Washington - President Joe Biden is pushing to ease supply shortages and tame rising prices in time for Christmas, but unsnarling U.S. supply lines could take far longer, experts told Reuters.
Biden brought together power brokers from ports, unions and big business on Wednesday to address shipping, labor and warehousing pain in the U.S. supply chain, and announced new around-the-clock port operations in Los Angeles. As his Republican opposition seizes on possible Christmas shortages to connect Biden's economic policies to inflation, and try to stall a multitrillion-dollar spending bill in Congress in coming weeks, the White House's message Wednesday was that asolution is in sight. "This is an across-the-board commitment to going to 24/7," said Biden, a Democrat. The port opening, and a promise from retailers like Target and Walmart to move more goods atnight are a "big first step," he said. Now, he said, "we need the rest of the private sector chain to step us as well." While more cooperation among the often competing, secretive players in the U.S. supply chain business is a plus, the White House's impact may be incremental at best, logistics experts, economists and labor unions warned. "What the president's doing isn't going to really hurt. Butat the end of the day, it doesn't solve the problem," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities. Americans, already by far the world's biggest consumers,have simply been buying a lot more stuff during the pandemic, much of it imported. Couple that with labor shortages, equipment shortages and a lack of space to store that stuff, nationwide.
Players from ports to retail chains are already workingfull-tilt to handle the pandemic-fueled surge in imports and getholiday gifts onto shelves and e-commerce centers in time forthe Nov. 26 Black Friday kickoff of the 2021 holiday season. Imports at the Port of Los Angeles - the No. 1 gateway forocean trade with China - are up 30% so far this year over lastyear's record. But that has left some 250,000 containers of goods stacked up on the docks due to delayed pickups, from chassis shortages and a lack of space in rail yards and warehouses. And that iscausing dozens of ships to back up at anchor outside the port. "The analogy would be the boa constrictor that ate themouse. There's a lump in it and the lump is the constraint inthe throughput of the supply chain, and it moves along each timeyou solve for a constraint," said Joe Dunlap global head of thesupply chain advisory team at CBRE Group, a commercialreal estate services firm.
'YOU DON'T BUILD A CHURCH FOR CHRISTMAS'
Frank Ponce De Leon, International Longshore & WarehouseUnion Coast Committeeman summarized the problem at U.S. ports,which the Commerce department estimates handle 76% of all trade,during comments last week. "You don't build a church for Christmas and Easter; youbuild it for a regular Sunday service," he said. "With theunprecedented influx of cargo, it's like Christmas and Easter onthe docks every single day, with more ships coming in and thepews have been full for months, and there's nowhere left to sit- or stand." Dockworkers remain available for 24-hour shifts to help clear the port backlogs, the longshore union said. But that isnot true of the people who move goods from the ships or fromports, other unions say. "One of the major problems with the current state oflogistics is the shortage of port truck drivers. They are notpaid a living wage," said Teamsters General President Jim Hoffa,who participated in the meeting with Biden. The backup may be exacerbating that shortage, because manyport drivers are not paid for the hours they spend waiting topick up a container, making the job less appealing. Still, there is no evidence experienced workers are sittingon the sidelines - U.S. transportation and warehousing are employing more people now then they did before the pandemic started, the Bureau of Labor Statistics show.
WAREHOUSES OVERFULL, UNDERSTAFFED
Like seaports, warehouses work best when they are movingproducts in and out quickly and predictably. Instead, portofficials say, they are packed to the rafters and strugglingwith employee hiring and retention. U.S. companies are leasing warehouse space at record levelsto handle the large influx of goods for e-commerce. The markets that serve Southern California ports include LosAngeles and the Inland Empire region nearby, which hadsecond-quarter vacancy rates of 1.2% and 1.4%, respectively,according to CBRE data. "Space is clearly tight," Dunlap said. It is not just that warehouses are at capacity, SteveDeHaan, CEO of the International Warehouse LogisticsAssociation, said in a recent letter to John Porcari, port envoyfor the White House Supply Chain Disruptions Task Force. Warehouse owners, tenant and workforce employers can bedifferent companies, which makes drawing up new contracts to payround-the-clock workers difficult. "The warehouse cannotarbitrarily make this decision," DeHaan said. Moving a warehouse to 24/7 operations adds another layer ofrisk, he said. "For example, receiving a container at 6 a.m. that wasscheduled for 3 a.m. delivery disrupts operations for the entireday," DeHaan said. "The goal of reducing container congestionover the next 90 days is ambitious."