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11-20-2021 3:26pm
What is Causing Shipping Delays, and How to Prepare for the Holidays
Chris Connors
Editor
As the holiday season approaches, demands for goods, and reliance on shipping efficiency rise at predictable rates. This year, COVID-19 is impacting costs and shipping timeframes for customers, businesses, and manufacturers around the globe. The global supply chain problems are causing delays that go on for months causing products to be held up at factories, ports, and warehouses, with virtually no location unaffected. These products sit in their place waiting for shipping containers, planes, and/or trucks for transport. The delays have been caused by numerous factors such as semi-conductor delays, shipping obstacles, worker shortages, and of course the impact of the COVID-19 pandemic. With global supply issues predicted to continue well in 2022, relief seems far off, and consumers will likely face long delays and higher prices to put presents under their trees or exchange gifts with loved ones this holiday season.
Prices on all goods across the board, for both manufacturers and consumers, have seen a dramatic increase throughout the pandemic and these prices will only continue to rise as we quickly approach the holiday season. According to Goldman Sachs, there were over 77 ships with $24 billion worth of goods waiting outside docks at ports in LA and Long Beach, California on October 25 of this year, less than a month prior to today. An increase in demand, more goods coming into the U.S., and less supply going out created intense congestion and tripled the time it takes to get a shipping container through a major U.S. port. This intense congestion has wreaked havoc on the global supply chain. President Biden attempted to alleviate some congestion by ordering all U.S. ports to remain open 24 hours a day. This order, unfortunately, had a marginal impact on the supply chain crisis and did little to nothing for the increase in cost and wait times for imported goods.
Ultimately, the problems affecting the global supply chain stem from a national worker shortage, material supply issues raising transportation costs, and congestion in U.S. ports due to more demand (goods coming in) than U.S. supplies (goods going out). Ports and warehouses around the globe are filled with nearly 862 million shipping containers, 27% of which are reported to be empty. But there is a solution on the horizon.
Companies like Staxxon and Holland Container Innovations Nederland (also known as 4Fold) are developing collapsible shipping that folds down to nearly 1/5 their usual size. This innovation, which was difficult to sell pre-pandemic, could be one of many small solutions to congestion at warehouses and ports that begins to alleviate supply chain issues across the globe. And this isn’t the only solution on the horizon. Ports across the east coast, specifically in New York and New Jersey have been less affected by the congestion and supply chain difficulties that are plaguing most major U.S. ports. NY and NJ ports have adapted better to the supply chain hold-ups by placing fair trade restrictions on foreign companies and increasing the production of chassis (vehicle frames for trucks that transport shipping containers) in the United States. Hercules Chassis, located in Hillsborough Township, New Jersey is one of many east coast companies ramping up chassis production lowering the need for foreign imports and therefore lightening congestion at U.S. ports. These innovations appear to be one of many small solutions to the rising congestion and cost of transportation. But what can businesses do to lighten the impact of a global supply chain crisis on their earnings?
The first solution for businesses is to focus on manufacturing and production in the U.S. Avoiding the need for overseas shipping allows companies to cut down on shipping times and reduce costs for themselves and consumers. Another solution for businesses is revealed in a study by West Point researchers titled “Modeling Supply Chain Disruptions During a Pandemic: A System Dynamics Approach.” The study attempted to find a solution to the increasing demand for inventory by consumers and many businesses’ lack of inventory due to supply chain problems. The study found a simple and temporary solution to help business owners struggling with a lack of inventory. An abstract from the published research states the following, “requiring an inventory minimum before selling and increasing orders to have a safety stock could allow a retailer to be more resilient or survivable to a pandemic. ‘Firms mitigate uncertainty in demand and supply by carrying safety stock, planning for excess capacity and diversifying supply sources’ (Jonsson, 2019).” Oursler, P., & Middlebrooks, A. (2021). Modeling Supply Chain Disruptions During a Pandemic: A System Dynamics Approach.
Essentially, the study observed that businesses that increased inventory orders, despite the increase in cost, were more likely to meet the increasing demand for goods and less likely to be found unable to satisfy orders. This simple solution may help many business owners stay afloat through the supply change issues caused by the COVID-19 pandemic. “The model results suggest that the higher the inventory minimum is, the more products the firm will sell during a year in a pandemic.” (Oursler & Middlebrooks, 2021)
The study does suggest that this solution is not always workable in practice, noting the model has “limitations and does not account for every aspect of the highly complex system.” (Oursler & Middlebrooks, 2021) That being said, the study found that “implementing a safety stock policy would inevitably increase the upfront cost of acquiring supply, but it would also allow the firm to have a buffer of excess supply in the event of increased demand.” (Oursler & Middlebrooks, 2021).
As far as consumers are concerned, there is not much we can do to alleviate the pain caused by a global supply chain system in chaos. However, ordering early, shopping local and at small businesses, and buying U.S.-made goods can certainly decrease consumers’ costs and wait time to get those gifts under your tree or into the hands of loved ones.
Sources:
Oursler, P., & Middlebrooks, A. (2021). Modeling Supply Chain Disruptions During a Pandemic: A System Dynamics Approach. http://www.ieworldconference.org/content/WP2021/Papers/GDRKMCC_21_60.pdf
https://www.cnbc.com/2021/10/25/economists-expect-shipping-problems-to-linger-well-into-2022.html
https://www.seattletimes.com/business/shipping-containers-get-foldable-design-as-logjam-cure/
https://www.wsj.com/articles/truck-driver-shortage-supply-chain-issues-logistics-11635950481
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