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28/10/2021

California port gridlock significantly impacts U.S. supply chain

Nearing two years since the pandemic's beginning, the global supply chain is still experiencing repercussions. Dive deeper into the current crisis in the American supply chain.

The current supply chain crisis

The initial impact COVID-19 had on the United States supply chain may be over, but aftershocks are still occurring as 2021 comes to a close. The post-pandemic employment lull is only making the pre-existing labor shortage worse for the country’s supply chain industry. With limited labor available, the country’s supply chain is struggling to keep up with unprecedented levels of climbing demand. America’s supply chain crisis has escalated enough for President Joe Biden to issue an executive order, titled “America’s Supply Chains” to investigate the problem.

As the biggest U.S. gateway for trade with Asia, the southern California port complex has 62 cargo ships anchored off-shore, waiting for space to dock, and 25 more on the way. Being just over 4 weeks out from Black Friday, the cargo surge is expected to continue into 2022. As we enter peak freight season, the issue does not merely end at US cargo ports. According to Supply Chain Brain, Los Angeles alone anticipates handling 10.8 million container units for 2021, increasing by 17% over 2020. Meaning an unprecedented amount of goods will pass through the entire supply chain.

The transportation network of America is experiencing a number of bottlenecks adding to the current supply chain crisis. A shortage in licensed truck drivers limits the movement rate of these newly arrived goods. Uneven and unpredictable orders have made long-term planning a near impossibility for trucking companies as well. Not to mention in order to fix the truck driver shortage, companies have to wait on new employees to be awarded their commercial truck-driver license.

The United States saw a surge in Asian imports of 1.7% from 2020. Bloomberg reports that China’s exports reached a new monthly record for September of “28.1% in dollar terms … from a year earlier to reach a high of $305.7 billion.” The strong demand comes ahead of the holiday season, likely caused by companies fearing the possibility of China’s energy grid crisis limiting trade closer to the holidays. To make matters worse, most American warehouses are not equipped with enough warehouse space to store the unexpected surplus of imported goods.

The current solution

Following President Biden’s executive order, the United States supply chain is doing everything it can to de-escalate the situation. Shippers and cargo owners at the Los Angeles docks are committing to work 24/7 to help ease the congestion. In addition, “pop-up” terminals are being created inland from the ports. To help with the truck driver shortage, authorities are working with states to speed up the commercial truck-driver license process.

Corporate executives and labor leaders have come together to resolve the additional bottlenecks in the supply chain. According to the White House, FedEx, UPS and Walmart have come together to establish around-the-clock operations, while Target, Samsung and Home Depot are increasing efforts to speed up distribution.

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