Escalating Supply Chain Congestion — Is There Any End in Sight?

The entire world is continuing to grapple with a disrupted supply chain, and the global pandemic is largely to blame for it. As COVID-19 began to spread in the early stages, it triggered major breakdowns in the trade network, causing everything from labor shortages and port congestion to an imbalance in supply and demand. While there are global efforts in effect to address these challenges, some predict the supply chain disruption may continue through the year and perhaps longer. 

Continued Supply Chain Disruption

All across the globe, COVID-19 has impacted workers, such as manufacturers, warehouse employees, shippers, and truckers, as they have gotten sick or faced quarantines, making them unable to work and greatly slowing down the output of their respective facilities.  

China’s continued pandemic approach has had an especially notable impact on the trade network, as it imposed a zero-tolerance COVID-19 policy since the beginning of the outbreak. Their strict COVID lockdowns and closures have had a trickle-down effect on global trade which has impacted ports, warehouses, and inventory. For example, when cargo carriers and shippers are unable to access key trade ports in China, such as the partial closure of the Ningbo port earlier this year, they are subsequently unable to keep up with consumer demand. And because China plays such an influential role in global trade, these closures negatively affect the entire supply chain, causing shipment delays, inventory shortages, price hikes, and more. 

China’s policies aside, the virus continues to wreak havoc worldwide. The Omicron variant has caused recent setbacks to supply chain processes, and there is massive potential for the disruption to food supply chains globally which would likely result in shortages of product and price surges. Workers at all stages of the chain have been impacted, and the rapid spread of this highly contagious variant can infect more people than have ever been seen so far. For instance,

Australia’s largest supermarket chain, Woolworths Group, reported that 20% of its employees were unable to work due to the virus.

Without enough staff to restock shelves, inspect food, or work at distribution centers, they cannot meet consumer demand. And while this is only one example from one supermarket chain in a fairly controlled country, there are many impacted communities from farmers to manufacturers and everywhere in between. 

So, aside from the potential food shortages, have these disruptions caused limited inventory in other ways? Yes, there are certainly inventory shortages, but in some instances, certain supply chains may be carrying too much inventory due to over-ordering to compensate for the 2021 holiday season rush. While the big companies had good intentions to keep up with consumer demand, predictions suggest that this immense pressure on the supply chain will have a ripple effect as it struggles to recover through 2023. 

The combination of port and warehouse closures, labor shortages, and kinks in the supply chain leading to unequal distribution of goods continues to put pressure on U.S. imports. While considerable efforts have been made to alleviate congestion in the Ports of Long Beach and Long Angeles, there are still many underlying problems and an immense backlog in container processing. These ports have recently adopted a new reservation system to space out the number of vessels at the port at any one time, but they continue to report a record-setting number of ships at anchorage and a record volume of cargo amidst an import surge.

At one point, a whopping 105 vessels were waiting to call on the ports of LA/LB. 

Counter Measures 

Unfortunately, there is no quick fix to solving all the issues in the supply chain.  As new virus variants continue to cause disruptions, there will likely be more turmoil. However, that’s not to say there aren’t ongoing efforts to address these issues. 

Some retailers are turning to on-demand production, waiting to produce products only once consumers purchase them, while warehouses are turning to more automation to combat labor shortages. Many companies are also expected to begin investing in more technology and analytics to better track and monitor every stage of manufacturing and distribution. 

In June 2021, the Biden administration created the Supply Chain Disrupters Task Force to address supply chain issues and port congestion. As part of the initiative, the President held meetings with leaders of the International Long Shore and Warehouse Union (ILWU) and the Ports of Los Angeles and Long Beach to develop action plans, such as extending working hours and offering additional shifts to workers. 

Biden Administration Port Envoy John Porcari has also been holding discussions to help alleviate the issues, creating long- and short-term solutions, like opening the Port of Oakland’s off-terminal container yard. This space is reserved for storing exports and cargo for pick-up, helping to reduce the wait-time for terminal space. 

Big companies and industries are also doing their part to help move cargo out of the port in off-peak hours so more ships can unload their cargo and relieve bottlenecks. For instance,

UPS has improved their port data sharing and increased to 24/7 operations, which the company estimates could help remove 20% of the cargo from the ports.

Meanwhile, FedEx committed to increasing their night hours and making changes to their trucking and rail use to double the amount of cargo removed from the port. Other large companies like Target, Home Depot, and Samsung have agreed to similar efforts. 

Predictions for 2022 and Beyond

Many experts believe these supply chain complications will not disappear in 2022, meaning continued labor shortages, limited inventory, delays, and port congestion. However, all hope is not lost. The Global Supply Chain Pressure Index, a gauge designed by the Federal Reserve Bank of New York to measure the impact of global supply-chain disruptions, suggests that these pressures show signs of peaking, which could lead to some moderation. So although the shipping industry may have another tedious year ahead, it is making small strides toward eventual relief.