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Politics Supply chain logjam poses question: Can Biden save Christmas?

07:20  24 october  2021
07:20  24 october  2021 Source:   rollcall.com

White House scrambles to avert supply chain crisis

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The tangled U.S. supply chain, which has left U.S. ports snarled with traffic and threatens the holiday season, is drawing federal attention, but experts say the problem may be too late to solve this year.

Containers are piled up at the ports of Long Beach and Los Angeles in California in September, signs of nationwide record-high demand for imported goods fueling a supply-chain logjam. © Provided by Roll Call Containers are piled up at the ports of Long Beach and Los Angeles in California in September, signs of nationwide record-high demand for imported goods fueling a supply-chain logjam.

President Joe Biden is scheduled to meet Wednesday afternoon with representatives from unions, companies and trade groups, including the Teamsters, the AFL-CIO, Wal-Mart, FedEx, UPS, Target and the National Retail Federation, but the problem is so deep and takes so long to resolve that a meeting about 10 weeks before Christmas may not be enough.

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Willy Shih, a professor of management practice at Harvard Business School, said underinvestment in infrastructure and the lack of domestic manufacturing have helped stall parts and products from moving through the supply chain. He also said the glut of pandemic relief added to the problem by spurring demand just as supplies were constrained.

“It’s too late for this year’s Christmas,” said Shih. “The die is cast on that one.”

The logistics logjam is primarily pandemic induced, he said. Automakers cut back orders in 2020 only to realize they’d cut back too far when demand ramped back up. COVID-19 outbreaks have shut down work at ports, and a shortage of warehouse workers and truck drivers has contributed to the problem. Even while all that’s occurring, e-commerce is on the rise.

Supply chain crisis has voters on edge

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The demand to restock and catch up that began in August 2020 “has not ended,” Shih said. “There has been no lull. It’s been nonstop peak shipping since then.”

He said 73 ships were waiting last month to unload at the Port of Los Angeles. That bottleneck has spread to Vancouver, where “there’s so much traffic you can’t get trucks in to get containers,” he said. New York; New Jersey; Savannah, Ga., and Seattle are also facing logjams.

“People are trying to go wherever they can to get the cargo in,” he said.

The White House says the supply chain isn’t any less of a problem overseas. The Chinese ports of Shenzhen and Ningbo-Zhoushan — two of the five largest ports in the world — each experienced partial terminal closures for several weeks aimed at curbing COVID-19 outbreaks, which snagged global supply chains. And in Vietnam, lockdown restrictions in September halted production supporting thousands of retailers worldwide.

The White House has considered deploying the National Guard to combat the supply-chain crisis, but it's reportedly unlikely

  The White House has considered deploying the National Guard to combat the supply-chain crisis, but it's reportedly unlikely "I think that any opportunity to make a difference will be looked at," Transportation Secretary Pete Buttigieg said over the weekend. If deployed, the National Guard could help move cargo off backlogged ships in ports in Los Angeles and Long Beach, through bottlenecks at warehouses and railroads, as well as drive trucks to deliver the goods. Video: Buttigieg defends Biden's plan to solve supply chain issues: A lot must 'go right' (FOX News) Your browser does not support this video Last week, President Joe Biden engaged with a series of meetings with port officials and major retailers like Walmart.

Shih said the problem has contributed to higher shipping costs, which are passed on to consumers: Two years ago, he said, it cost $1,800 to move a container from Shenzhen to Los Angeles or Long Beach, and $4,000 by the time that product moved inland.

“These days, it’s over $20,000,” he said. “And when you’re doing charter, it costs twice that. And somebody’s got to pay for it.”

Shippers and retailers are taking steps to alleviate the problem.

The 24/7 solution

The White House announced ahead of Wednesday’s meeting that the Port of Los Angeles would begin operating 24 hours a day, seven days a week to get the ships into port and unloaded. Nearby Port Long Beach already expanded to 24/7 operations in September, according to a White House official.

Those two ports are the point of entry for 40 percent of the containers to the U.S. and have seen demand surge this year. The Port of Los Angeles saw 30 percent more container traffic through August of this year than in the same months of 2020. The Port of Long Beach saw a 28 percent increase through August from last year. Both ports saw a decline in traffic in 2020.

With global supply chain problems escalating, start your holiday shopping now

  With global supply chain problems escalating, start your holiday shopping now Parents should get their children’s wish lists ready for Santa before they put on their costumes and go trick-or-treating. © Getty Images Christmas_tree If you start Christmas shopping after Thanksgiving, you're setting yourself up for a highly stressful December, especially if you want to buy something that requires a computer chip. Game consoles, smartphones, vehicles, workout machines and other electronics are likely to be in extremely short supply.

Wal-Mart, FedEx and UPS also would move toward 24/7 operations, according to a White House senior official, while Samsung, Home Depot and Target would ramp up off-peak work hours to alleviate the backlog of freight.

“By taking these steps, they’re saying to the rest of the supply chain, ‘You need to move, too. Let’s step it up,’” said a White House senior official.

Joe Metzger, executive vice president for supply chain operations at Walmart U.S., said the company has chartered ships and diverted shipments through less congested ports, is hiring 20,000 people to fill permanent supply chain positions, rerouted inland shipments and hired more than 3,000 drivers to try to accommodate the demand.

“We have been laser-focused on inventory levels since the start of the pandemic and reported higher inventory in the second quarter this year than a year ago,” he said in a statement on the supply chain. “While we’d like to see inventory levels continue to improve, we’re on the right track.”

The White House in August also named John Porcari, a longtime Transportation Department official who also was twice secretary of transportation for Maryland, as a port envoy to help push private industry to find solutions to the backlog.

Capacity, too, is an issue. Shih said outdated infrastructure has contributed to the problem. The bipartisan infrastructure bill that the Senate passed on Aug. 10 and is pending in the House includes $17 billion for ports.

The Biden administration official said, “Put simply, much of the shipping and freight infrastructure was built decades or even generations ago, and Americans are importing and exporting far more than we did back then.”

But Shih said American consumers are at least part of the cause.

“If you talk to shipping executives, they’ll say their only relief will be when American consumers stop spending like they’re spending,” he said. “We have dumped so much money into the economy that what has happened is an import boom like nobody’s ever seen.”

The post Supply chain logjam poses question: Can Biden save Christmas? appeared first on Roll Call.

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