Understanding the Shortages?
October 6, 2021 | View PDF
Perhaps you, like me, have gone shopping for a specific product recently, only to learn the store was out of stock with no indication as to when replenishment would take place.
This is becoming commonplace across the U.S. and, while for most of us it’s a minor inconvenience, on a national and global scale it’s potentially catastrophic. My life can go on pretty much as normal without the brand of flavored bottled tea I enjoy. For a factory making a product that depends on a certain raw material, however, inability to get that material shuts down production.
I did research on this matter over the weekend and learned a great deal, or at least enough to add another weight to the scale in my mind that’s tipping us closer to national collapse. Much of my study involved a look at the global shipping industry and oooooo-boy is it messed up. I’m still not an expert, but will try to convey what I learned.
COVID – The pandemic forced lockdowns across the world. Factories were closed, as were businesses relying on the products they made. What was in the global pipeline was expended or sat in ports waiting for delivery until workers returned from lockdown. If you think of this in plumbing terms, there were places along the global pipeline with nothing in the pipe and others plugged by product.
Irresponsible government – Americans were told to stay home. The government paid them to do so. People took the money, and shopped online.
Every product ordered had to be shipped. More and more orders were pumped into an already plugged pipeline. Warehouses were emptied of existing products, so companies placed more orders to refill them.
Vulnerability - Global shipping is incredibly vulnerable and, when it breaks in just one critical place, there are implications worldwide. For example, in March of this year, just as vaccines were helping some places to recover and reopen, a container ship in the Suez Canal was turned sideways by strong winds in a place where it couldn’t be refloated or effectively unloaded. It blocked the main shipping route between Europe and Asia for six weeks, and nearly 400 ships were unable to pass. Those ships carried more than $9 billion in all manner of products and materials needed by retailers and factories on multiple continents. Just one container ship problem had global impact.
Manpower and infrastructure – On September 30, there were 90 container ships at the port of Los Angeles – Long Beach, the main shipping center between the U.S. and Asia. Of those, 28 were docked and being unloaded, but 62 were waiting to do the same offshore and been told the wait time to dock is 9-12 days. There are only so many dock workers and cranes to unload shipping containers. Some of the ships can carry more than 14,000 twenty-foot containers. Even working round the clock, the congestion problem is expected to last well into 2022. And I haven’t even touched on the downstream impact this has on truck and rail shipping.
Impact – Shortages will likely become worse before they get better. What I’ve described happening in one U.S. port is taking place at dozens more around the world. Prices will be going up dramatically because of shipping supply and demand issues. There will be economic impact because the shipping crisis will be peaking right at the peak of the holiday shopping season, a critical make-or-break time for U.S. retailers.
What can we do? – Not much other than get your holiday shopping done ASAP, place shopping orders only for U.S. – made goods if you want them on time, shop locally if you can, be frugal in anticipation of higher prices, reduce your debt and expenses, and hang on. We’re in for some rough times ahead.