Solving The Supply Chain Crisis One Container at a Time
On Monday, November 15, 2021, President Joe Biden signed into law a roughly $1 trillion bill (for your information this is how $1,000,000,000,000 looks). Included in the bill is $312 billion for transportation that will assist in repairing America's aging transportation system. Most of us have experienced a drive on roads that are fit for a third-world country in major cities like Houston, Philadelphia, and New York City. We all agree it’s time for an update and there will now be money allotted for that over the next five years. But more importantly is the $16 billion that is to be allotted for ports and waterways, to provide a much needed update that can assist in easing the supply chain crisis.
From my personal perspective President Biden's bipartisan infrastructure bill has come a little too late to help ease the supply chain nightmare. You can throw all the money in the world at the water ports stacked with containers to the sky and it still won’t help. In addition, $16 billion is a far cry from what countries around the world spend on their water ports. Singapore’s Tuas mega-port expansion project is to be completed by 2040 with a 20 million-TEU first stage to be completed by the end of the year, costing $1.76 billion. Ports in the United States like the Port of Los Angeles and Port of Houston get dwarfed in comparison with countries like Singapore. What's even more fascinating is that The Port of Singapore is a free port and is sustained by the country's economic growth.
One of the problems here in the United States is that the water ports are owned and operated by the states. This limits them on spending, as expansion projects need to be approved by local municipalities and residents. The United States is far behind and the ports are simply not equipped to handle the ship traffic for the biggest economy in the world with a leading GDP of 20.49. The issue is a lot bigger than a bunch of containers stacked at the port with no chassis to drive them out. The major issue here is that we are no players in comparison to other countries around the world which have no problem sending the ships to the United States of America. Just to put things into perspective there are 204 container cranes at the Port of Singapore and just 82 container cranes at the Port of Los Angeles.
In order to ease the supply chain overload there has to be both a short-term strategy and long-term strategy put in place. The bulk of the cost will need to be paid by the federal government as this is a national issue. Local municipalities can operate water ports but cannot possibly sustain the financial burden of a national supply chain issue. The water ports that litter the Southern, Western, and Eastern coasts of the United States are merely an entry and exit point for all goods that flow through the USA. Just throwing money at our local ports is not going to solve the problem. There needs to be a government initiative that takes control of addressing the domestic and global supply chain issue. Local municipalities can be a part of that but it has to start from the federal level.
Solving The Domestic Supply Chain Crisis In The Short-term
The main issue is to ease the current bottlenecks at U.S. water ports, starting with the Port of Los Angeles. Executives like Gene Seroka, can claim that they have workers and machines working around the clock but the port is in dire need to move containers out to make room for the containers that are being unloaded from ships dock at the port. For that, we can’t just rely on truck operators to pull up with an empty chassis to take any container. These drivers need to know exactly where the payload is going and how exactly they are getting paid. In normal times truck operators will bring an empty container to the port, drop it off at the terminal, pick up a full container, and continue its logistics journey. But currently, the Port of Los Angeles is not allowing any empty container drops, as there is simply no room to put them anywhere. This is frustrating the drivers and not making a pickup at the Port of Los Angeles very attractive and it’s just driving up shipping prices for businesses that are waiting on their containers. The current situation is literally driving away truck operators and they are simply choosing other delivery routes that are more fluid. It’s not at all uncommon for truck operators to be turned away from the port due to the inability to access the right container.
When the private sector cannot seem to solve the problem on its own the federal government needs to pitch in, no matter who is the president. At this point, the primary focus should be on getting all shipping containers out of the ports to make room for the ones that need to be unloaded from ships. That might mean bringing in the National Guard to drive trucks to logistics points where they can be unloaded and wait to be picked up by the customer's shipping company. If necessary, let's bring in the U.S Army Corps of Engineers and build shipping terminal lots in central locations where containers can be easily accessed via intermodal transportation to keep the goods moving until they reach their final destination (at the Port of Houston the U.S. Army Corps of Engineers actually maintains operations for things to run smoothly and efficiently). Members of the National Guard will keep on moving containers around the clock until the shipping bottleneck eases up. Where we stand today our ports are not going to be able to resolve this issue on their own and need a powerful logistics strategy to relieve the U.S. water ports. The ports are not meant to be a warehousing facility for large shipping containers. It’s simply not going to work, water ports are a logistics touch point that transfers containers to another mode of shipping such as truck and rail. Our ports are simply not made to store containers which is why they are getting stuck there for months. Many customers have no way of reaching shipping containers as they are stuck in a behemoth pile of steel.
Solving The Domestic Supply Chain Crisis In The Long-term
The real issue here is that U.S. water ports are not made to handle container traffic of even a small country in Africa, let alone our country with the number one economy in world. If you were to look at a live marine traffic map the cargo ship traffic for the U.S. is not as bad as other countries around the world. It’s just that when we need our stuff, we need it now (or more likely yesterday) and supply chain issues become amplified. In regards to the growth for shipping hubs around the world, the Port of Los Angeles that handles most of the containers coming in from Asia, has been left out of the top ten ever since 2005. The problem is that other countries around the world have been growing and reinvesting into their shipping hubs while growth for shipping hubs in the United States remains static. It’s a little embarrassing on the global scale but voters have been uneducated until recently and the issue primarily remains on the back burner.
In conjunction with the U.S. Department Of Transportation and U.S Army Corps of Engineers, a serious 25 year plan needs to be put in place for how to bring our shipping hubs up to par with those of countries like China & Singapore. Even the Port of Rotterdam in the Netherlands is more modern than any water port located along the coast of the United States. It hosts 162 multi-purpose cranes, 103 container gantry cranes, 25 floating cranes, 22 ship-to-shore bulk cranes, 12 container cranes, and ten sheer leg cranes. Shipping hubs around the world that are seeing tremendous growth have been in planning for almost a quarter of a century. Hosting a successful shipping port takes many years and multiple administrations to see that it gets completed. Simply throwing $16 billion is not going to create anything in the near future and planning needs to be well thought out and executed properly. Until that happens we're going to be stuck in a supply chain crisis as each Presidential Administration comes in and leaves every four to eight years.
The latest Infrastructure Investment and Jobs Act that was signed into law is going to have little impact in the short-term as the country is still not equipped with necessary shipping facilities to handle the consumers in the United States. Perhaps with rising inflation people will have to begin curbing spending habits and demand for products will begin to decline. No one really knows how the supply chain crisis will be resolved but there needs to be some serious folks sitting around the table who will learn from other countries around the world.