SUPPLY CHAIN CRISIS WORSENING


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The number of ships anchored outside the ports of Long Beach and Los Angeles has risen from about 60 in early October to nearly 80 now and there is no clear end to the pile-up in sight, Soren Skou, CEO of shipping giant Moller-Maersk said in a Financial Times interview last week. (See “Backlogged Ships = New Abnormal,” 28 Sep 2021.)
Clogs at the world’s ports are becoming even worse now as manufacturers and retailers scramble to meet post-COVID demand and stock inventory for the winter holiday shopping season at the same time, he said.
“The ports aren’t working as well as they should, so we can’t discharge [shipping] containers as fast as we would like” and get them back into circulation, Skou added.
“What we need in Long Beach is more longshoremen and, most importantly, more truckers,” he noted.
The demand for containers and deck space on ships has pushed freight rates to record highs, as we reported in “Shipper Books Tenfold Increase in Net Profits,” 17 Aug 2021.
As a result, Maersk multiplied its third-quarter profits by five times year on year, pocketing $5.9 billion, its richest period since 2014.
The company has spent about $1 billion to add to its air freight capacity, buying Germany’s Senator International air freight business. Maersk also will add five airplanes to its own fleet over the next three years, it has announced. (See “Maersk Building End-to-End Logistics Service,” 12 Oct 2021.)
Recent comments from corporate executives during earnings calls indicate that companies are seeing logistics gridlocks lasting longer, perhaps even into the second half of next year, The Wall Street Journal reported.
The current global tangle “is going to extend for quite some time,” Robert Biersterfeld, CEO of C.H. Robertson Worldwide, the U.S.’s largest freight broker, said in an earnings call earlier this month quoted by the WSJ.
Other executives echoed Skou’s comment that solving the global supply chain problem hinges on finding more workers to move merchandise.
Also, supply lines have become globally interwoven in recent years, leaving no quick way to unclog them, logistics experts told the WSJ.
“The logistics industry does not see 2022 as having any less disruption in supply chains than in 2021,” UPS president Scott Price told French news agency AFP in September.
The disruptions are prompting companies such as Clorox, Majestic Steel, and apparel maker Under Armour, to make permanent changes to their supply structures, including dropping secondary products to focus resources on key items and forging relationships with a broader array of suppliers, the WSJ said.
Manufacturers are redesigning assembly processes and facilities to make them more resilient to shortages, such as the scarcity of computer chips that has crippled the auto industry this year, according to the WSJ.
Although supply chains could be operating almost normally by next fall, “COVID is the big wild card,” Lisa Ellram, a Miami University business professor specializing in supply chain management, commented to the WSJ.
TREND FORECAST: As we noted in “Fed’s Favorite Inflation Gauge Reaches 30-Year High” (2 Nov 2021), clearing clogs in the supply chain will be only the first step in curing what ails the world’s supply chains.
Once supply lines are open, there will be a backlog of orders that will keep the opened supply lines full, still keeping pressure on prices.
Also, once supply lines are clear, the world will still face a shortage of key minerals and materials essential to industry. These shortages will persist, to a greater or lesser degree, through 2022, slowing growth, keeping prices on the rise, and hampering the job market’s recovery.

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