Los Angeles Port Crisis: How to Move Containers Again

About the author: Christopher S Tang He is the Edward W. Carter Distinguished Professor of Business Administration at the University of California, Anderson School of Management.

Los Angeles’ infamous traffic jams are a familiar sight, but the current predicament in its ports is something new. To alleviate faltering supply chain issues at these ports, President Biden announced on October 13 that the Port of Los Angeles would follow the Port of Long Beach to operate 24 hours a day. But there is no indication that the crisis has abated. The number of ships waiting to unload has reached a new record of 100 container ships On October 19 with 45 more Arrive in the following three days.

Focusing on port operations is a positive step. But long-term reform will need to relieve various bottlenecks in the entire supply chain. To get the supply chain moving, the US needs to move containers out of overgrown warehouses.

Dual Ports Los Angeles 40% of all seaborne imports into the United States. There are nearly 500,000 TEU (twenty-foot equivalent unit) on ships waiting to be unloaded in ports. Putting this into perspective, the CSCL Globe ship, with a capacity 19100 TEU Containers can pull 156 million pairs of shoes300 million tablets, or 900 million cans of baked beans.

Significant delays at US ports are affecting consumer spending, hampering the recovery of the US economy. to share President Biden The US Secretary of Transportation Buttigieg’s houseIn Port Operations reveals the importance of supply chain operations to the health of the American economy.

To ease the flow of materials at ports and down supply chains, the US government, corporate managers, port managers, and experts have identified several different key factors.

Some have theorized that the underlying cause of the shortage is a pandemic-driven shift in consumer demand from the service to goods such as office chairs, printers and gym equipment as more Americans work and spend more time at home.

In Asia, safety policies related to Covid-19 such as Partial closure of ports in China And Factory closings in Vietnam It hindered the supply of imported goods from Asia.

On the home front, many believe that the supply chain crisis was caused by labor shortages including port workersAnd truck driversAnd warehouse operators, and others.

There is also a shortage of containers in China, limiting the amount of goods available for export to the United States even when containers of goods arrive at the port, there lack of container structure For truck drivers to transport loaded containers from the port.

Worse, warehouses in the US are almost full. there is only 1% vacancy rate In the Los Angeles area in late October.

When the increasing demand is met with the limited supply of everything, the entire supply chain is cut off.

Since these processes involve many stakeholders, and the US government has no direct control over most of them, it will likely take several months to resolve. Also, a long-term supply chain solution should include a comprehensive review of the physical and information infrastructure to coordinate between the various stakeholders along the supply chain, the implementation of which may take years. In the meantime, I suggest three short-term solutions.

First, when supply cannot be increased quickly, one can find ways to entice consumers to shift their demand from goods to services.

For example, the Biden administration could push ahead with vaccination mandates so that more Americans can rekindle their love for plane rides, hotel stays, movie nights, dining at restaurants, and working out at the gym. Even better, the government could partner with service providers to offer special incentives for Americans to enjoy newly improved services after a downtime.

Shifting demand from goods to services can alleviate a supply chain crisis.

Second, many supply shortfalls result from a lack of coordination between the various components. A few quick fixes can go a long way. On October 21, California Governor Gavin Newsom Requested State agencies to find land that can be used to store stranded containers in ports.

This is a good move, but those containers are not going to benefit anyone unless they come out of the repositories.

The challenge is that many retailers are in no hurry to claim slow-moving items in some containers because storage fees and demurrage at yards and warrior houses are so low. If the government can impose an additional penalty on unclaimed containers, retailers will quickly move them through fire sales.

Once the warehouse vacancy rate increases, it will give way to new containers with short stays.

Third, the shortage of container and container hulls in various ports is caused by port operations. Since the ports are full of loaded containers, they do not have space to receive empty containers. There is a short supply in Asia due to non-re-shipment of empty containers.

Once more containers are claimed and unloaded at different yards, port operators, trucking companies and warehouse operators can coordinate their operations so that truck drivers can unload empty containers, chassis and chassis-laden pickup containers in one trip. Once these processes are synchronized, more containers will be evacuated from the port, allowing space to offload incoming ships.

By changing demand dynamics and removing barriers, port traffic can flow smoothly again.

Guest comments like this were written by authors outside of Barron’s Newsroom and MarketWatch. Reflect the point of view and opinions of the authors. Send feedback suggestions and other feedback to ideas@barrons.com.


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