One word best describes the US supply chain: BROKEN. There is the sense among supply chain experts that it’s too late for any meaningful solutions to be implemented that will positively impact getting goods delivered to store shelves for the upcoming holiday season. If such solutions existed, they would have already been implemented.
Six months ago, it was thought that adding more capacity was a viable solution to the space shortage. Shippers have been struggling since July 2020 to find sufficient space on ships to move their cargo. It made sense that adding more ships was the simple solution that would fix the supply chain problems. Considering there are over 100 ships waiting to be unloaded at Southern California ports, more ships was not the answer. Adding more ships did allow more product to move out of Asia but it has also created a gigantic congestion problem at US ports.
All stakeholders agree that the industry must come together as a group to fix the US supply chain moving forward. Yet, steps are still being taken by individual stakeholders that seem to suggest otherwise. The ports of Los Angeles and Long Beach have reacted to their severe congestion problem by announcing an “emergency fee” of $100 per container. Effective November 1st, the ports will begin charging the carriers $100 per day for local containers that remain at the terminal longer than nine days. Containers that are scheduled to be loaded on the rail will have even less time to be moved out of the terminal. Rail containers will be charged $100 per day once a container has been at the terminal longer than three days.
The ports of Los Angeles and Long Beach are so congested, experts believe the $100 emergency fee will have little impact on the situation. In fact, some experts believe this new fee is going to make port congestion even worse. The fee also puts the carriers in a difficult position. The carriers can either absorb the emergency fee or pass it along to their customers. Based on past decisions, it is safe to assume the fee will be passed on to shippers.
The shipping industry has been warning of a potential US infrastructure meltdown for years. The meltdown was going to happen sooner or later. The Pandemic was the catalyst and accelerated the meltdown. Stakeholders have tried different tactics to keep cargo flowing. Unfortunately, the tactics being employed today are the same band-aids that have been used over the last thirty years. The magnitude of the current shipping crisis is not going to be fixed by using short term solutions. Real change will only occur when all stakeholders decide to work together for the good of the industry. If you are familiar with the shipping industry, you understand that is a tall task.