Supply chain havoc is getting worse — just in time for holiday shopping

“Gadgets are particularly vulnerable to shortages because they include many different components. Consider all the parts that go into a PlayStation 5 or a new laptop, including their chips, outer shells, and screens. Many of these components require their own specialized manufacturing facilities, which are typically in different factories and often in different countries. For a device to be delivered on time, all of these parts need to be made in sync. Right now, that’s not happening.”

“Demand for these components has run up against efforts to contain Covid-19 in the countries where the production and assembly of many goods actually take place. Amid a recent delta variant outbreak and nationwide lockdown in Malaysia, the government designated electronics manufacturers critical businesses so that production could continue. In May, Vietnam directed vaccines directly to factory workers, while urging smartphone manufacturers working in the country, like Samsung, to do the same. (Vietnam’s Covid-19 challenges haven’t gone away: This past weekend, tens of thousands of workers fled the country’s commercial center after the government, which is still struggling to access vaccines, lifted pandemic lockdown restrictions.)”

““What will happen is that a phone will be delayed because they’re waiting on their plastic supplier, and the plastic supplier is waiting on the ingredient,” Penfield, the Syracuse professor, said. “It just takes one supplier — and it could be the base ingredient supplier — to fully screw up your supply chain.””

“All these problems mean that consumers are seeing rising prices and shipping delays for a wide range of products. So those looking ahead to the holiday shopping season might want to get an early start, and not just on consumer electronics.”

No, the supply chain mess is not a war on Christmas

“these shortages and delays are the product of many cross-cutting problems that have existed for years, including the Covid-19 pandemic, rising consumer demand, and a global and highly optimized manufacturing network that doesn’t adapt to change quickly.”

“What the pandemic did do was cause factories to shut down, usually because there weren’t enough workers, and that created shortages of products and components. Those shortages led to bottlenecks and delays in product manufacturing (if factories don’t have the parts to build something, it doesn’t get made and doesn’t get shipped).

As more shortages lead to more bottlenecks, the disruption causes problems in other parts of the supply chain, creating even more shortages, new delays, and higher prices. For example, automotive manufacturers haven’t been able to make cars and trucks, because they can’t get their hands on enough computer chips. Ikea can’t ship furniture parts from its warehouses to its stores thanks to the trucker shortage. A supply crunch for petrochemicals has driven up the cost of making anything that includes plastic, including children’s toys.”

“US companies have been moving more and more manufacturing abroad for decades, which means a growing amount of the stuff American consumers want to buy needs to be imported. Meanwhile, worsening conditions for truck drivers in the US have made the job incredibly unpopular in recent years, even though the demand for drivers has gone up as e-commerce has become more popular. That means that as Americans relied more on online shopping during the pandemic, getting goods from ports to doorsteps has been challenging.”

“Covid-19 has also affected consumer demand — namely, which products they want to buy and how much — creating constant changes that the supply chain just hasn’t been able to keep up with, especially lately.”

“This record number of imports is slowing down product deliveries. Cargo ships carrying holiday merchandise are waiting to unload their stock along the California coast, but there aren’t enough port workers to do the job. Those delays mean there are fewer containers available for manufacturers trying to send more products to the US, which only sets the supply chain back even more.”

“Pushing the Port of Los Angeles to operate 24/7 is Biden’s most direct action to date, and it’s supposed to ensure that an additional 3,500 cargo ships are unloaded each week. The Port of Los Angeles and the Port of Long Beach, which expanded its operations last month, are responsible for 40 percent of the containers brought into the US, so expanding their operations is supposed to speed up shipping nationwide, the White House says.”

“it’s not clear what Biden can do to fix the bottlenecks occurring higher up in the supply chain, like manufacturers running low on components and factories getting shut down abroad. While the White House has convened task forces to address these underlying problems, those efforts probably won’t bear fruit in time for the holidays.”

“In the long run, it’s possible that the US government can change policies that contributed to this situation in the first place. Politicians could shift their approach to trade, which has historically encouraged US companies to manufacture products abroad. Improving labor standards might boost working conditions for truckers and factory workers to make those jobs more appealing — boost global vaccine manufacturing and ensure that workers in other countries are safer from Covid-19 outbreaks. Admitting more people into the US could address a shortage of delivery and port workers.”

The great book shortage of 2021, explained

“Right now, distribution networks across the world are massively congested.

“Los Angeles — which is a major port of entry for the United States — New York, and New Jersey are all pretty full up,” says O’Leary. “We’re hearing reports of delays of weeks for getting things cleared.”

“Containers are not moving out of ports and onto trains quickly enough,” explains Chris Tang, a UCLA business professor specializing in global supply chain management. “And on top of that, all of the warehouses in the Midwest are full. So everything is stuck.”

An increase in online shipping in part of what’s driving the congestion. Meanwhile, the complications of Brexit and the internet’s beloved container ship Ever Given — both of which dramatically disrupted global supply chains — certainly aren’t helping ports empty themselves out faster.

Even more pressing, however, is a shortage of truck drivers. There just aren’t enough trucks on the road to pick up as much stuff as we’re currently shipping around the world. “We’re talking tens of thousands fewer truck drivers than we need,” says O’Leary.

And as stuff sits in warehouses, waiting to be picked up by increasingly scarce truck drivers, the price of storage goes up, adding to overall shipping costs. “It used to be around $3,000 per container,” Tang says. “Now the price is closer to $20,000.” The skyrocketing costs mean that companies selling luxury goods will take more warehouse slots, since they can afford them, while lower-priced goods, like books, compete for what’s left.

Barnes & Noble CEO Daunt notes that books do have one big advantage over other goods when it comes to shipping: They’re durable. “The reality is that books are fantastic because they don’t really perish, so you’re able to print lots of them in advance,” he says. “They’re incredibly robust, so you can send them through the most basic of supply chain routes. They’re not strawberries or peaches or delicate things.”

But right now, even the most basic of supply chain routes are finding themselves overwhelmed.”

“One of the big underlying problems when it comes to printing and shipping books is the same labor shortage that’s currently roiling the rest of the country. There aren’t enough press operators to get books printed, and then there aren’t enough truck drivers to get them to bookstores. Wages have gone up, but there still aren’t enough people working.

“In the whole national workforce, you’ve got 8.4 million unemployed but 10.9 million open jobs,” says Baehr. “That’s a two and a half million-person shortage, period, and that’s across all buckets. The book industry is getting hit with that just as much as the paper industry is getting hit with that just as much as the transportation industry is getting hit with that. It all just compounds on itself. It’s just a rough spot right now for the book business.”

“Simply put, the working-age population in the US has stopped growing,” says Gad Levanon, founder of the Labor Market Institute. “And the working-age population without a BA is shrinking quite rapidly.” That’s a major issue for the industries we’re discussing here because in general, people with college degrees prefer not to work in warehouses, as truck drivers, or in printing presses.”

Biden’s vaccine mandate has cargo giants in a pre-holiday panic

“A trade group for air cargo giants like UPS and FedEx is sounding the alarm over an impending Dec. 8 vaccine deadline imposed by President Joe Biden, complaining it threatens to wreak havoc at the busiest time of the year — and add yet another kink to the supply chain.”

“The deadline has been hailed by public health officials as a way of increasing vaccination rates as the country continues to struggle with the Covid-19 pandemic. But business groups and conservatives have warned that it could have damaging economic impacts. The deadline brushes right up against the peak holiday season and as some of the biggest cargo distribution companies, including UPS and FedEx, are already battling unprecedented labor shortages.”

Biden Administration Affirms Support for Protectionist Jones Act, Throwing Hawaiians, Puerto Ricans to the Sharks

“Biden made it abundantly clear that he supports the Jones Act, a 1920 federal law that requires that cargo ships traveling between American ports be made in America and owned and crewed by American citizens”

“The Jones Act is an absolutely terrible law, designed purely for protectionist measures, that shields maritime companies and unions in the United States from competition. The consequence of the Jones Act is that a foreign commerce ship that goes to states like Hawaii or Alaska or to territories like Puerto Rico can engage in domestic trade in only one American port. It can travel to other American ports but cannot take on or deliver goods unless it goes to a foreign port and then returns. A vessel from Japan that’s heading to Los Angeles cannot also stop in Hawaii along the way and engage in commerce, despite the logical economic efficiencies in doing so.”

“The end result of this restrictive law is that only two percent of U.S. freight is transported by sea, despite our long coasts, our many ports, and island states and territories. It’s in part why we have to depend so much on trucks and trains for transporting goods, even along coastal regions. Cato notes that internal shipping is about half the volume it was in 1960, while rail and truck commerce both saw dramatic increases.

Nowhere are the burdens of the Jones Act more apparent than in places like Hawaii and Puerto Rico. These restrictions distort market forces and significantly drive up the costs to transport goods to these places. The New York Fed calculated that it can cost twice as much to ship something from the American mainland to Puerto Rico as it does to nearby island nations like Jamaica. Puerto Rico actually imports jet fuel from other countries rather than the Gulf Coast because it’s just too expensive to get Jones Act-compliant vessels.

There’s no need to exaggerate the impact of the Jones Act on domestic transport costs because whenever a disaster comes around, like Hurricane Maria in Puerto Rico in 2017, the government will temporarily waive the Jones Act’s requirements so that the costs of recovery aren’t quite as back-breaking.”

“”Among the obstacles to Jones Act reform is the complex web of special interests that benefit from preservation of the status quo. Among Jones Act supporters are U.S. shipbuilders, merchant mariners, various maritime unions, and those who actually believe the law is essential to national security.””