A single ship carrying 19,100 20-foot shipping containers can haul 156 million pairs of shoes, 300 million tablets, or 900 million cans of cooked beans. It’s hard to even accommodate the nearly half a million containers of cargo, waiting on ships outside the Los Angeles and Long Beach ports.
With the holiday season here, as we work through supply chain hurdles, short-term steps — including consumer incentives to shift spending, penalties for leaving shipping containers idle and rerouting ships to Oakland — can help mitigate Southern California’s backup.
Multiple reasons led us to this point. The pandemic has changed the lifestyle of many Americans, who have switched to mixed work schedules and started spending more time at home. This has led to increased demand for things like office chairs, printers, gym equipment, and home appliances.
With demand soaring, safety policies related to COVID-19 have made it difficult for suppliers to get things to where they need to go. Logistics experts report that intense quarantine requirements and partial port closures in China, along with factory closures in Indonesia and Vietnam, have significantly hampered the production of goods for the US market.
Meanwhile, the shortage of containers in China has severely limited the amount of goods that can be shipped to the United States. When loaded containers arrive at the port, there is a lack of structures available for truck drivers to use to haul them away. And there is a shortage of warehouse space to store the remaining goods in US ports.
In the United States in particular, where many self-interested players are involved and the government has no direct control over most of them, it will be difficult to involve everyone in resolving the crisis. I suggest three short-term approaches:
First, when supply cannot be increased quickly, it makes sense to curb demand – to try to induce consumers to shift their spending from goods to services. To achieve that goal, the Biden administration must push faster and harder on vaccination mandates. Safety is a must to get Americans back into travel, eating out, and back to the movies, shows, concerts, and the gym. Once the vaccinated population reaches a critical threshold, the government can incentivize businesses to get Americans out of these homes and back to enjoy services again.
Second, many undersupply problems are caused by a lack of coordination among those involved in the supply chain—and a few quick fixes can go a long way. Take warehouse capacity: California Governor Gavin Newsom signed an executive order on Oct. 21 calling on state agencies to designate land designated for storing containers now stuck in ports. This is a good step forward.
The government should follow up with penalties for unclaimed containers, which often exist because storage fees and demurrage yards are so low. As an initial step, the Port of Los Angeles and Long Beach commissions recently approved new fines for containers that have been in the port for more than nine days. Fines will start at $100 per container, increments of $100 per day, and provide incentives for retailers to quickly claim containers and dispose of the goods inside via fire sales.
Third, while the Twin Ports of Los Angeles and Long Beach and the ports of Seattle and Tacoma are very crowded, importers and exporters should not lose sight of the Port of Oakland. Despite being a smaller port, Auckland has spare capacity to handle container ships more quickly. Also, the port has the infrastructure required to move containers quickly via the direct Union Pacific Railroad.
These quick and simple solutions can help ensure that merchandise like toys, shoes, game consoles, and holiday decorations arrive in stores soon. However, even though temporary fixes may hold us back this holiday season, we need to plan ahead. Any long-term supply chain solution must include a comprehensive review of the entire physical and information infrastructure.
Christopher S Tang, professor and chair of business administration at the University of California, Anderson School of Management, has studied supply chains for more than 30 years. This piece was written by Zocalo public square.