The 2:00 Minute Warning

OK, so this is getting personal. Some of our viewers have told me that I'd make a great TV weather forecaster because I am, in their words, "getting real good at delivering bad news!" One CEO, during a supply chain consultation with me, told one of his directors, "Mike likes to make forecasts. He predicted all this storm stuff over a year ago—and he was spot on!" Well, it’s true that we predicted the problems ahead, but more importantly, we’ve been helping shippers get ahead of the issues—more on that later.

Look, I'd much rather be the bearer of "happy news" but when you are talking about global supply chains, the news is sobering. This isn't just Mike Regan's opinion. On September 27, the Wall Street Journal published a front page story with the title “Supply Chains Delays Worsen as Ports Struggle to Adapt”. Then this week Freightwaves published an article entitled “How supply chain chaos and sky high costs could last until 2023.” And if I really wanted to pour it on I could include at least ten very recent articles that basically share the same message:

SHIPPERS NEED TO ACT NOW TO PROTECT AND SAVE THEIR SUPPLY CHAINS!

As the WSJ article notes, our ports are operating at capacity with each recent week setting a record for ships at anchor in the LA Basin, and now at some ports on the East Coast. The limitations on working hours, the lack of available workers, and the lack of major automation capabilities are major factors in these record breaking delays.

While some ports, such as the Port of Long Beach, are testing 24/7 operations, which are the norm in Asia, let's not kid ourselves. With the type of work rules in effect and operating conditions governed under the ILWU contract, capacity constraints are and will continue to be a factor throughout 2022.

As the article notes: “Before any changes this coming week, the longshore routine at the ports involved two shifts: 8 a.m. to 4 p.m. and 6 p.m. to 3 a.m. An overnight shift of five hours is available but it is up to 50% more expensive and rarely used, say liner and terminal operators who foot the bill.”

And there are other "BIG" issues to deal with. The article also highlights the fact that even if the ports had longer hours, the problem would still exist if the truck drivers aren’t available to pick up freight, or if they are being asked to schedule pick-ups during hours that leave them unable to deliver to closed warehouses.

Three weeks ago, I sat in on an outstanding conference call where Gene Seroka, the Executive Director of the Port of Los Angeles, cited a very important statistic: The Ports of LA and Long Beach have grown the volume of containers moving through their ports by 30% on a year over year basis, but trucking capacity has only increased by 8% during the same period.

The Freightwaves article was very sobering because it highlighted the fact that with significant constraints with China's power grid, manufacturers in important regions are reducing capacity as the government rations their electrical supply. However, when this capacity comes back on line, shippers will also be dealing with things like the renegotiation of the contract between the ILWU and the Pacific Maritime Association which expires on July 1, 2022. Since the union has already put shippers on notice that they will oppose any significant expansion in automation and may start to slow things down at the ports in the first quarter of 2022, shippers should be asking: How will we get our stuff if the union carries through with the threat? The article also notes that other things like AB 5, a terrible piece of legislation that will seriously impact trucking capacity, could seriously hurt shippers who aren't protecting their supply chains.

If you could use some support, information or technology in weathering this supply chain storm, you know what to do: Contact your friends here at TranzAct. We have helped shippers implement important strategic initiatives that can help you save your supply chains and even improve your bottom line profitability.

All it takes is just one phone call or email and we will be there with important information about market conditions, data, and technology to help you make better business decisions and strategies. As always, we encourage you to check out our resources that will help you understand how the current and future conditions in the freight markets will affect your business.