America’s Broken Supply Chain

Not enough workers there can offload containers in a timely manner, and a shortage of truck drivers is delaying shipments to the rest of the country. This all results in price hikes for everyone and possible shortages for holiday shopping. David Lynch, global economics correspondent at the Washington Post, joins us for the broken supply chain. Thanks for joining, David, Sure, let's talk about the supply chain. You know, throughout the pandemic,

pretty much every industry had been hit very hard. Supply chain issues were popping up all over the place. I think the country kind of started getting a better understand, ending an education on what was going on. We were seeing backlogs, you know, from everything, right the great toilet paper shortage and how manufacturing will slow down. But right now what we're seeing is that problem continuing to persist.

And one of the key things that everybody's seeing is all of these shipping containers off the coast of California with tons of containers on them, just waiting waiting to be moved inland, waiting to be shipped across the country. And we're just seeing how everything's been clogged up. Nobody really knows how to fix it. We're seeing shortages of truck drivers, all sorts of things really compounding on top of each other. So David, help us walk through with

how the supply chain has been broken so badly. Sure, well, it's as you said, this has been going on really since the beginning of the pandemic, when Chinese factories shut down during the initial lockdowns to try and beat back the virus, and the disruptions that started from that, they have just been rippling through. Uh. You know, we Americans have been trapped in our homes, so many of us, for much of the last year or so, and so

rather than spending money at restaurants, ballgames, movie theaters. We were spending it on stuff. Everybody was buying a new iPhone or a laptop, or a desk so they could work from home, or a new furniture to make the house more comfortable. And all that stuff comes from China and Southeast Asia by large, and so the normal seasonal

patterns have been completely disrupted. That means a lot of the equipment that's needed once the shipping containers get onto land, the trucking, the chassiss you know, really every piece of the of the chain has been discombbulated, has been put out of sync. And this system is designed to work like runners in a relay. I run my lap, then I handed baton to you. You run your lap, et cetera. When I'm done with my lap. If you're not, they're

waiting to take the baton. We've got a problem, Yeah, definitely. I you know, obviously we know how big of a shift the pandemic was. Right things stopped in its tracks and are spending habits changed just that quickly. And as you said, you know, the more demand for all that stuff, whatever it was, you know, started kind of exposing all of the problems in that supply chain. Ruining that relay race. As you just said. Okay, so let's talk about the

US and how we handle this stuff. It seems like we've never been particularly good at the flow of this, at least when it comes to coordination and information sharing, and that's part of the big problem why things are so backloged. On the one hand, the system does a pretty good job of working under normal conditions pre pandemic, none of us had much trouble getting our hands on

the stuff we wanted. But relative to an optimal system, for instance, comparing of US port to a top line port in Europe or Asia, we're we're not where we

should be. You know, for a country that prides itself on high technology, we don't have fully deployed the sort of seamless information systems, databases, all the high tech wizardry that would allow everybody who's involved though on the supply chain to see the same information at the same time, to be able to track containers, to track equipment, so that everybody has full visibility into what's happening. We're not

as good at that right now as others are. And some of that's because the data privacy concerns competitive concerns. If I'm a retailer, I might worry that if if you that you know, at the ports, have full visibility into what I'm ordering and when it's coming, you know, that might be useful information for my competition to have. There are ways around that, but we need What experts tell me is we need to get beyond those concerns, resolve them, and put in place the sort of systems

that others already have deployed. Right now, we're seeing a huge backlog on the West sports in l a Long Beach. All that is this happening all over the country. Why are we seeing this mostly off the coast of California, Well, because that's where that's where cargo from Asia lands in the US. That so all the all the factories in coastal China, Vietnam, Cambodia, Southeast Asia, across that part of

the world. When container ships pick up the cargo there, they take it to l a Long Beach to a lesser extent, as those ports have gotten crowded, they move up the coast to Oakland and Seattle. But those facilities are are farther away from the consumer heartland and they're not as as big as l A and Long Beach. Now you are seeing the port of Savannah, for instance, has got a lot of ships waiting offshore. Nothing like l A, but relative to Savannah's normal operations, they're seeing

a lot of demand. Uh and up to New York as well, even Houston. Some of the ships that were diverted through the Panama Canal that would have normally have gone to the West Coast that came up through the canal and and hit our Gulf ports ports there. So you've seen the congestion spread in that regard. You know, this is an unusual obviously an unusual episode, but it's exposed some some vulnerabilities in the system that need to

be addressed going forward. You made note in the article the US is importing a historic amount of goods and that l A Port is expected to handle a record ten point eight million containers this year's I mean, obviously that's just a ton. Let's talk about costs, because cost of all the shipping stuff has gone up tremendously. Twenty dollars for a container. You made mention that it's twice what it costs in July, and that's twice what it

costs in January. So the prices of shipping have gone up exponentially, and it's obviously affects smaller companies more than bigger players like you know, Walmarts and stuff that can

absorb those costs a lot easier. Yeah, exactly. I mean, if you're if you're a Walmart or an Amazon or Costco, you're able to sign long term, annual contracts with the ocean carriers, and because you bring them so much business, you're going to get a decent rate, and you're almost more importantly, you're going to have certainty that your stuff

is going to get on their boats. If you're a smaller guy who's importing a hundred containers in the course of a year rather than hundreds of thousands of containers, then you're just not as important to the carriers, and so you might get bumped off a vessel as the carriers have had to skip sailings because their boats are getting tied up. All those ships that are waiting off the coast of l A. They should be already on their way back to get more stuff out of China,

but they're not in position to do that. So somebody's got to lose out. It's not gonna be Walmart. It's gonna be a little guy that forces the little guy into the spot market where he's got to pay through the nose. It's like trying to get to a ball game. You buy the tickets at the beginning of the season, you get one rate. If you want to buy a World Series ticket the day of the game standing outside the stadium, you're gonna have to pay a scalper and

that's going to cost more. Tell me a little bit about just in time production, because I know that figures into a lot of the way companies operate. It helps them keep inventories and costs low. But when things get backlogged like this, you know it really you know, we start seeing some weaknesses in that. And you know sometimes businesses have to turn down companies have to turn down business because they can't get the right ingredients equipment to

to complete their orders and stuff. Yeah, that I mean, we've we found that in talking to companies out in the Midwest to have their operations set up and and this is you know, this was a great innovation because it brought tremendous efficiency to production. Instead of keeping enormous stockpiles of material around, if you do that you've got to pay to store them. He's got to pay. He has already purchased the stuff, but you're not getting paid

for your goods yet. So just buying sort of as much as you need to produce this week's output or this month's out was a great innovation, but again it was efficiency at the cost of resilience. And so when something goes wrong, and the pandemic isn't the only thing that's ever gone wrong in history. We've had bad weather in Texas which knocked offline at pro chemical plants that produce a certain kind of resin that's needed for lots

of industrial plastics. We've had earthquakes, we've had fires. All sorts of things can go wrong, and when they do, and when they disrupt this finally calibrated supply chain, that's when the problems arise. Let's talk about one of the last cogs in this whole supply chain, which is the truck drivers, which we've seen shortages of two. But you know, as we've been talking about, right there's backlogs at the ports.

It takes time to get those containers unloaded and onto trucks, and what we're seeing is just a big backlog of truck drivers awaiting hours to get into the ports to get those containers out of there. You talked about one man who was a truck driver, and in normal circumstance, he can make seven round trips and an eleven hour work day to get those containers out of there. Now he's just doing one or two trips and spending time. I think he learned salsa looking at YouTube videos or something.

That's all the time he's kind of wasting just sitting there waiting to get in and out. And the important thing here is the way all of these disruptions feed on themselves. Right, he can't get in and out of the rail yard as quickly as he'd like to to pick up containers because the rail yard is jammed with containers, and they're jammed with containers because the porch are dealing ultimately with record volume and sending in more stuff to

the rail lyard than they can process. That discourages the trucker. Uh. It discourages others from getting into truck driving because they look at what's going on and they said, well, jeez, you know that's not easy money. I'm gonna do something else. Uh. And as you say, that you know, the trucker we profiled uh is wasting so much time that he's you know, he's listening to audio books and he's uh watching Conan O'Brien comedy bits uh and and even learning how to

dow to dance. This's also by watching YouTube videos. But but the trucking situation is a tough one because you know, the trucking companies tell me that they're having a hard time getting young guys to come into the business because you know, it's it's a tough way to make a living. And you know, the short haul guys, that's one thing, but those long haul drivers, when you're away from home four or five nights uh in a row, a lot

of guys don't want to do that. Yeah. And finally, you know what we've been hearing right start buying your Christmas presents early. The holiday shopping season is going to be rough, low supply, higher prices. Um. You know, people are saying that these headaches, these supply chain headaches are gonna last through Yeah this and you know these are problems that early on in the pandemic, people were saying, Okay, maybe it's gonna be a quarter or two uh, and

then we'll be back and sink. Now it's it's clear. You know, it was all last year, it's all of this year, and it may well be all next year for the holiday season. Uh. Yeah, I wouldn't. I would wait around. Uh. You know, I don't think this is going to be the apocalypse. I don't think people are going to go to stores uh and find you know,

completely barren shelves. But if you've got your heart set on a particular toy or a particular piece of electronics, I'd start looking forward early because there's no guarantee it's going to be there, you know, if you wait till the last minute. David Lynch, Global economics corresponding at the Washington Post, thank you very much for joining us anytime. I'm Oscar Ramirez, and this has been reopening America. Don't

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