Supply chain disruptions show fragile and risky system

From grocery stores to school systems, Americans continue to feel the supply chain issues that emerged with the pandemic.

“Capacity is normally tight during this time of year leading up to the holidays,” said Steve Gordon, a veteran North West trucking executive. “Reviving the global economy while large parts of the global supply chain are still hampered removes many alternative options. You can’t go to your # 2 or # 3 provider to fill the void when your # 1 provider has an outage because they are already depleted by operating somewhere below maximum efficiency.

One reader suggested that the problem was serious enough to cause the military to operate the ports. It probably wouldn’t work because of the military’s limited skills in this area. Even during World War II, the private sector handled most of the loading of the “Arsenal of Democracy”.

President Biden has already negotiated with the Port of Los Angeles, unions and users to operate 24/7, following similar measures at the adjacent Port of Long Beach. LA / Long Beach mega-ports account for 40% of the country’s maritime imports and, in early October, around 60 container ships were waiting to unload offshore.

In contrast, the Northwest Seaport Alliance, which includes the port operations of the ports of Seattle and Tacoma, does not need mega-ports to be successful.

The alliance said it processed 330,517 20-foot equivalent units – the industry’s container metric – in September, an increase of 7.1% from the same month in 2020. Imports since the start of the year year have increased by more than 22%.

This is good in normal times.

Still, port officials said it was an “everyone on deck” time to unravel supply chain bottlenecks.

At a press conference earlier this month, Alliance CEO John Wolfe said, “We are witnessing an unprecedented period in the global supply chain. … When part of the supply chain starts to be stretched to its limits, it’s like a domino effect. … When a domino falls… then the other parts of the supply chain start to fail, and that’s what we experience.

These dominoes range from factories overseas to railroads and trucks in the United States.

For example, Bloomberg reports that in Hong Kong, a coffee machine now has to wait up to nine months for critical electronics to arrive, while the cost of moving a container from Asia to America has passed. from $ 2,000 before the pandemic to $ 20,000.

Gordon said ports “are the least resilient part of the supply chain”, not least due to restrictive port workforces and resistance to the addition of technologies that would increase efficiency. “These are lousy places for truckers, and only a very small subset of the trucking industry with no other customer options serves the port. Large (trucking) fleets with modern capability are generally turning away from this activity. “

Not only that, but truckers are still in short supply.

The railways are also feeling the pressure, especially the BNSF and Union Pacific, which serve the west coast ports. Intermodal trains, carrying containers on flat cars, are backed up at the terminals.

It is hard not to blame globalization for most of the problems. In the 1960s, say, almost everything Americans used was made here (when we were the world’s largest exporter). Addressing pandemic shortages would have been much easier than with today’s complex and highly concentrated 10,000 mile supply chain. One example is that 80% of our active pharmaceutical ingredients for domestic production come from China and elsewhere in Asia. The pandemic shows how fragile it is.

Journalist Barry Lynn warned early on that the drawbacks of cheap and effective products from Asia created a fragile situation. He first saw it when an earthquake in Taiwan in 1999 caused a semiconductor shortage that closed factories in California and Texas.

In an interview in 2020, he said experts ignored his concerns, so he turned to his skills as a journalist.

“I found people in the semiconductor industry, CEOs, who knew what was going on,” Lynn said. “Over time, I realized it had to do with this drastic shift in the way we conduct competition policy, driven by the Chicago School (of Economics) in the early 1980s. , when we saw the monopoly, we saw the danger. After Chicago, we only saw efficiency.

And, as the pandemic shows, vulnerability.

Some companies thought the same way before the pandemic, Trump’s trade war, or Biden’s “Buy American”.

A 2016 article from the Organization for Economic Co-operation and Development examined how some multinationals are rethinking their reliance on global supply chains. Although he saw the so-called relocation to be more “a trickle than a flood,” the experience of the past year and a half may give him a boost.

Gordon, the director of trucking, predicts that “the free market will solve this problem, but it will take some disruption in prices and costs over the next six to 18 months (not weeks). The last thing we need is for the government to try to solve this problem which is far too complex for it to understand or have any impact. “

I don’t agree with the last part. The government has a vital role to play, including encouraging and even requiring vaccines.

We will not overcome this crisis until the majority of the population is vaccinated.

About Shirley L. Kreger

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