The disruption of the entire supply chain is forcing many manufacturers and dealers to rethink their business models. From manufacturing products with limited raw materials or constrained subassemblies, to managing new and used inventory and parts, to labor shortages, to implement dealers managing their operations, we are facing a subset of the challenges related to the supply chain within our agriculture industry.
This past quarter as a member of the Industry Relations Task Force, I have had the opportunity to meet with major manufacturers to discuss a variety of issues. Supply chain was a key topic in all of our conversations. A few consistent themes emerged during these discussions:
- The supply chain constraints will continue throughout 2022, and experts estimate supply chain disruptions will last 15 to 18+ months before returning to normal.
- Employee morale has taken a toll, too. Long hours, constant pressure, and demands from angry customers that can’t be resolved quickly due to supply chain dependencies are causing employee fatigue and burn-out.
It’s important to look beyond the agriculture industry and look broadly at this situation. Regardless of location or product, certain links in every supply chain are experiencing vulnerability. The reasons are complex – ranging from pre-pandemic tariffs to Biden Administration policies, etc. However, I want to focus on two key links in the supply chain that have an effect on all of us: the major bottleneck of transport vessels and the severe logistics labor shortage.
In October, a record-breaking 73 ships found themselves bottlenecked outside southern California ports near Los Angeles and Long Beach. However, the number of unloaded ships is much higher than the 73 vessels reported as ships have moved farther out to sea to avoid congestion. In early December, more than 60+ vessels destined for the port complex remained in waters farther out to sea, some hundreds or even thousands of miles away. In pre-pandemic years, it was rare for more than one ship to wait to be unloaded. The Port of Los Angeles handles 40% of the containers that bring finished goods, critical components, subassemblies, parts, and materials to our manufacturers.
With nearly 90% of global trade transported by ship, the employees manning these vessels are a forgotten but crucial link. Due to travel restrictions and other complications during the pandemic, those people working on ocean-going vessels have sometimes been trapped at sea for months on end. According to a July 20, 2021 Reuters’ report, approximately 100,000 individuals were stranded at sea. Experts predict that once these employees return to land, many of them will not be returning to the job.
At the port, labor shortages are rampant. Search Google for ‘L.A. dock worker jobs’ and you’ll find hundreds of open positions. With the unprecedented shipping backlog facing L.A. ports in large part due to a lack of workers available to unload goods, skeletal crews have endured unbearable circumstances with little relief. Compounded by the potential fall-out from Biden’s executive order regarding vaccine mandates for employers with greater than 100 employees, there are dock workers who will refuse to comply and simply find jobs elsewhere.
Port officials in Los Angeles and Long Beach have decided to implement a Port Congestion Surcharge (PSC). Any container that dwells more than nine days for local truck drayage and more than six days for rail moves are liable for a $100 per day surcharge, increasing by $100 per day. Overstays of those durations previously accounted for about 40% of all containers on the terminals. Ocean carriers have little control over the discharge of most cargo they deliver, leading to criticism that carriers were improperly targeted and concerns that carriers would try to pass the fees on to importers. This surcharge has been delayed a fourth time by the port authorities, but if it goes into effect, the cost of freight will skyrocket and compound the problem even further.
The supply chain congestion flows downstream from the sea to the ground. Trains are sometimes backed up for 25 miles awaiting entry into railyards, and trucks wait hours or even days to pick up and/or deliver their loads. American Trucking Associations’ Chief Economist Bob Costello said the current driver shortage has risen to 80,000 — an all-time high for the industry.
“Since we last released an estimate of the shortage, there has been tremendous pressure on the driver pool,” Costello said. “Increased demand for freight, pandemic-related challenges from early retirements, closed driving schools and DMVs, and other pressures are really pushing up demand for drivers.”
Gene Seroka, the executive director of the Port of Los Angeles, said about 30 percent of the port’s appointments for truckers went unused every day, largely because of shortages of drivers and warehouse workers to unload items from trucks.
There is not a simple fix to this problem. However, one insightful person who works on the L.A. docks provided a perspective that has been largely ignored by our media and policy makers.
“Ask anyone and they will blame online orders,” said Eli, a longshoreman at Port of L.A. “When COVID hit, you expected a drop in shipping for a long time, but that didn’t happen. Instead, more people shopped online, so shipping went up as a result. Still is, by the way. There is no single solution to this, and I’m just a dockworker, but a big way to help would be to buy more locally or within America for a while. But that is not going to happen, because we are so tied with overseas shipping right now and bringing in things from Asia.”
Wow, he nailed it. I think this dockworker said it best.
Maybe I will think twice before placing my next order on Amazon. I never realized the impact that my online order has on everyone involved with the global supply chain, including our OEM’s and you.