The global supply chain crisis isn’t over—in fact, it’s getting worse. And that may mean there will be long waits for new gear.
In March memes about Ever Given, the tanker stuck in the Suez Canal circulated on social media and front-page photos of U.S. ports clogged with dozens of cargo ships waiting weeks to unload, highlighted a perilously dysfunctional global shipping system. A March 6 New York Times story proclaimed, “the pandemic has disrupted trade to an extraordinary degree, driving up the cost of shipping goods and adding a fresh challenge to the global economic recovery. The virus has thrown off the choreography of moving cargo from one continent to another.”
It seemed it couldn’t get worse. But a new, more contagious variant of Corona Virus is further debilitating the global supply chain, from production to transport. Experts and analysts expect that it won’t just be bikes, boats, and tents in short supply this back-to-school season, but that retailers will be sold out and unable to restock with any predictability potentially into the holidays.
According to a recent article in the Washington Post, a surge in COVID-19 is causing a fresh wave of factory closures throughout Asia that’s exacerbating already vexing supply chains issues. If you’re hoping for a delivery of gear from a factory in Vietnam or Bangledesh for back-to-school shoppers, don’t hold your breath.
Beyond factory closures and port delays, now when containers finally land on U.S. soil, they’re being rejected by rail carriers due to rail yards out of space to store cargo. When the system works, containers go from ship to train to truck to warehouse without a pause at any step. Now, a shortage of trucks is leaving thousands of cargo containers wait in storage, and they’re often moved a second or even third time before eventually exiting the yard, according to Lawrence Gross, a transportation consultant in Durango, Colorado, quoted in the Washington Post.
According to the Post, Union Pacific, the nation’s largest publicly traded railroad, temporarily halted eastbound traffic from the ports of Los Angeles, Long Beach, Oakland and Tacoma. BNSF Railway cut back on container transport from Los Angeles and Long Beach. Both actions were an attempt to address seaport congestion and equipment shortages that were out of control. According to the Post, “at the Port of Long Beach in California, cargo was sitting on the docks for up to 12 days, waiting for a rail car to arrive, according to Mario Cordero, the port’s executive director. That compared with a pre-pandemic norm of 3.5 days.”
Manufacturers still can’t get their goods out of Asia due to a lack of containers, fully booked ships, and overbooked airline freight space. When manufacturers do find an empty container to transport goods across the ocean, it’s costing up to 12 times what it cost pre-Covid, $24K versus $2K, which also impacts the price of goods for consumers.
The system needs an overhaul. The future of global shipping is not looking bright.
“Once you fall behind, it’s really hard to dig your way out,” Gross said in the Washington Post story. “The system has gotten out of whack.”
“It’s likely these issues will persist through the end of the year as the capacity to move boxes from our ramp to the final destination fall short of demand,” Lance Fritz, Union Pacific CEO, told an earnings call last week, as quoted in the Post.
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