In the time leading up to the Christmas holiday, shipping has always been big business, especially this year, when bottlenecks and shortages of goods seem to be on the front page almost daily. Each year, thousands of containers full of goods and resources bob their way across the ocean, their final destination typically decorated with a bow or colorful wrapping. While holiday shopping has already begun, getting all those goods to their respective shelves starts literally months earlier.
Of course, the global pandemic limited the production of so many products we’ve grown accustomed to having. Enthusiasts, who found themselves with government-mandated down-time and $timulus packages, made use of the situation to upgrade their rides or homes. Manufacturers and suppliers reported record numbers of sales throughout the event and demand went up. Eventually, a constant supply of those goods was unsustainable. This means many enthusiasts can’t get parts. Currently, many of those products are available on a limited basis, while replenishing supplies find themselves stacked up in containers somewhere along the supply chain.
Internet forums, YouTube, and news agencies are all brimming with finger-pointing where the most recent bottlenecks in shipping are to blame as to why people can’t get parts. There’s no doubt the world’s supply department is facing an unprecedented level of issues, but who’s to blame? everyone wants to know why they can’t get parts they ordered. We took a look at several areas which we think contribute to the current situation.
The Buck Stops Where?
Remember when customers were coming to fisticuffs trying to get their hands on Cabbage Patch dolls? Forget that it was about a toy and ask yourself, where do you put the blame for such actions? Clearly, those who “threw down” for a doll are in need of some counseling. Others might blame store workers for not stocking shelves fast enough, or not planning ahead for the deluge of demand which ensued. If you think that was merely a product of the ’80s and we are MUCH smarter Americans now, I have two words for you – toilet paper.
We can clearly be our own worst enemy, but this is about more than empty shelves. Like the virus-de-jure, the current availability of goods is much more far-reaching — global in fact. When you consider the global shipping trade hauls 11 billion tons of cargo each year, you can begin to see the scope of the issue at hand. The International Chamber of Shipping (ICS) has called on the United Nations, claiming that since the supply chain is a global entity, various inconsistencies among governments dealing with the virus have helped create the backlog by limiting the availability of crews for shipping vessels.
No doubt crews on these ships should be considered “essential,” but ICS reports that 400,000 seafarers were unable to leave their ships, with some working as long as 18 months over their initial contracts. Many were forced to stay on the vessel for months on end, even in port, due to not meeting the differing requirements between countries. In the letter, they suggest intervention and oversight by the United Nations to help clear up the shipping bottleneck.
But what about those ships anchored just off our coast? That’s where the issue (and finger-pointing) goes from floating to flatbed. Finding the tip of the port-based bottleneck is much like looking at a plate of spaghetti and trying to find an end of one strand. Once you pick one and begin to follow it, you see how completely it’s interwoven within the confines of the plate, and how they ALL contribute to serving up the dish we are currently forced to eat. The ingredients of that meal have both been simmering in legislation and broiling in the pressure-cooker of recent events.
Back in 2018, California’s Supreme Court heard a case to settle when, and if, an individual worker should be classified as an employee. The scope of that case is much broader than can be covered here, but suffice to say, the decision prompted the State of California to introduce the “gig worker bill,” also known as Assembly Bill 5 (AB5). AB 5 codified an “ABC test” for determining the validity of any independent contractor classification.
Marketed as a way of evening the playing field between owner-operators and employees in company-owned trucks, the bill dissolved many contracts with independent owner-operators. This is due to the cost increases they imposed upon the shipping company by requiring employee benefits for those independent contractors. While a number of advocacy groups from varied professions sought exemption from the bill, it was decided the trucking industry within California was subject to the confines of the bill, and going into effect on Jan. 1, 2020, the timing couldn’t have been worse.
Another legislation snafu dealt with the trucks themselves. Also in 2020, California’s Department of Motor Vehicles implemented a “Guide to California’s Clean Air Regulations for Heavy-Duty Diesel Vehicles.” In the guide, the State of California explains that the California Air Resources Board has begun enforcing regulations pursuant to California’s clean air goals. Designed to “level the playing field”, the guide explains that if your vehicle does not meet the current state clean air laws, you could be subject to fines or lose the ability to operate in California.
In one example, Port of Los Angeles’ freight volume jumped 37-percent year over year in July. Consider in June 2021, the Port of Los Angeles (the busiest container port in the Western Hemisphere) became the first port to process 10 million containers in a 12‑month period. It’s easy to see how limiting the availability of trucks to haul away those goods from the dock can have dire effects. On the other side of the coin, these standards were known long before they came into effect and many were playing a waiting game, hoping the trucking industry would receive an exemption.
Once drivers and their trucks are deemed fit to operate within the state, drivers are then subject to waiting in long lines for loads. Most truck drivers in California are independent owner-operators and as such, get paid by the load, not by the hour. Spending several hours, idling in lines waiting to get loaded can actually cause an owner-operator to lose money due to rising fuel costs and lack of creating income during the downtime.
Another issue of much more recent foundations deals with the increase of goods through all ports. Once ships off-load those containers, the shippers need carriages to place them on, as well as trucks to haul them to market. According to DAT Freight & Analytics, Spot Truck Posts have increased 0.5-percent from October 2020 to October 2021 while Spot Loads have increased 35.2-percent in that same timeframe. Likewise, with the ratio of imports exceeding exported goods, many containers are languishing on carriages throughout the entire system, awaiting a load to help pay the ride back over the ocean. Many shippers have resorted to stacking containers off-site to be able to further enable other ships to unload cargo.
As with any issue consisting of so many contributing factors, there are numerous solutions being offered as a means to bring things back to some form of normalcy. Of course, government entities at the local, state, and federal levels are proposing ways to “incentivize” those caught within the supply chain to improve efficiency and productivity. Some have suggested fines up to $100 a day for each container languishing on dry ground for more than a designated number of days. The fines are designed to help grease the wheels of both loaded containers awaiting transport to market, as well as those empty containers awaiting their trip back across the ocean. While some see this as a means to move boxes more quickly, others contend the additional cost would simply be placed upon the customer. Likewise, the fines may not get the product to shelves any quicker, as the loaded containers could be shipped to off-dock awaiting areas to elude any additional fines, and potentially tie up another valuable chassis in the process.
Other voices are asking for ways to de-regulate so much of the transportation situation to allow a more free-flowing transfer of goods. Some, are asking for simpler terms, stating that how ports and shippers treat independent owner-operators could go a long way in bringing capable drivers back to the various ports of call.
Follow The Money!
Government officials are not the only ones looking to roll bank on this current situation. The Commercial Carrier Journal reported (CCJ) one of its sources has seen a 445-percent uptick in import container costs. CCJ states the only way to get space on the ship today is to pre-pay. Their source states that a year ago, finding a container space on a ship used to cost around $5,500. Today, that cost is reported to be $30,000!
In an effort to soften the blow of sitting in long lines, East Florida Hauling has begun offering driver bonuses of up to $1,000 a day for issues incurred while sitting in the Port of Miami, awaiting a load. It is yet to be determined whether the bonuses will have a significant effect on moving freight from Florida’s docks.
A Retailer’s Perspective
We reached out to a few friends in the industry to see how the current crisis is affecting business models, and what they are doing to overcome some of the hurdles and keep products flowing. We asked Gabriel Flores how Classic Industries has traversed these difficult waters.
To what extent has this current situation had an effect on your business?
“Like most businesses, we have had some challenges with growing and maintaining our staff to the levels required to run the business efficiently,” Gabriel stated. “Fortunately, our staff is experienced and reliable. Their dedication and willingness to step up over the past two years has allowed us to continue our business operations and move forward with minimal delays.”
Do you currently have materials/products on container ships waiting to be docked and unloaded?
“Yes, we have containers being delivered daily. Fortunately, we have multiple warehouses in Southern California, so we’re able to process the parts we receive and ship them out to customers quickly.
We do not have any significant issues related to filling orders presently. Some product categories, such as interior soft-trim products have seen longer lead times, but we generally keep a large inventory on hand to avoid fulfillment issues. In spite of the recent challenges, we still average a 91-percent fulfillment rate.”
Have increased shipping costs been a determining factor in your ability to receive future materials/products?
“The demand for automotive products has continued to rise over the past two years. While there has been a substantial increase in transportation costs, the rising costs haven’t impacted our ability to procure parts or deliver to our customers in a timely manner.”
The Bottom Line
As you can see, there is no one major cause to the shipping situation right now. In fact, many of the contributing factors would be of no consequence, if it were not for many of the other detractors occurring at the same time. Some of the “issues” are actually positive things, such as the record-setting shipments many of the nation’s ports are seeing right now.
Other factors are merely pointing out the chink in the supply chain’s armor, such as the effects of legislation and regulation on the transportation industry. Other times, the issue has root in simple machinery shortages such as carriages to haul off the new containers or return the empties back to port. While rail and over-the-road trucking can move massive amounts of freight, containers first must be moved from ships to holding areas where they can be sorted and set up for transport. Shipments destined for rail service are dependent on a carriage immediately upon the shore. Couple all of that with arrivals during the height of Christmas, and you can see how such a huge bottleneck can be overcome trying to flow from so many fronts.