And speaking of complicated topics, I’ve been researching the supply chain bottlenecks. It’s darned hard to propose solutions if you don’t know what problem you’re trying to solve.
I began my investigation by looking at the port processing statistics for U. S. ports on the West Coast, East Coast, and Gulf Coast. These statistics are measured in the eceentric Twenty-foot Equivalent Units (TEUs). So far I’ve considered the following ports:
and what I found was interesting. The Port of New York and New Jersey reflected what I expected: declines in April, May, June, and July 2020 with recovery thereafter. I was a bit surprised with Savannah and New Orleans. Savannah is processing the greatest volume of freight in its history while New Orleans actually has excess capacity.
Los Angeles and Long Beach, on the other hand, are processing less freight than they did in 2020 and substantially less than in 2019. As a first approximation I don’t think that any reasonable solution to the supply chain bottleneck problem can fail to consider why Los Angeles and Long Beach are having problems.
I will continue to investigate this issue and post on it from time to time but I don’t want to leave this topic before emphasizing one thing: the greatest factor in supply chain bottlenecks has been a naive and risky approach to sourcing. Naive because managers assumed that things would only get better never worse; risky because the pursuit of tiny improved margins without backup suppliers has led to a breakdown of the entire system.
Speaking of supply chain lags – we’ve ordered windows for several apartments. They were to have been installed many weeks ago…and, we’re still waiting.
Yesterday I had a conversation with a garage door installer. In the past he would order a door, and within days go to the supplier to pick it up. Now, the wait, after an order has been placed, is somewhere between 20-24 weeks. When called, if the door is not immediately picked up, it’s sold to someone else.
This installer has been a friend for years. During the last election he was an avid anti-Trump guy, and voted for Biden. Now, after all the economical shifts, material shortages, increased inflation experienced these past 10 months he is calling Biden the worse president in history. I was surprised by his vehement change of heart.
Driving to work I listened to an episode where they claimed that the threat of a $100/day fine is helping to clear the terminals. That many stores/companies had ordered ahead and were using the terminals to act as free warehousing, which then lead to back ups.
Also, I see inconsistent reporting on how much the posts are shipping. The following suggests they are shipping more.
“Dockworkers and terminal operators at the Port of Los Angeles processed 9,072,917 TEUs of cargo from January through October, a 15.4% year-over-year uptick.”
https://labusinessjournal.com/news/2021/nov/22/ports-la-and-long-beach-take-new-steps-reduce-cong/
Steve
“Driving to work I listened to an episode where they claimed that the threat of a $100/day fine is helping to clear the terminals.”
Meanwhile, in the real world: From the LA Times covering a news conference.
At a news conference Tuesday to mark Labor Secretary Marty Walsh’s first visit to the port complex, Port of Los Angeles Executive Director Gene Seroka pointed to the drop in ships at anchor as a sign of progress. “Since we instituted a penalty for long-aging containers, the number of ships at anchor has decreased by more than 40% over a four-week period,†Seroka said.
The implication had some supply chain watchers blowing their stacks. The dwindling number of ships directly offshore can’t be disputed — but the total number of vessels waiting hasn’t gone down because the ports have suddenly sped up operations.
“It’s an apples-to-oranges comparison,†said Sal Mercogliano, professor of maritime history at North Carolina’s Campbell University and a former merchant mariner who criticized the comment on social media.
The dramatic decline in the number of ships at anchor stems from a new policy set by shipping trade groups that encouraged incoming ships to wait out in the open ocean rather than close to shore. Starting Nov. 16, boats crossing the Pacific have been asked to sit 150 miles offshore as they wait for a slot to unload their cargo, and boats traveling north or south along the coast were asked to sit 50 miles out. Although only 46 ships were waiting in San Pedro Bay as of Wednesday, an estimated 50 additional container ships that embarked after the change are now loitering over the horizon, which would raise the total backlog to a record high.
That would be a record, as in……a record.
This is just dumb:
“That many stores/companies had ordered ahead and were using the terminals to act as free warehousing, which then lead to back ups.”
Hey! I know. Let’s use the terminals as free warehousing so we have no product on the shelf and lose sales! At least we saved on inventory costs! Its brilliant!
Let me guess. NPR?
“Naive because managers assumed that things would only get better never worse; risky because the pursuit of tiny improved margins without backup suppliers has led to a breakdown of the entire system.”
I have no way to verify or debunk this if you tell me you have seen it.
All I can tell you is that in a 7 company portfolio (and prior companies owned) we have no instances of such thinking or actions. Not one. Zero. Supply is a standard board meeting topic. Before the pandemic (for years and years), and more acutely afterwards, the entire logistics effort focuses on first securing supply. Margin considerations only pertain to seeking alternative suppliers or the usual bargaining or substituting. We have businesses that purchase everything from resins to agricultural commodities to steel rebar. Not to mention labor, machines and general supplies. You never let operations go down. Its the cardinal sin.
I suspect it’s a malady of big companies.
It may be. Although its quite an indictment. Its almost a bridge too far to think its an attitude that is pervasive.
Neither of us is a fan of large corporate. I voted with my feet and wallet.
“NPR?” Nope. I t was in rural PA and you dont get NPR there. It is not news that they are holding more ships further out from ports. It has been reported several times, like at link. What I am pointing out is that there are significant discrepancies in the kind of numbers that should be pretty easy to sort out. If it is true that containers are being cleared out that should be easy to verify. Dave claims the LA ports are shipping less than normal. The ports say they are shipping more.
https://www.latimes.com/business/story/2021-12-03/officials-say-the-ports-logjam-is-easing-but-numbers-dont-tell-the-whole-story
Steve
Steve, my links were the ports themselves. I’m not saying it. THEY are. Not one of your links was to the ports’ websites. Mine were.
In your LAT link THE REPORTER makes the unsupported claim that they’re moving more shipping than ever before but the representative of the port does not.
Just looking at the LA port for calendar year 2020 vs 2021 they were at 7.4 million TEU in 2020 and 9.1 million in 2021. What am I reading incorrectly?
See the same thing for Long Beach.
Steve