Supply chain logjams hobbling smaller shippers

Date: Thursday, October 21, 2021
Source: Freightwaves

Recent commitments to move to 24/7 operations by transportation and shipping giants FedEx, UPS, Walmart, Home Depot and others are receiving a lot of support by the Biden administration but some smaller businesses feel left out.

“Having UPS and FedEx ramp up their delivery process doesn’t do a lot for the challenges we have with lumber and labor shortages that are handicapping our industry and creating a shortage of new houses,” home builder John Fowke, testifying on behalf of the National Association of Home Builders, told a U.S. House Small Business Committee panel on Wednesday.

“This in turn has put a stress on existing housing stock. Therefore the possibility of affordable housing has left the scene,” Fowke said.

Subcommittee Chairman Dean Phillips, D-Minn., noted in introductory remarks that while large companies have the cash or flexibility to increase operating efficiencies, “small firms engaged in international trade have to accept the prevailing market price and are therefore more adversely impacted by the increased cost of shipping.”

Large corporations such as Walmart or Amazon not only can more easily absorb the higher shipping costs that are hitting all companies, “they can also negotiate more advantageous freight contracts to ship larger volumes, which allows them to more reliably get their goods across the ocean while smaller companies struggle,” Phillips said.

“Additionally, the massive increases in freight costs have helped fuel profits for the seven largest publicly traded ocean carriers in the world, who reported more than $23 billion in profits in the first half of this year, compared with just $1 billion in the same period last year.”

Chris O’Brien, chief commercial officer of third-party logistics company C.H. Robinson (NASDAQ: CHRW), testified that his company works with large and small shippers as one of the world’s largest purchasers of transportation services.

“It is especially challenging for small businesses,” O’Brien said. “We represent them with the ocean carriers and give them LTL pricing at the rates and size and scale of the larger shipper. But we are getting calls every day from potentially the largest companies in the world that are also struggling, sometimes they are thousands of containers behind. Right now our people are working harder than ever on behalf of customers of all sizes.”

O’Brien also emphasized that the trucking industry represented the “weakest link” in the supply chain right now due to a long-term shortage of drivers that has been exacerbated by tight freight capacity. He recommended support for pending legislation that would allow truck drivers under age 21 to move cargo between states, as well as legislation that promotes women drivers.

“It’s no secret that truck driving is not attracting adequate labor, and anything we can do to help the lifestyle and improve the attractiveness of that role is important,” he added.

Christine Lantinen, president and owner of snack food manufacturer Maud Borup Inc., testified that a shortage of labor across all parts of the supply chain is keeping her business from expanding.

“We need to see action to relieve the bottlenecks,” she said, citing government data showing that 42% of the nearly 100 million Americans not in the labor force are retirees.

“How do we target that group? Maybe allow them to work tax free up to a certain dollar amount or provide further Social Security benefits for coming back to work.”

Rep. Judy Chu, D-Calif., used the hearing to promote the Ocean Shipping Reform Act, legislation that would give the Federal Maritime Commission more power to regulate ocean carriers. Bipartisan support for the bill, introduced in September, has grown to include 26 Republican and 18 Democratic cosponsors.

The hearing was also used by Republicans to rail against the bipartisan infrastructure bill, which they asserted would further raise shipping costs through higher taxes and expensive new energy regulations.


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