Date: Wednesday, September 29, 2021
Source: Sourcing Journal
Port congestion has been a major symptom of the gridlocked global supply chain stemming from the pandemic-induced e-commerce buying boom—and in the U.S., both coasts are feeling the burden.
On Monday, The Port of New York and New Jersey reported the highest number of container ships at anchor for all of 2021. Off the coast of New York, approximately 24 cargo ships and oil tankers were stuck waiting to dock due to a surge in demand for consumer goods and short-staffed ports.
Of the 97 container ships in-port at the Ports of Los Angeles and Long Beach on Tuesday, 67 are stuck at anchor or in drift areas, according to the Marine Exchange of Southern California, which tracks ship traffic in the area. On Sept. 20, the ports reached an all-time record of 70 container ships stuck at anchor.
The Port of Los Angeles’ Signal platform, which includes a public-facing dashboard view of how many shipments will be arriving at the port over the next three weeks, indicated that anchorage average for these ships was 9.8 days.
The port’s executive director is calling on the U.S. federal government to deploy more funding to combat the ongoing problem. The government has invested approximately $11 billion in the Eastern Gulf Coast compared with roughly $1 billion in the West Coast over the past decade, Port of LA executive director Eugene Seroka said in a Bloomberg Television interview.
Seroka has been a major proponent of federal intervention, particularly at home, declaring at Sourcing Journal’s Hong Kong Sourcing Summit that the U.S. freight system was “long overdue for federal investment.”
Costco charters three ocean vessels
Ahead of an assuredly hectic holiday season, another major retailer is renting its own container ships to protect its expenses and shorten lead times.
Costco has joined the likes of Walmart, Target, Ikea and The Home Depot as retail giants chartering their own ocean vessels to import freight, renting three ships to import products from Asia to the U.S. and Canada. This would help Costco avoid spending six times the normal price on shipping or containers through a third party, chief financial officer Richard Galanti said in the retailer’s fourth-quarter earnings call.
Galanti said Costco leased “several thousand containers” for use on the ships. Every ship can carry 800 to 1,000 containers at a time, he noted.
The warehouse club is expected to make 10 deliveries over the next year using these ships, accounting for approximately 20 percent of its imports from Asia.
“I feel very good with the job that our merchants, our traffic department and our operators have all been doing in order to get the products that we need, pivot when and where necessary and keep our warehouses full,” Galanti said on the call.
Galanti estimated that Costco’s price inflation for its products is now in the 3.5 to 4.5 percent range, which represents an increase from last quarter’s estimate of 2.5 to 3.5 percent.
West Coast ports expand hours as infrastructure deal awaits vote
The California ports are taking new measures to improve the situation on their own, with both hubs expanding weekend operating gate hours and the Long Beach destination testing a 24/7 pilot program that would expand the hours for cargo pickup to times when there is less traffic in the region.
“We are in the midst of an historic surge in cargo, and our terminal operators and other supply chain partners are giving their all to keep it all moving,” Port of Long Beach executive director Mario Cordero said in a statement.
Both ports said that approximately 70 percent by tonnage of all U.S.-international trade moves by water through the nation’s ports. The San Pedro Bay ports move approximately 40 percent of all containerized cargo entering the U.S. each year and roughly 30 percent of all containerized exports.
Seroka’s pleas for federal intervention are making headway, albeit not at the pace the supply chain disruptions can be eased in the near-term. The Biden administration released a multipronged strategy in June to secure critical supply chains in products from medicines to microchips, establishing a supply chain disruptions task force. In August, it appointed former deputy Transport Secretary John Porcari as port envoy to the task force looking at easing congestion.
The administration also negotiated a record $17 billion in investments in port infrastructure as part of the bipartisan infrastructure deal that will likely go to a vote by the House on Thursday. The funds would help reduce congestion and supply chains over time by investing in repair and maintenance backlogs and helping address congestion and emissions near ports.
FedEx reroutes 600,000 packages per day as labor shortages exacerbate domestic supply chain issues
Today’s issues within the supply chain go deeper than the situation out at sea. The U.S. is also dealing with a labor shortage that is impacting not only the warehousing and distribution centers, but the trucking industry that transports the goods intermodally. In August, the Bureau of Labor Statistics said that the truck transportation industry lost 6 percent of its pre-pandemic labor force of 1.52 million workers throughout the Covid-19 pandemic.
Alongside an announcement that it will increase shipping rates after the holiday season, FedEx is rerouting more than 600,000 packages a day as it scrambles to cope with the labor shortages at its hubs.
“Our Portland, Ore. hub is running with approximately 65 percent of the staffing needed to handle its normal volume,” said Raj Subramaniam, president and chief operating officer at FedEx, during the delivery company’s first-quarter earnings call. “This staffing shortage has a pronounced impact on the operations, which results in our teams diverting 25 percent of the volume that would normally flow through this hub because it simply cannot be processed efficiently to meet our service standards. And in this case the volume that diverted must be rerouted and processed, which drives inefficiencies in our operations and in turn higher costs.”
Worldwide, the congestion has only gotten worse, with ocean carrier schedule reliability tallying 21.94 days on the worst-hit China-U.S. West Coast routes, while these delays are up to 30 days on the worst-hit China-European Union (EU) routes, according to supply chain visibility provider Project44.
If there’s a slight positive to take related to the congestion, after 22 consecutive weeks of increases, Drewry’s World Container Index (WCI) composite index remained steady at $10,377.19 per forty-foot equivalent unit (FEU) for the week ended Sept. 23. The pause comes after ocean carriers CMA-CGM and Hapag-Lloyd halted the increment of spot rates as container prices on most trade lanes are at record highs.