- Allen Czermak
Navigating The Container & Supply Chain Crisis
Some are calling it Containergeddon while others are simply referring to it as a supply chain nightmare; whatever it is retailers are in a major pickle for the upcoming holiday season. In a typical season, resellers would make sure they are loaded up on inventory for the last quarter of the year but now they have their hands up in the air and are not sure what to do. Many of these businesses rely on the sales in the last few months of the year to help them turn a profit for the entire year. Not having the inventory to sell is putting these businesses in limbo and the most frustrating part about it is that their shipping containers are right here in the United States.
Many retailers in the United States are not waiting for the products to be manufactured from overseas but are waiting for their containers to be unloaded and shipped to their nearest warehousing facility. Some containers have already been unloaded from massive cargo ships but are piled high due to the mass influx of containers that cannot be accessed. It’s truly a frustrating experience and some big retailers are beginning to take matters into their own hands.
Port Of Los Angeles Container Delays
In order for retailers to get their merchandise from China to the United States they will opt to choose the shortest route via the Pacific Ocean. The final destination for the cargo ships is none other than the Port of Los Angeles. From there, retailers will rely on intermodal transportation companies to deliver shipping containers to one of their local warehouses.
The problem is that labor shortages, demand for products, and the pandemic has all led to a major traffic jam at the port and this is being referred to as Containergeddon. In a recent interview, Gene Seroka, Director of The Port of Los Angeles said the following, “The quickest route from Asia to the United States and its interior points is the Port of Los Angeles, and that is what everyone is trying to maximize on, but it’s like taking ten lanes of freeway traffic and squeezing them into five”.
But in truth, it’s more than that. Even when the ship gets to port and is ready to be unloaded, the port does not have the manpower to handle the container surge. There is a lot that has to happen besides unloading a cargo ship and sending it out of the port. The container needs to be processed, sorted, and parked at the terminal so it can be picked up by a logistics service. The labor shortage is not helping as many departments in the port are being overburdened and the port has nothing else to do besides leaving the containers piled one on top of another. At this point a business could have no way to access the container and get it sorted and parked for pickup. This has turned into a real nightmare for both big box and small retailers.
Major Retailers Chartering Smaller Cargo Ships
Big companies like Walmart, Home Depot, and Costco are avoiding the Containergeddon fiasco by hiring smaller cargo ships that can navigate to a port that will facilitate the shipment of the container faster. Other ships that deliver coal and grain from abroad can make room for a limited number of containers which can also expedite delivery time. Either way it’s going to cost these big box retailers more to get their products to the United States and shoppers are going to see price increases on these products.
But what's most unfortunate is that it’s not the big box retailers that will suffer most but rather the small businesses that make their money through online platforms where they sell their merchandise. These brands will be forced to liquidate whatever inventory they have or pay for their products to be delivered via air if they look to compete this holiday season. It’s a hard reality but there is so much on the line for these popular but small brands that some are driving U-Haul trucks directly into the terminals to unload their containers. It’s a real challenge which the big box companies can handle but not the small brands.
What Are The Options For Small Brands To Get Their Containers Sooner?
It’s important to understand that there are other routes to the United States besides from China but it needs to make economical sense. The American Apparel & Footwear Association had an offer from an international logistics company that if it could truck its container from Myanmar to Taiwan and they would be able to receive the container sooner. This would add an additional $3,000 to their shipping cost which was already at $18,000, bringing the total freight cost of $21,000 in order to get their container to the United States. Each company needs to weigh the pros and cons of expediting their shipping container to the United States. Some retailers that earn their profits in the fourth quarter are forced to pay these costs as their whole existence is in peril.
The other option is to forgo shipping a whole entire container and ship part of the container via air. For example, an apparel company that has stores scattered throughout New Jersey is opting to ship hats which are trending via air and choosing to wait on the other sportswear to be shipped via sea. If there are items that will definitely sell during the holiday season it would be wise to ship those products to your warehouse via air and possibly increase pricing slightly to recover those costs. Just don’t raise prices too much since that will scare away shoppers.
There are many quality logistics providers but some are able to guarantee ten day delivery from Shanghai, China. Regent Logistics claims that it can get your container from Shanghai, China and have it available the next day with seamless intermodal cargo transportation to its final destination. It’s important to have a relationship with a logistics company that could be able to facilitate a shipping container when you need it most.
The Supply Chain In The USA Is Broken
It’s more than a COVID-19 pandemic and increase in the demand for home products that has led to this shipping container debacle. Businesses have become so reliant on manufacturing products overseas and it’s now coming back to bite them. If there is an important element in your supply chain that you don’t have ownership on and it fails there is no way to fix it. It’s not like you can rely on another means of getting your products 6,000+ miles away. Our companies at home have taken for granted that a freight company delivers containers to their warehouse without even thinking about what happened in between for it to get there. Well now they know and are paying the price, anywhere upwards of $25,000 per a container. This is in addition to the added cost of manufacturing to which the Chinese are taking advantage of U.S. companies with excuses like the pandemic, inflation, and product demand. It could be that they are right but the supply chain nightmare will continue until we have a fix at home.
The Only Question Is: How Do We Become Independent Of Manufacturing In Countries Like China?
This is a really hard question but there is going to have to be a commitment from the government, states, companies, and the people of the United States of America. Politicians are going to need to put aside differences and come together on a common idea of bringing manufacturing back to the United States. Perhaps it will take a decade but most importantly the citizens need to show interest and support brands that manufacture products in the USA. If the country can’t get together on common ideas like fixing the supply chain then the states need to introduce incentives to produce goods in the United States. The issue first came to the forefront when PPE supplies were not available at the height of the pandemic. Families of patients could not believe that there were no ventilators for their loved ones here in the USA. It was a major let down to our citizens that our healthcare companies were not able to treat the most vulnerable. It was a hard time but people often forget and think things will just fix themselves. Well they didn't and here we are watching the logistics nightmare titled Containergeddon.
People are only beginning to notice the issue of the current supply chain nightmare because they can’t get the products they need. Contractors are stalling jobs due to the lack of building supplies available and if they can get their hands on lumber it’s at a high price. The supply chain crisis needs to be a topic that impacts everyone from the consumer looking to buy toilet paper to the big company that can’t get vital supplies to meet the demand of a big order. When the supply chain issue begins to hurt big companies' revenues, only then will we see legislation introduced to promote production here in the USA.