It's been weeks since the ports of Long Beach and Los Angeles announced they were moving to a 24/7 schedule in order to clear up backlogs, but so far nothing much has happened. There are still upwards of 60 or 70 container ships anchored offshore waiting a turn to offload their cargo.
Over the weekend a reader emailed to ask me what's going on. I don't really know, but I can at least point out that there are various choke points in play:
- Docks: Ships can't unload unless there's berthing available for them.
- Trucks: Berthing space can't open up faster than usual unless there are trucks available 24/7 to move the containers.
- Warehouses: Even if there are enough trucks, they have to have someplace to take the containers. If warehouses are full, trucks have no place to take their loads.
The problem, fundamentally, is that people are spending lots of money and that's caused a big spike in trade with Asia. This is a good thing, but it's also caused a crunch at the LA/LB ports since nearly 100% of their trade is with Asia.
Nobody is willing to build anything permanent to deal with this, since the backlog is obviously temporary. But the bottom line is that somehow, some way, we need more warehousing space so that there's someplace to put all the containers; more trucks running 24/7 to speed up cargo offloading at the docks; and 24/7 operation at the ports.
Any one of these things is useless without the others. The problem is that you can't just whistle up more trucks or more warehouses. It takes a while.
The other big problem, of course, is labor: not just trucks but truck drivers, and not just warehouses but warehouse workers. Aaaand, those are both boring jobs under pressure and with very long hours, which typically have paid sh!t, and truck and warehouse company owners ... aren't paying enough to fill them. And then there's COVID, which limits available workers not only directly but also (probably more) indirectly, eg because they're needed to help care for sick family, and that part of the problem is made much worse by the strenuous efforts of Republican politicians and media.
Bottom line: you can also thank business owners and Republican politicians and media for a significant part of the current supply chain bottleneck.
In addition, as I understand, anyway, the truck drivers at the port don't get paid unless they are actually transporting a container. So, when they are force to wait due to no fault of their own they sit around making no money.
The drivers are generally independent contractors who own their own trucks. Or at least their own bank owns their truck.
I haven't seen Long Beach this congested since Snoop Dogg got a particularly sticky icky.
I thought the warehouse issue could easily be fixed by piling up containers higher (LB had a 2 atop each other limit that could be raised to 6 or something... too lazy to find the actual numbers)
...but this just exacerbates the problem when you want to select a container and it's buried....you have to unstack everything (where you going to put them all?) to get to the one you want and then restack the whole mess again.
It takes very careful management and a lot of computer assistance to organize the containers in such a way that the next ones to go out are on the top of the stack. In the current state of overcrowding, I expect the process is considerably less than perfectly efficient. That, of course, makes it worse; there are a limited number of cranes and crane operators and if six containers have to be moved to load one container on a truck, loading is going to be slow, which makes the crowding in the yard worse, which makes loading slower, which makes the crowding worse, etc.
You've just given a real-life consequencesof the Knapsack Problem.
Good coverage on the topic at Naked Capitalism (who, BTW, is currently running it's annual fundraiser should you be inclined to chip in).
https://www.nakedcapitalism.com/2021/11/why-the-us-supply-chain-crisis-is-intractable-and-will-get-worse.html
Two other very un-sexy issues you don't hear about...
1. A loaded container that makes it to its destination faces whatever backlog exists at the unload point. Once the container is empty, what then? Back to the port? No room for the empty. Why? Too many empties stacked at the port. Throw some short term money at the empty container problem and send some ships back to Asia loaded with empty containers. We do this in trucking all the time; pay a rate for empty miles. Faster and cheaper than building warehouses on land you don't have at the port.
2. Shortage of container chassis. Chassis are the metal trailer frame the container is attached to for truck transport. You'll be shocked to learn a major supplier of chassis is China. The U.S. is currently in a tariff-related pissing contest with our Chinese friends. Need more chassis.
Reminder: ports are bidirectional.
Poets may be bidirectional, but that doesn’t mean trade will be: https://abcnews.go.com/Business/wireStory/us-trade-deficit-hits-record-809-billion-september-80969398
Oy… ports.
I know what you mean, jellybean.
Reports I've seen say a really first-cause bottleneck is space to store empty containers. LB sort of made a dent in that by allowing higher stacks of them but it still creates a logjam. When there's no place to park an empty it has to reside on a chassis, one for each container that doesn't have a spot, which means there's no way to truck an incoming out of the port and onto rail cars or however they're going to be moved out. Chassis are key to moving containers off the dockside to ultimate transport modes and too many of them are tied up parking empties and aren't available to move new arrivals. At least based on what I saw about a week ago.
By now it's probably so jammed up, so far down the line, that it'll take months to identify and resolve the bottlenecks, one by one. Reminds me of stories about the Southern Pacific-Union Pacific merger back in 1996-- their computer systems were so badly integrated that some carloads are supposedly still lost. Could it happen with containers this time? Sure looks like we're going to find out.
Speaking of railroads, one of our customers on the West Coast usually receives a steady supply of chemical feedstock by rail. Until COVID, of course. When things picked back up this Spring the rail carrier couldn't provide the capacity so the customer had to pay for tank truck capacity; that's 5 trucks to equal a single tank railcar.
We had a steady of stream of trucks running back and forth to Oregon to meet their need and of course we're short people too so we were struggling to meet other customers' needs. Now multiply this scenario many times over across the country.
Just another supply chain anecdote.
People are going to be swapping stories about this era for quite a while . . .
The overwhelming flaw in just-in-time everything is that it's highly inelastic. It assumes everything will work perfectly. Further, it may work beautifully as a rarity amidst a mostly 20th century plenty of slack and elasticity market, but when it becomes the dominant paradigm, the mass of inelastic operations can grind to a halt at the least irregularity, like a domino chain. Butbutbut....the spreadsheet proves that this is the prefect way to make gobs of money. Alas, the world isn't ideal and spreadsheets lie.
^^This^^
Great point! And, lest anyone forget, the world's future will include a lot more than usual "irregularities", like extreme weather, massive fires, pandemics, and the like. We're overdue for a new, more robust paradigm, but probably won't get it unless there's a substantial cost to those companies still walking the JIT tightrope.
Just In Time supply chain and logistics relying on Chinese or SE Asian manufacturing is very efficient and cost-effective. Until a global pandemic disrupts everything and unfucking the whole system takes months and months.
If big business paid a living wage, with descent hours, time off, on and on, there would be workers galore. Unfortunately, big business is so busy stuffing their own pockets that they forget that, without workers, they themselves would be out of work.
Time to bring back unions and get workers out of this morass.
You may want to look up what unionized dock workers actually make and possibly consider tracking your children out of STEM and into shipping. They're part of one of the most successful unions on the planet.
However, the members are now voting Republican since they're culturally "red" despite being part of a very strong union with upper middle-class salaries.
AND they're part of a unions whose members rely on trade with GOP-hated countries like China.
But Kevin, not quite a month ago you were telling us that the administration was doing something about it: https://jabberwocking.com/biden-presses-port-of-la-to-speed-things-up/
And, as it happens, that the backlog was 40 to 50 ships.
If only it was something solvable by an administration...
It should always be mentioned in stories like this that it's not a 'Los Angeles' problem, as lots of Trump Republicans allege. Ports in red states like Houston and Savannah are just as badly affected. It's not even an 'American' problem. From Sydney to Shanghai to Rotterdam, distribution systems are all fouled up because of the pandemic.
According to my insider sources at the LA dockyards, the management has done precisely nothing to speed up the offloading process. Schedules are completely unchanged from prior to Biden's announcement despite a large deficit of workers due to rampant COVID infections among the workforce.
I would assume the union is officially anti-Democrat since the vast majority of the workers are now voting Republican (in addition to refusing vaccinations).
I remember when Hillary asked the auto workers why weren't they supporting Democrats since Obama bailed out their industry and their jobs...and basically, they resented the fact that they needed to be bailed out.
From your brief description, it sounds like the dock workers bear resentments too. I'm sure a lot of it is justified, though some of it is possibly misplaced. Can they still afford to live in CA? Finance and e-companies are celebrated while those that just make things work are caste aside. Ok, just speculation....
West coast longshoremen are members of the International Longshore and Warehouse Union and are extremely well paid. The truckers who move the containers from the part are private contractors struggling to get by.
Well except the majority of adult workers are vaccinated nor do covid infections matter. Your post is a waste. Nothing in Drums article is factual. It's a made up story and I would remove it.
No, no, no.
It is not a " good thing " that people are spending a lot of money on Asian imports. Not when it is money artificially being created by the govt so they can TRY to consume more than they are producing ( especially when production is being naturally constrained by a pandemic and restriction measures in response).
As I said before, it is simply not logical to think you can actually consume more than you produce long term . Thinking that is possible is just believing in magic . And doing so short term means you are consuming your capital stock ( eating the seed corn) which is horrible. Or you consume other people's consumption and THEY consume less than they produce . And you build up debt for that . Is kevin saying that is a good thing?
Or , if the govt programs create an artificial demand for consumption that physically cannot really be supported in reality, something somewhere has to bring that consumption back into balance. If it cannot be market forces doing it efficiently, it will be things like shortages and inflation making it impossible for people to actually consume what they are supposed to based on what money you gave them.
Railroads.
They have been cutting back a lot, lowering costs to increase ROI--well, until things go off the rails....
Also there is increased rail congestion due to oil trains. Many of the proposed pipelines have been stopped, so the Bakken crude gets to the coast by train.
Not really. Rail has plenty of space.
I'm sure the wheat farmers confronted with cost increases and shipping delays will feel much better after they read you post.
Eh, ok. That is why wheat rail only has a 76% move rate, with capacity to spare.
It's down to 20-30 ships. Pre covid had ships anchored as well. This is not new.
How long had the ports be on a single shift schedule?
Crane operators are not a dime a dozen and you would need to double your work force and pay overtime to operate 24/7 assuming 2 12 hour shifts
Never mind get a full 3rd shift compliment of operators trained
Buys with that specific skill are awfully hard to find
Guys (or gals)..........
I remember seeing that many ships queued up to load coal off Gladstone in Australia a few years ago. And businesses have for many years sought to carry no inventory as it is apparently a poor use of capital. These logjams will now be causing business to buy forward and increase their inventory as a buffer against supply shortages, which will in turn increase the supply shortages. Could take a while to work itself out I think!