- Allen Czermak
Can The Supply Chain Crisis Get Any Worse?
Wall street economists are introducing a group of models to hopefully show us that the new year will indicate signs of relief in the never-ending global supply chain crisis. The Chinese Lunar New Year is coming up signaling the start of a peak shipping season.
Partly because of the fast-spreading omicron variant, transportation of goods from ports of entry has been mired with labor and parts shortages. The big question is, will consumer demand die down enough for global economies to finally see some slackening in supply bottlenecks?
According to the Bloomberg Economic Index shortages have decreased very slightly over the last six months but the wave of missing workers is still a big part of the problem. As of this past Sunday a total of 111 vessels are waiting in various water ports which is almost double the amount of this past July.
The Morgan Stanley Index reported on January 12 that the congestion at the ports has most probably reached its peak. It may be because of a slowdown in the demand for goods and an indication that firms are making adjustments to ease the constraints. New shipping ports are rising up in different cities of the US and Washington will be giving financial incentives for these new ports and other infrastructure improvements. Private companies are becoming creatively independent as well.
Government Grants to Bolster U.S. Ports
Pete Buttigieg, the transportation secretary, has awarded more than $241 million dollars to stimulate action in solving the critical issue of clogged U.S. ports and accelerate the flow of goods. This is part of a five-year plan of the Biden administration to alleviate congestion and introduce new infrastructure improvements. For the next year the plan is to double the grant to $450 million for five years annually. One of the specifics of this grant is $53.3 million going to improve rail capacity at the port of Long Beach California by building a new train facility. This structure will have a 10,000-foot track system to spur up freight movement helping to ease trucker shortages.
Pressuring Ocean Carriers To Use the Port Of Oakland
In December, Secretary Buttigieg and Secretary Vilsack appealed to the world’s leading ocean carriers to decrease disruptions to agricultural shippers by restoring mutual treatment of imports and exports. Ocean carriers have made fewer containers obtainable for U.S. agricultural commodities specifically in the Port of Oakland California. Ship operators have been sending back empty containers instead of allowing farmers and ranchers to ship exported goods to the countries where the ships are headed empty of cargo. High fees and unreliable shipping times have caused intense aggravation to dairy farmers and cattle ranchers who must pay additional revenues to truckers to ship their goods to ports further away from their facilities. With the cooperation of foreign shipping lines congestion in other ports such as Los Angles can be reduced substantially.
Port Tampa Bay Florida is Reducing Truck Delivery Expenses
Tampa Bay’s container market has grown significantly especially with the recent launch of a new direct Asian service and more new connections with Central America and Mexico. The largest number of distribution centers of the state of Florida are concentrated on the Tampa Bay/Orlando 1-4 Corridor. Since this center is centrally located in the middle of the Florida peninsula, there is a substantial savings to both importers and exporters in their truck delivery expenses. This positive shift in supply chain planning is helping alleviate the demand for same-day service for those companies involved in food and drink sales, retail distribution, and e-commerce. There is a large truck cost savings for exporters and importers since truck drivers can now make multiple shorter round trip deliveries per day with this Tampa distribution center so centralized. Tampa Bay Port has just added 25 acres of paved storage and are planning on constructing another 30 acres, more than doubling their staging space. Additional cranes, and another deep-water port are being added as well.
Port Savannah Georgia Pop Up Ports
To appreciate the significance of the innovation that is happening in Savannah, one of the nation's busiest ports and hopefully will spread to other U.S. ports, let's go back to October 2021. During that month, cargo ships spent 12 days waiting to unload at the Port of Savannah which was triple the amount of waiting time of 2019. Four -in-land pop -up ports were introduced one hundred miles from Savannah close to the North Carolina border. In October there were thirty-one ships waiting to be unloaded and as of this writing there are only six remaining.
Griff Lynch, the executive director of the Georgia Ports Authority thinks that these temporary ports can become permanent locations to increase Georgia businesses in general. These pop-ups are now located in inactive train yards. This port are active all day and night - twenty - four hours loading and unloading huge ships.
Port of Boston Makes Room for Larger Container Vessels
The Port Authority of Boston under the direction of Mike Meran has expanded their port infrastructure and is beginning to accommodate larger container ships. The port expansion is opening up new horizons for customers to ship more products and make new global connections that were not possible in the past. The Conley Container Terminal project cost $850 million dollars causing lots of excitement in Boston. Through the channeling of state and federal funding the Conley Container Terminal has been expanded by seven feet allowing larger ships to dock properly with additional cranes installed as well.
For example, an exciting new dynamic presented itself in mid-January of this year to this ever-expanded port of entry. A supersized ship hailing from Hong Kong can carry as much as 12,000 metal containers each measuring twenty feet long. This ship, named Ever Fortune, is as long as three football fields and measures approximately 160 feet in width. It was built in 2020 and will connect the city of Boston to several ports in East Asia through the Panama Canal.
Loctek Furniture Company Will Build its Own Cargo Ship
Have you ever heard of Loctek? If you have not you will begin hearing about it in the near future. Gigantic companies such as Target, Costco and Walmart have been chartering their own ships to get their merchandise delivered in a timely fashion. Locktek is going a step further; it is actually in the process of building its own container ship. This furniture company has just signed a $32.6 million contract with Huanghai Shipbuilding to build for them a 1,800 TEU cargo ship with expected delivery by March 31, 2023. By owning the ship Loctek is foreseeing avoidance of the increasingly high freight rates and decreasing delivery time since its online sales have been soaring.
The COVID-19 pandemic has caused havoc in all sides of the retail industry. Whether its manufacturing, changes in sales tactics or pod logistics, there is room for modification and improvement. This is exactly what many states bordering on water are doing. There is great potential for the improvement in the infrastructure at all ports of the United States. Many of these ports have not had updates for many years. Due to the breakdown of the shipping container systems, cities, private companies, and the federal government are making hands-on efforts in solving the shipping and container issues. Expanding the terminals at the American ports will certainly allow many more venues for large container ships to dock.
Other cities not mentioned in this article are also on the bandwagon of expansion. Many advantages to logistics will come out of this catastrophe caused by the backup of cargo. Realizing the potential in online sales is one of the ways that companies can expand and make more money. Folks have become accustomed to shopping online and with most stores and malls requiring masks, shopping has lost its glamour for many. The big box names have their own independent methods of hauling whether it's leasing their own ships or actually buying them, so the consumers will be able to get their goods in a more timely fashion. It’s about time the Federal government has jumped in to help the ports modernize. The trucking industry does not use old trucks generally but stays up to date on the latest improvements and requirements for their workers to function efficiently and safely. We will always need those truck drivers to be the movers between the ships and the consumers. Unless you are a big box store with your own truck drivers and ships it is imperative to look for a reliable pod logistics company to get your merchandise to your customers fast and safely.
If money continues to come into the states from the Federal Government, the American ports of call will continue to improve their infrastructure making the chance of shipping container backups decrease in the years to come. Computer programs are being developed that will be able to forecast when consumer demand will be at its peak and what they will be buying. Let’s be hopeful that not only will the supply chain crisis not get worse but will begin improving this year.