White House Action on Supply Chain Bottleneck Seen As First Step To Ending Crisis
WASHINGTON — They’ve almost become as ubiquitous as scenes of weathermen and women leaning into the fierce winds of a tropical storm during hurricane season.
We refer, of course, to the daily television news footage of a reporter bobbing up and down in a decidedly modest boat while a massive cargo ship looms yards away, dominating the backdrop of sea and air.
Inevitably, the coverage is taking place outside the massively congested ports of Los Angeles and Long Beach, a metroplex of global trade through which roughly 40% of all goods imported into the United States pass.
For beachcombers and sun bathers along this stretch of Southern California, an area the Beach Boys claimed is synonymous with “Fun, Fun, Fun” and “Surfin’ Safaris”, the anchored vessels are surely an eyesore.
But to those in the business of keeping America’s freight moving and retailers who depend on year-end, holiday-related sales to make up between 27-35% of their annual revenue, according to the U.S. Census Bureau, those ships are a vivid sign of how worrisomely outdated the U.S. supply chain had become even before the coronavirus pandemic put another crimp in it.
“Our members see this crisis as the number one issue confronting their businesses and the economy as a whole,” said John Drake, vice president for supply chain policy at the U.S. Chamber of Commerce.
“That’s why we’re doing everything we can to help fix this problem, and why our members are doing everything they can to deal with it as well,” he said.
Moments before Drake’s phone call with The Well News, President Joe Biden unveiled a series of measures the administration hopes will uncork the blockage at the nation’s largest port complex.
These include having the Port of Los Angeles join the Port of Long Beach to host non-stop operations through the holiday shopping season.
To make it work, the White House has secured pledges from the likes of Walmart, Samsung, UPS and FedEx to extend their working and delivery hours, and even the International Longshore and Warehouse Union has agreed to add shifts in southern California to match the extended hours for moving cargo.
Crucially, the U.S. Chamber played a big role in bringing member companies to the table and making the president’s announcement possible.
Drake said the effort was born of an understanding that an unprecedented, so-called Black Swan event is occurring in regard to the nation’s supply chain.
“We’re living through an extraordinary moment,” he said.
The black swan theory, also known as the theory of black swan events, was developed by Nassim Nicholas Taleb, a Lebanese-American essayist and risk analyst who began to formulate it during his earlier career as an option trader.
It describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.
“What we’re seeing is a combination of a surge in imports — because people are shifting their purchases from going out and entertainment and travel to online shopping — and the effects of the pandemic which has exacerbated underlying cracks in our supply chain foundation,” Drake said.
“That’s what we’re experiencing in real time today,” he said.
Drake said the White House announcement on Wednesday was an important shift in the direction of the conversation about the supply chain and a shift in the momentum of that conversation.
“Now, we all really have to work to support the Ports of L.A. and Long Beach to keep these nighttime operations going,” he said.
“I can tell you we are going to continue working with our members to realize opportunities, to bring more and more companies to the table to utilize those extended hours,” Drake continued.
“And I think over the long term, that’s going to help everybody because it will improve overall access to the ports,” he said.
This is not to say the announcement by the White House is anywhere near a one and done fix. Everyone coming to the table knows that supply chain pressures — even temporary supply chain hiccups — can cause significant ripple effects throughout the economy.
With the stakes so high, fixing a few ports — no matter how huge — is only the first step in addressing other, long-term supply chain challenges, Drake and others say.
“One thing we need to be looking at is how to collect and publish better data, so that carriers and shippers can understand how they are performing and what’s working,” Drake said. “And we have to address the ongoing labor shortage, which is killing us right now.”
“Finally, we have to recognize that most ports around the world are just much more efficient and much more productive than our ports are … and we have to close that gap,” he said.
A Blue Christmas Ahead?
Given that it’s already mid-October, one would assume the upcoming holiday season is going to take a major hit, but Jon Gold, vice president of supply chain and customs policy at the National Retail Federation told The Well News via email that there’s still some reason for optimism.
“Retailers have been working steadily through the pandemic to mitigate supply chain challenges, and as we approach the business holiday shopping season, retailers have taken a number of precautions to ensure they have the products available that consumers are looking to purchase,” Gold said.
These precautions include bringing in product earlier, shifting sourcing, building up inventory and using more air freight.
“Retailers have also implemented a variety of strategies to circumvent current supply chain challenges,” Gold said. “These include moving up their peak shipping season to bring in products earlier than normal. Additionally, they have invested in advanced technology that allows consumers to see what items are in stock, where they are available, and expected delivery times.”
Gold said while retailers have been proactive on this front, consumers also have a role to play.
“The National Retail Federation is encouraging consumers to shop safely and early, so they are able to find the products they want and need on time,” he said.
A recent survey conducted by the federation found that 36% of holiday shoppers are planning to start shopping earlier than they typically do.
“Consumers have demonstrated an appetite to extend the holiday season and begin their shopping earlier so that they can find items they want at prices they want to pay,” Gold said.
As for the challenges so much in evidence on the news and even in the halls of the White House, Gold said they simply highlight the need to invest in an updated, 21st century supply chain network.
“The supply chain is handling more merchandise than ever, which results in shortages in shipping capacity, warehousing space, truck capacity and rail capacity, available equipment such as empty containers and chassis and workforce,” he said.
“The administration’s recent appointment of a supply chain task force and a port envoy are major steps forward and National Retail Federation looks forward to working with officials to find additional solutions,” Gold added.
In an unsigned statement provided to The Well News, FedEx said it is continuing to “navigate operational challenges due to constrained labor markets, increased package volume and the ongoing pandemic.
“We are taking bold action in order to provide the best possible service to our customers. We’re accelerating our efforts to bolster capacity, which includes a laser-like focus on people, facilities and technology,” the statement said.
Like the National Retail Federation, FedEx is strongly encouraging all customers planning on shopping online for the holidays to shop early and ship early.
“We’re also actively working with merchants to help ensure they’re ready. We are sharing tools to give shoppers more control over their deliveries, solutions to help simplify the returns process and tips to help merchants keep their business on track,” the shipping company said.
If anything, the United Parcel Service is actually feeling bullish about this year.
“We’re gearing up to make this one of the most successful peak holiday shipping seasons ever, just like last year,” spokeswoman Carmen Ballon said in an email.
“We collaborate with our customers to meet their needs, but capacity is not unlimited at UPS or in the industry,” she said. “We understand that there must be some flexibility, so we work with our customers to adjust as we go. Last year, UPS had the highest on-time delivery performance in the industry, exceeding 96% of all packages delivered on time, every week from Oct. 1 through Dec. 26.”
But again, those shopping early will likely be the determinant of success of even the most well-laid plans.
“In 2020, only 17% of shoppers planned to finish shopping before Black Friday. This year, nearly one in four shoppers will finish their shopping before the traditional holiday season even kicks off,” Ballon said.
Better Coordination, More Innovation Will Be Key
But even if predictions of a smoother than anticipated holiday season come to pass, the work of those trying to eliminate chokepoints in the nation’s supply chain will be far from over.
“I think the Ports of Los Angeles and Long Beach are a great start, but eventually, we’re going to need to have most major U.S. ports on a 24/7 schedule,” he said. “Along with that, we have to have the ports coordinate their activities better and we need to look at technological innovations to enable every worker at a port to be as productive as possible.”
When it comes to the nation’s nagging truck driver shortage, something that’s been a problem for years, Drake thinks part of the solution lies in streamlining the licensing and other regulatory processes drivers have to go through before they get behind the wheel.
“We need to look for opportunities to pick up the pace of the process, so it doesn’t take so long to get a new driver on the road,” he said. “At the same time, I think there’s a real need to make these jobs look better to people than they do now.
“A lot of folks think the Tesla Motors of the world are going to automate them out of a job, but I don’t think so,” Drake said.
“I think we need to publicize these jobs better, emphasizing that these are good paying jobs with lots of benefits involved in them, And I think that we need to start emphasizing how important these jobs are for our economy,” he said.
Short Term Pessimist, Long Term Optimist
Though some contacted by The Well News still expressed confidence about the upcoming holiday season, Drake said it remains one of the U.S. Chamber of Commerce’s “top” concerns.
“This supply chain issue is going to get worse before it gets better. It’s not something we’re going to get past in a few weeks time. But I do think this announcement out of the White House changes the conversation in a good way,” he said.
“I think we’re going to be living with this issue for quite some time … and that there’s still work to be done, but I’m optimistic that steps like those taken by the president will make the situation better than it would have been if stakeholders had not come together like they did with this announcement,” he said.
With that, Drake was asked one more question, and that was about the states’ role or possible roles in helping to alleviate the supply chain crisis.
“One of the things I really like about the bipartisan infrastructure bill that Congress is currently considering is that it puts a lot more onus on states to develop goods movement plans, as part of their infrastructure investment plan.
“I really believe the states need to be looking at their ports as economic development centers, and they need to be making investments that take that into account,” Drake said.
“It’s my contention that states really need to understand what valuable resources ports are and the need to really focus on their development,” he said.
Of the infrastructure bill, Drake predicted “cooler heads will prevail” and the package will get passed sooner rather than later.
“I think something will come together, but that doesn’t mean you stop pushing and stop pressing. We have to keep all the pressure on that we can,” he said.
Dan can be reached at [email protected] and at https://twitter.com/DanMcCue.
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