A key force driving the supply chain issues the U.S. is facing is a lack of warehouse space coupled with a dramatic increase in demand from stateside consumers.
On Nov. 5, the National Conference of State Legislatures hosted a summit where supply chain issues were discussed. Ray LaHood, co-chair of Building America’s Future, said that during the pandemic, people have been ordering 28% more goods. This increase in demand is leading to ships sitting offshore from ports waiting to be unloaded. And despite cooperation between the ports, railroads and trucking companies, the crunch is expected to last months.
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“They’re trying to find a solution,” LaHood said. “The bottom line is probably this will not be solved until the first quarter of next year.”
The warehouses and trucking companies that were used to moving and storing a certain amount of goods weren’t set up for the increase in demand, said Susan Gardner, senior director of operations and projects for the Georgia Ports Authority.
Playing in to that lack of capacity is the fact that the U.S. economy relies on a just-in-time model of delivering goods, said Chris Jones, president of Florida Economic Advisors. Most retailers are used to getting their goods hours before they’re wanted by consumers, thanks to complex algorithms that help predict demand. While this helps keep overhead low, and reduces the need for warehousing goods, it also means that any disruption between the producer and the consumer throws it off.
“If you’ve got no cushion, if you’ve got no warehouse space for excess inventory to deal with those surges in demand, you have a problem,” Jones said.
As evidence, he pointed to the Port of Long Beach in California, the nation’s second busiest port, which the week before had stated they have approximately 60% more tonnage waiting to be offloaded than the facility has the ability to process. Infrastructure to handle an increase in volume will take time and money to develop.
For LaHood, the infrastructure bill, which passed Congress last week, offers hope to address the problems into the future. There’s millions of dollars to improve port infrastructure included in it. It’s a departure from the status quo, he said.
“There was never really any money at the federal level to improve ports,” LaHood said. “Now there will be.”
A White House breakdown of the $1 trillion infrastructure bill states that it will invest $17 billion in port infrastructure and waterways, and $25 billion in airports to address repair and maintenance backlogs.
In Washington State, the Seattle Times reported in mid-October that there were some 15 cargo vessels waiting to berth at either Seattle or Tacoma ports.
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