Covid's Supply Chain Chaos Is Just a Dress Rehearsal for What's Coming

Right now, there are nearly thirty thousand containers at any one time sitting in the docks. That's three times the usual number, and they're waiting seven or eight days to get on a train instead of the usual two. So the great supply chain snarl up hasn't gone away, it's just got closer to home. That's lesson. One lesson to This would be a really bad time to have a U S rail strike, which certainly explains why the Biden administration is now actively trying to resolve a dispute between

US rail workers and their employers. In a few minutes, have a fascinating conversation with the author and journalist Christopher Mimms about the arriving today. Economy, how the route that a product takes to our front door somehow became more important than the way it was made, and why the fast changing world of supply chains and overnight delivery is now being changed even more by the pandemic. But first, here's Bloomberg u S Economy reporter Augustus Serreva down at

the docks. The biggest challenge facing us in the supply chain has been the sheer strength of the American consumers buying power. Retail sales up one cent on a month over month basis, and it is certainly better that it was the prior and the chair and CEO of Bank of America Brian Moyne Andrew said he's looking at the consumer from where he sits. He says, it's really very strong and that will take us through the tightening that

we're looking at. It looks like Americans are still spending, if not a little bit less than they had been anticipated down. So what's gonna slowing down? Nothing? Right now? During COVID, many Americans were working from home. We couldn't travel, we weren't going out to restaurants, events for movies. Some of us decided to buy furniture, sporting goods, a new refrigerator, and all of this turned into cargo that was part of Los Angeles executive director Jeane Siroca, who leads the

busiest port in the US. Things have used up a little bit for Saroka. Recently, the huge backlog of cargo ships at l A and the nearby port of Long Beach, which once grew to more than a hundred ships awaiting a chance to unload test dwindled, and the TV newsmans that beamed on flattering images of all A's bottlenecks worldwide are incoming around as much. Still, the improvement at American ports has hardly fixed the country's supply chain hadas warehouses

from Los Angeles to New York remain full. The arteries of the nation's largest railroads are still clogged in the Midwest in labor issues on the docks, railways and roads are threatening to throw a ranch at The recovery COVID nineteen and the buying frenzy it sparked exposed cracks throughout the US supply chain infrastructure, and fixing it could take years, said Stephanie Loomis, vice president of Procurement at US based

free forwarding firm Cargo trans Well. I mean part of it is what what COVID really showed is it proved that, you know, overall, our global supply chain is really quite fragile, and it doesn't take much to upend it. And then once it is upended, then every little hiccup becomes, you know, becomes a tsunami. If you're finding it hard to find baby formula and a c and even a brand new Tesla lately, you can blame the American consumer in part.

Not even inflation running at nine point a new for a year high and fears of a recession hitting in the US have put the brakes on the turbo charged the American consumer. The country's largest ports of Los Angeles and Long Beach registered their busiest June on record in these California ports are expecting to handle even more cargo this month as retailer stock shelves ahead of the holiday season. Here's saroke again. Our nation's economy is driven by you

and me buying goods. So I think we may start buying Hamburger instead of stake. We may buy beer instead of fine wine. We're gonna watch our family's pocketbook a little bit closer. We're gonna keep buying. The relentlessness of US consumer buying has surprised analysts when unprecedented demand for goods broke the US supply chain last year, showing crucks throughout the process. Many analysts expected consumers to eventually go back to spending money on flights, movie tickets, and nights out.

That should have eased the pressure on the American logistics network, but demand for goods has remained strong so far. To be sure, indicators compiled by the New York Fed City Bank and a startup freight forward or Flag Sport are all anticipating that, with shipping strains on demand, a painful spell of weaker demand might be an expert global supply chains free costs are declining and inventories are beginning to

pile up. But importers got the message last year and they don't want to risk another crisis ruining Christmas for Americans this time around, So retailers begin this year racing around the clock to beat these issues ahead of the holiday season. We have a shipper, for example, that has over six hundred containers worth of artificial Christmas trees that were already in the port in the March April time frame that would have been unheard of prior to the pandemic.

Bath Rooney, director of the Port of New York and New Jersey, the second largest sport complex in the US. But when you have outdated infrastructure and thousands of retailers fighting for limited capacity, that means while more bottlenecks. I equate this to us going to the Department of Motor Vehicles, are going to a walk in medical center where before they open, we and a hundred other people bull show up thinking we're going to be the first ones online.

In fact, massive retailer is like Target and Walmart, will wind up being first in line to get their products shipped around the country, said loom Is, the Free Forwarding executive in Indianapolis. In the meantime, with limited capacity all around, smaller companies with less money to spend have found themselves bagging actors across the supply chain to take their cargo. You know, if if targets calling, the carrier is going

to move Target. The carriers have made it clear that their priority is their largest customers, not so much the rest of You know it, I say it all the time. You know the world doesn't revolve around Walmart, Target Amazon. There's there's billions of companies that also I forwards on China and meet their adducts to come in, and they only have two weeks to do it. You either put it on a ship before you put it in the air. But without big time investment in infrastructure, clogged supply chains

are risking becoming fossilized as the new normal. American ports often rank as the world's most inefficient for containers, and some parts of the supply chain haven't been modernized in decades. The US government's infrastructure package passed in has promised seventeen

billion dollars reports. On top of that, ports and their tenants plan to invest almost thirty three billion dollars per year by Some of those plans, however, involve upgrades like automation, which are currently a topic of fierce debate and contract talks between union dockworkers on the West Coast and their employers, but these investments take time. In the emirror, can supply chain is begging for solutions. Now here's loom is again.

The real solution is that in several places around the world, most reportedly in the United States, we need serious infrastructure UM advancement, and it proves that and those things just don't come over late. For Bloomberg News, I'm a guest to Sarava. I'm genuinely delighted now to be talking to Christopher Mims, who I should say is a slightly unusual interviewee for Stephanomics, because not only does he right for a competing media organization, he's technology columnists for the Wall

Street Journal. But he's here because I just came across his book and really liked it. The book is arriving today, and I've found it without the help of any publisher or agent. In fact, my sister Laura Flanders told me about it, and I thought it was just such an interesting piece of reporting about every part of the global supply chains that we talked about often on this podcast. I've been waiting for an excuse to have the author on the show, So Christopher, no journalistic impartiality here. I

am a fan of your book. Um. The full title is arriving today. Why everything about what we buy and how we buy it has changed? And I was struck listening to that piece from Augusta surreva Um, the freight company person at the end, says talks about how a hiccup in global supply chains now can quite easily become a tsunami, and that struck me certainly for me in your book, that's one of the things that has changed, right, Supply chains are more complicated, more global, and also a

lot more fragile. Yes, they are a lot more fragile. I mean, it's it's a pretty simple principle to understand. I think the longer you make a supply chain, um, the more points of failure there are. And the thing is that a supply chain is a physical thing, it's

a geographic thing. And you know, we live on a planet now where whether it's a pandemic or political strife or increasingly extreme weather and climate change, um, individual events anywhere along that supply chain can interrupt the whole thing. And on top of that, you know, supply chains have been made more efficient year by year, uh, you know,

in the name of not carrying excess inventory. And when you live in a world where everyone has adopted this this Fortist or Toyota production system idea that everything should be just in time manufacturing and supplies, and you twin that with really long supply chains, then you end up with tremendous vulnerability, and frankly, I think we've seen new

kinds of waste. So in a funny way, all of these retailers that we've seen, especially in the US, with all this excess inventory, um, you know, they ended up with it despite doing their darnists to try to avoid that by creating these these long, just in time supply chains. And as we heard in the piece, and we'll get into I think later, there are still some serious issues, particularly on the sort of ground based bit of the

supply chain. Right now, it's kind of moved a bit from from long lines of container ships to to what's happening on the ground. But we should we should back up a little bit, and if you could just tell us briefly what you set out to do with your book, because you've taken on a pretty big terrain. So I wanted to trace the path of just sort of a

typical consumer good from Asia. You know, in the past people have been creative and done things like T shirts, but I just did a USB charger because it's this ubiquitous electronic object. It's sort of the first run on the ladder when a country starts to get a little more sophisticated in their manufacturing because there is a fair

amount of electronics and microchips in it. And so I traced the path of one of these from Vietnam, which of course is becoming this new manufacturing powerhouse, and just trace its journey across the ocean and then across the continental US, and in the process, you know, it gave me an excuse to talk about how shipping works and has changed, how ports have changed tremendously, how trucking and rail has changed, and then how sort of the Amazon

portion of the supply chain has changed hugely, Right, so all of what we used to do where we would get you know, by goods from a store, now of course through e commerce. How does that distribution network function and how is it dependent on you know, not just armies of millions of people, but lots of robotics, artificial intelligence, prediction algorithms. How has that made that arriving today, uh

noteification possible? Why is it that I can go online and pretty much anything I want there is a seemingly infinite variety of it available to me within what was two days now it's one day, now it's four hours, even though that object began its journey maybe six months ago, twelve thousand miles away on the opposite side of the globe. And I guess we should say the timing was pretty

relevant here. So you you were, you were how far through the book when COVID struck because that obviously that must have made reporting a lot more difficult, but obviously everything about what you were writing about a lot more interesting to more people. Yeah. I was probably about two

thirds of the way through the reporting, um. And you know, I hadn't written a word when I was standing, you know, on the dock in Vietnam and getting texts from friends like, hey, have you heard about what's going on, uh, you know in China right now with this virus that's spreading. And I was like, I don't know what you're talking about, you know. And at the time, I was literally on

and around the world journey. Um. And so a lot of the goods that I saw on the dock that day, you know, containers full of things like, um, items that people would buy to make working from home and educating their kids from how possible, uh, you know ppe you know, masks and gowns and stuff was in these containers that I was watching get loaded that would then arrive you know, um, two to six weeks later at the Port of l a and be part of that initial just buying spree

that happened at right after lockdown. There's been a lot of books that explained, you know, how important that container ships are and the creation of the container and how it built the modern world. And I've read quite all of those books. But you're the first person who actually took the trouble to find out how on earth you pilot one of those enormous container ships into the Port of Los Angeles and Long Beach, which is obviously where

of goods from Asia come into the US. So just tell us a little bit bit about because it turns out it's a much tougher parking job. But I think any of them would have imagined. Yeah, I mean, I think one of the great untold stories of the of this century and the last half of the previous century is the way that so many jobs that used to be sort of mundane blue collar jobs have become really skilled labor. And a great example of that is the

harbor pilot. I mean, they've been harbor pilots since ancient Greece, because when your ship arrived to a port, you don't know where the shoals are, you don't know how to navigate. It's very tricky. So a native pilot would come out on a boat and this still happens to this day, um and hops on the boat and they're the only person who is allowed to pilot that ship into the port. Nowadays, it's extra important with these truly enormous container ships because

the tolerances are so narrow. The way I described it in the book is like imagine you have like a wooden block and you're just kind of like pushing it down a rain gutter, and there's maybe a centimeter on the bottom and on each side, and that's how wide

the ship is relative to these ship channels. And then you know, even the tolerance on the top is very tight because a lot of these ships as they go under you know, let's say a bridge when they're going into the port, you know there's there's maybe only two ms tolerance, and if it's a hot day and the bridge is sagging, maybe it's just a meter. So these harbor pilots um, you know, if they mess up millions and millions of dollars worth of equipment is smashed and

and it's a huge problem. So their job is really tough, and they're compensated accordingly. They're the highest paid, uh you know, civil servants in in the on the payroll of the city of Los Angeles and make more than four hundred thousand dollars a year because they are so rare. But they also, it sets out, have quite a high risk of dying on the job. They're still having to basically jump onto one of those ladders, kind of hanging off

the side of Jacob's ladder. I mean that to me was just extraordinary, and they quite regularly fall off and die, right, Yeah, So they have harbor Pellet as a one in twenty chance of dying on the job during their career. Because to this day, transferring somebody from a small boat to a large ship is very difficult. They kind of hop

onto this rope ladder and climb up the side. You know, you would think that they would invent some kind of I don't know, escalator or something, but it's just nobody's figured out any better way to get a person onto a giant ship at sea. You also made a point of mentioning the sailors around the world who are marooned on all these container ships during COVID, and I think you sort of had a line about, you know, never

has so much be known to so few. Yeah, I mean at the peak, there were hundreds of thousands of sailors varied a lot for months and months who could not get off of their ships because it was a collective action problem, right, Like if a ship comes into a port, you know, those sailors could belong to a half different nationalities, none of which are the same as the country in which they've just alighted. And during you know, the early COVID times, even these countries didn't want to

let sailors off of these ships. Nor could these sailors necessarily hop on a plane during the early part of the lockdown to fly home. And so you ended up with sailors who, you know, they would sign up for a six month contract and they would be kept a year or eighteen months. And you know, it wasn't quite that they were enslaved on these ships, but it was in a way, you know, it's close, right, It is a form of servitude where they absolutely could not get

out of the situation. They could not get home, and the sailors who whose entire income is depending on getting onto those ships and relieving the ones who are on there, couldn't get on and make a living. So it ended up being this this really kind of collective disaster that's a product of the way that you know, the seas

are still um. You know, you get out beyond beyond the range of of countries Navy, it's still lawless zone in a way, and it's a place where countries have to collaborate, and you know, these these blue color largely sailors were the victim of that during the pandemic, and it was it was this tiny fraction of the global workforce who are still managing. We're responsible for the for the supplies that did get through during that time when

we were all locked up at home. Okay, so we have we do currently have doc and railroad worker unions negotiating contracts with their employers and on the railroad workers, given that we already have all these delays of goods waiting to get onto trains. The White House is so worried about the paralyzing effect of a strike that they've just created a Presidential Emergency Board to come up with a plan to that will be acceptable to railroad management

and the union workers. The International Longshore and Warehouse Union, which you write about in the book, are also in talks at these Some of these workers are subject to this paradox of automation that you described, So just tell us a little bit about that. Yeah, port workers, especially these days, um, are subject to, uh, this paradox where if you want to make these ports cleaner, greener, more productive, um, you know, you've got to automate them. Um. But of

course the Longshoreman's union doesn't want that. So what they have negotiated for in the past is okay, you can automate you know, this terminal, because ports are can sometimes be made up of dozens of terminals. But in exchange, you will retrain this many workers to maintain the robots that are literally going to replace the people who before we're driving the cranes, driving the yard trucks that move

containers around, etcetera. Um. So this has been the story in shipping and imports frankly since the debut of the shipping container. The shipping container wiped out more jobs in ports than any subsequent innovation. But this latest iteration will certainly shrink the ranks of UM long shoreman even further.

And you know, to be clear, you know, if you go to the port of Rotterdam, which was really the first giant port in the world to automate back in the late n or you go especially in China, there's tremendous automation there already the technology is available, but it is this real struggle now that you don't frankly often see where it is a direct trade off between automation and jobs. Usually automation displaces workers into new roles, but here it's like, you know, those jobs are going to

go away. A lot of other bits of your book, which about the rise of sort of mass manufacturing and scientific management techniques, I mean, we can't go into all of it, but the trucking I think we do need to make time for because shortages of truckers has been such a feature of the recovery post COVID, not just in the US, but also across Europe and in the

UK um in the past couple of years. So why is it that we find truckers probably as important, maybe more important to getting goods to us than forty years ago, but somehow not enough of them. Yeah, trucking is an area where technology has made truckers more productive. Um. Certainly, deregulation in the United States also went a long way toward making truckers more economically productive, but it made the job more punishing, more difficult, longer hours, frankly, much lower pay.

It's no surprise that you have so much turnover in trucking because you especially in the US, you have lots and lots of people who are certified to drive long haul trucks who go and get that commercial driver's license, but they burn out quickly. And a big part of it is, you know, if you're on the road, let's say your long haul trucker for twenty days out of every month, you're working fourteen hours a day. Uh, you know minimum because that's the federal limit, and you're essentially

making the equivalent minimum wage. Well, forget that. You could just stay home and have two jobs in fast food and at least sleep at home at night. So it's become a very unappealing and a very difficult and a very lonely job. And so the average age of truckers just keeps going up. Um. And you know, there's I think a lot of political paralysis around addressing what the

real quality of life issues are there. You point out in your pieces that they're earning two thirds less in real terms than they were forty years ago, these truck workers, despite being just as important to the supply chain, if not more so. So, I guess the obvious question is why aren't they just paid more by these companies who rely on them so intensely. I mean, it's complicated. Part of it is that you know, they they're not able to really unis effectively anymore, whereas before they were all

part of the team Stars union. UM. But I think a trend you see overall in a lot of these jobs you're at the supply chain is that UM, more and more efficiency and cost is wrung out of the supply chain, but at the price of robustness and reliability. And when workers are part of the the system that is paying the price for all of that increased efficiency and lower cost. Because truck transportation is significantly cheaper now than it was before deregulation, then you end up with

a more fragile system. So in some ways it is it is a choice that has been collectively made UM, both politically and economically having devoted all this time to the way the global supply chains were and then seeing how they were tested in by COVID, seeing how the

recovery has affected been affected by supply chain issues. There's a huge debate about whether or not this system of globalization is going to be unpicked, you know, whether we're going to sort of try and unscramble the omelet and have more regional or even local production, and that a lot of these very elaborate systems that you catalog and describe are just going to go away because they haven't been a good fit for the last couple of years.

What do you think about that? I mean, how much will the pandemic change all those things that you've looked at?

The experts I have talked to you who've been studying this for decades have told me that the pandemic was in some ways address rehearsal for other challenges to come, and that this entire system, which has become so efficient and so affordable, you know, grew up during a period of unusual peace, prosperity, lack of international ConfL But now that you have you know, war in Europe, you have extreme weather events, you have political unrest as a result

of rising prices and food shortages. All of these things directly affect you know, name a commodity right or name a finished good, and so what you have people talking about is near shoring, ally shoring, you know, even before

you get to so called re shoring. So I think that it is just a natural consequence of all of these interruptions that manufacturers that you know, all the people who are in the back, and and our kind of villains on euros of this who have to manage these supply chains are like, I need to find a new place to get these goods, or I need to bring some of this uh in house, or I need to pay my suppliers and subcontractors war to guarantee that they will have enough extra capacity for me. You see this

in the automotive industry, paying chip companies more to guarantee capacity. Um. So I do think that what you are going to end up with are shorter supply chains and some amount of what's called near shoring. And you know, frankly, it's probably about time because there are many ways that this was in some senses environmentally unsustainable long before it was

economically unsustainable. Do you think Amazon is going to stop doing things differently because all of that could change and you'd still it would still be pretty hard working in an Amazon warehouse. True, Amazon has changed a great deal. That's one reason they've had to continue increasing their wages, and it's one reason that they're facing this pressure from unions, although it is still extraordinarily hard to unionize a warehouse

in the United States, so that's on their side. I think that the way in which Amazon will change is Amazon the bulk of the goods that they sell is through a marketplace, so they're agnostic about the source of those goods. So Amazon quote unquote could do a massive pivot to nearer suppliers and not even know it because it's just where those manufacturers are sourcing from. That's interesting in this unprecedented advert for Wall Street Journal columnists. We

recognize quality wherever it is. But you did mention that you've just finished a documentary, So so tell us how we could see because that sort of is providing some of this kind of update post COVID update to your analysis. Yeah, and and a lot of visuals that make it real because the scale of it is hard to understand unless you can see it. But um, yeah, if you just like search YouTube for it's actually called chain Reactions and just search it for like chain reaction, w s J

or something, Um, it'll pop up. It's also on w s J dot com. It's free there. But yeah, that documentary really lays out a lot of this and you can hear it straight from the truckers, the longshoreman, longshore people, but she prefers the term longshoreman. You know, the ups drivers,

the Amazon workers, um. And I think it's really powerful, frankly, to hear it directly from the people responsible for making the system work, as I did, because certainly that's not an encounter that we have every day generally unless we work in this industry. Christopher Mims, thanks so much. Yeah, thank you very much for having me. That's it for this episode of Stephanomics. Will be back next week for

the season finale. In the meantime, do please rate the show if you like it, and check out the Bloomberg News website for more economic news and views on the global economy. You can also follow at economics on Twitter. This episode was produced by Summer Sadi and Young Young, with special thanks also to Augustus Seraiva, Anna Montero, Brendan Murray, and Christopher Mims. Mike Sasso is the executive producer of Stephanomics, The s