driver’s license. Now, federal lawmakers are pushing the Department of Transportation to approve a pilot program that would allow up to 3,000 younger drivers to drive tractor-trailers interstate at any one time if they complete extra apprenticeship training.

“We let them fight wars,” Willy Shih, a management professor at Harvard Business School, said. “Anything that will relieve the labor crunch at this point I think will help.”

Still, there are other ways to make truck driving easier, like adding more parking for drivers and making it easier for them to use the restroom during pick-up and drop-offs. Critically, truck driving would also be more appealing if more truck drivers who are paid by the mile or per delivery were compensated for the time they spend waiting to pick up cargo, which amounts to these drivers giving up free labor.

This approach to compensation has also made it harder to move operations to a 24/7 basis. After all, truck drivers aren’t incentivized to pick up cargo on a new, late-night shift if their drop-off locations don’t open until the morning.

There’s a role the federal government could play, too. A Wednesday letter from more than 97 supply chain trade associations urged the president to continue an ongoing hours of service relief program, which includes a temporary exemption on federal restrictions for how many hours commercial truck drivers can drive. To help deal with the shortage, the trade groups also say the Transportation and Labor Departments should do more to promote careers in trucking.

“Being a professional driver is not a low-education, low-skilled job,” explained Tra Williams, the president and CEO of FleetForce, a driving school based in Florida. “It takes a collaborative effort by leaders in the industry to reframe that narrative … and make sure that there’s opportunities for folks to rise up into the middle class and beyond.”

The pandemic won’t be the only supply chain disruption

Logistics improvements need to happen simultaneously in order for everyday people to see real progress. Building more warehouse space won’t improve delivery times if people don’t want jobs in those facilities; hiring more truck drivers won’t free up shipping containers if there aren’t chassis to carry them. To fix these shortages and delays, companies across the supply chain need to work together, and the government needs to step in where it can.

Whether that collaboration will actually happen is unclear. The US logistics industry comprises many different companies that focus on maximizing their own individual profits, not the supply chain’s overall efficiency. Those firms may not purchase more equipment or add more capacity if it’s easier to pass higher costs onto the next leg of the network and, eventually, to consumers.

But that may not be the best approach in the long run. If Covid-19 has taught us anything, it’s that preparing for the worst is often worth the time and money. After all, the pandemic isn’t the first supply chain disruption ever, and it probably won’t be the last.

Rebecca Heilweil

Source: Supply chain problems and shipping delays aren’t getting better. Here are some solutions. – Vox


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5 Ways AI Can Help Mitigate The Global Shipping Crisis

With the fourth Now we have a quarter on us, all industries are faced with the challenge of managing a holiday production schedule that will deliver the products. The key for startups looking to defend the quarter from disruptions is to take a proactive, data-driven approach to inventory management.

Here are five methods we’ve been advising clients to adopt:

  • Use data and analysis to identify and map inventory that is impacted by the global shipping crisis. If you don’t have the data on what’s on a ship carrying your materials, use this crisis as an opportunity to justify prioritizing supply chain digital transformation with advanced data, IoT, and analytics (e.g. machine learning and simulation).
  • You need to know the location of your products at all times if you are to successfully assess the impact a shortage will have on your operation. Eventually, AI will aid startups realize how myriad disruptions impact their provide chain so they can better respond with a Prepare B when the unthinkable comes about.
  • If you don’t have the data available, you should partner with a vendor and use a secure environment to share third-party data to provide actionable AI-driven insights on business impact on all parties involved, from start-up to commissioning. retailer. to the consumer.
  • Simulate and forecast the impact of these problems on the supply side on the demand side. Perform scenario planning exercises and inform critical business decisions. If this capability is not in place, an emergency such as a pandemic, civil unrest, or an uncontrollable rate hike will wreak havoc on your business plan. Use this situation as an opportunity to implement a disaster management program to prepare for potential risks.

By: Ahmer Inam

Ahmer Inam is the chief synthetic intelligence officer (CAIO) at Pactera EDGE. He has greater than 20 years of expertise driving organizational transformation. His expertise contains management roles at Nike Inc., Wells Fargo, Sonic Automotive and Cambia Well being Options.

Source: 5 ways AI can help mitigate the global shipping crisis | TechCrunch



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How ‘Chaos’ In The Shipping Industry Is Choking The Economy

Whidbey Island is a lovely place about 30 miles north of Seattle on the Puget Sound. Most days the tranquil sounds of rolling waves and chirping birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents are complaining about the ruckus created by humongous container ships anchored off their shore.

“We’ve never seen them this close before,” a Whidbey Islander told a local news station. “We’re hearing the throbbing noise at night. … It’s a nuisance.” The noise has been so loud that residents have been complaining to the county sheriff’s office about it.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It’s fueled by a surge in demand for imports, mostly from East Asia. There’s so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

“We are seeing a historic surge of cargo volume coming into our ports,” says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. “The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough.”

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it’s become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don’t park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It’s the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it’s “completely abnormal.”

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they’re now waiting, on average, about five days to get in. In normal times, they don’t have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what’s going on is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since it was invented,” he says.

The maiden voyage of the first container ship set sail from Newark, N.J., back in 1956. It may be hard to fathom just how big a deal this innovation was. It was just a big ship that carried containers, literally metal boxes. But these metal boxes enabled ships to carry dramatically more cargo, and, by standardizing shipping practices and using new machines to handle the boxes, shippers were able to slash costs and the time it takes to load, unload and transport that cargo.

Economists credit these metal boxes with increasing the efficiency of shipping so much that it stitched the modern global economy together more than anything else — more than all free-trade agreements put together.

Now economists are concerned that the plumbing provided by these miracle boxes and the vessels that transport them is clogged. It’s making it more difficult for stores to restock their shelves, manufacturers, carmakers and builders to get the parts they need, and farmers to export their products. It’s an important reason, analysts say, that we’re seeing consumer prices surge.

How did shipping get topsy-turvy?

In the early days of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of maritime shipping was so dramatic that American scientists saw a once-in-a-lifetime opportunity to study what happened to whales in the absence of a constant deluge of vessels. The noise from the ships apparently stresses them out — kind of like they’re currently stressing out the residents of Whidbey Island.

Greater tranquility for whales in the first half of 2020 was the result of shipping companies canceling their trips and docking their ships. Then the economy rebounded, and American consumers unleashed a tidal wave of demand that swept through the shipping industry when they started shifting their spending patterns. Unable to spend money on going out, many started spending their money (and their stimulus checks) on manufactured goods — stuff that largely comes from China on container ships.

At first, it wasn’t the ships that were the problem; it was the containers. When the buying spree began, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still stranded in the U.S. because of all the canceled trips at the beginning of the pandemic. More importantly, processing containers here has been taking longer because of all the disruptions and inefficiencies brought about by the pandemic. Containers have been piling up at dockyards, and trains and trucks have struggled to get them out fast enough.

“The pandemic has exacerbated longstanding problems with the nation’s supply chain, not just at the ports but in the warehouses, distribution centers, railroads, and other places that need to run smoothly in order for Longshore workers to move cargo off of the ships,” says Cameron Williams.

He’s an official at the International Longshore and Warehouse Union, which represents dock workers, primarily on the West Coast. Dock workers have been working through the pandemic to handle the increased cargo volume, he says, and at least 17 ILWU workers lost their lives to COVID-19. “We continue to work hard and break records month after month to clear the cargo as quickly as the supply chain allows,” Williams says.

It’s been all hands on deck to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at West Coast ports means it takes longer to unload stuff, which then extends the time it takes for ships to get back across the Pacific to reload.

That congestion was already creating massive delays on both ends of the shipping supply chain, tying up large numbers of containers and ships and leading to growing backlogs and shortages. Then, in March 2021, the Ever Given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockage didn’t directly affect the Asia-West Coast shipping corridor, it added to the global shortage of ships and containers by stranding even more of them out at sea.

As if all this weren’t enough, last month there was a COVID-19 outbreak at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government implemented stringent measures to control the outbreak, and as a result, more than 40 container ships had to anchor and wait. “In terms of the amount of cargo, what’s going on in South China right now is an even larger disturbance than the Suez canal incident,” Jensen says.

The effects on the American economy

With so much shipping capacity bogged down, importers and exporters have been competing for scarce containers and vessels and bidding up the price of shipping. The cost of shipping a container from China/East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many big importers pay for shipping through annual contracts, which means they’ve been somewhat insulated from surging prices, but they are starting to feel the pain as they renegotiate contracts.

Rising shipping costs and delays are starving the economy of the stuff it needs and contributing to shortages and inflation. It’s not just consumers and retailers that are affected: American exporters are complaining that shipping companies are so desperate to get containers back to China quickly that they’re making the return trip across the Pacific without waiting to fill up containers with American-made products. That’s bad news for those exporters — and for America’s ballooning trade deficit.

As for when it’s going to get better, none of the people we spoke to believes it’ll be anytime soon. And it’s not even considered peak season for the shipping industry yet. That typically begins in August, when American stores start building their inventories for the back-to-school and holiday seasons. The residents of Whidbey Island may have to continue dealing with the nuisance of gigantic, noisy ships cluttering up the horizon for the foreseeable future.


Source: How ‘Chaos’ In The Shipping Industry Is Choking The Economy : Planet Money : NPR



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