covid19

In our previous article, we covered how the global pandemic has affected manufacturers and shipping firms in Asia. Today, we’ll discuss the impact COVID-19 has had on the domestic supply chain.

Destination Frustration

Shipping problems are not unique to Asian markets. Here in the United States, the coronavirus has reduced the number of longshoremen, truck drivers, and rail workers. Between the shortage in American personnel and the volume of imports coming into Los Angeles and Long Beach, cargo ships often have to anchor for a week or more off the coast before they can come into either port and unload.

A lack of longshoremen at destination ports means vessels cannot be unloaded in a timely manner, and it’s forcing some operations to cancel voyages. In turn, this means empty cargo containers cannot be cycled back into the shipping chain, making the container shortage even worse.

Could shipping firms reroute their vessels to ports besides Los Angeles and Long Beach? Yes. However, dock workers are already overwhelmed in other ports and a change in destination would increase ocean transit delays.

Fewer Truckers

There are about 80,000 fewer truckers this year compared to 2020. While COVID-19 has been a contributing factor to the drop-off, many truckers are also leaving the workforce because the U.S. Department of Transportation set the maximum number of hours that truckers can work per week. Since drivers are usually paid by the mile, they cannot earn as much as before. Thus, they’ve either left for greener pastures or retired.

The trucker shortage, however, is likely to deepen. Almost 60% of all current drivers are 45 or older, and nearly a quarter of truckers are over 55. Prior to the coronavirus, there were 14 million job openings for drivers, but only 1.9 million hires were made in 2019. Since March 2020, there has been a 40% decrease in driver training because of smaller classes or commercial driver’s licensing schools have closed.

Fewer drivers means fewer goods moving overland to warehouses and store shelves. In other words, lead times stretch out longer and shortages continue.

Lean Weakness

Many Lean Six Sigma black belt types who mastered “just in time” supply chain management have seen their training and certifications upended by the coronavirus.

This is leading to a rethinking of lean inventory. For instance, manufacturers of computing equipment may keep a higher stock of chips in reserve. This change would build resiliency into their organizations and lessen the effects of a future shortage. Companies would spend more on inventory, but then again, lean supply works only if manufactured products and their components are readily available. 

Strengthening the Chain

Cable Plus has taken steps to improve our supply chain and shipping services. While there will continue to be disruptions to the overall supply chain for some time, we want to assure you that Cable Plus will continue to provide you with the right solutions at the right price — right away.

The global pandemic has affected nearly every aspect of daily lives, from how we interact with others on a personal basis to how we conduct commerce.

Cable Plus has faced the same challenges as other businesses in that the coronavirus has interrupted our supply chain from time to time. While we continue to go above and beyond to help you get the solutions you need to connect your networks, we thought discussing how the world is linked together via supply chains will provide a better perspective on today’s shipping and inventory challenges.

Production Problems

For decades, American businesses have off-shored production for cost-savings. And the nations that we’ve outsourced to have themselves sent production to southeast Asian factories, where various parts and components can be made for less.

That’s just good business sense, right? Well, it was before the pandemic, and it might be once again when COVID-19 is in our rear-view mirror. But for now, factories and exporters in Indonesia and Vietnam are struggling to contain the delta variant and manage production slowdowns, which both have an adverse impact on the supply chain.

There has also been a pair of factory fires in Japan that directly impacts the connected world. One factory makes advanced sensing devices and the other manufactures fiberglass used in circuit boards. The result is shortages, which aren’t just for toilet paper anymore.

For instance, consider semiconductor chips. With lead times about a year out, the high demand for chips could see shortages last well into 2023 and beyond. This affects the production of computing and networking devices, vehicles, smart home devices, gaming consoles, and many other goods.

Companies have always focused on having greater access to supplies — and at lower costs — over their direct competitors. Now, companies across multiple industries are in an overheated competition for the same supplies, such as chips.

Shipping Difficulties

Production slowdowns caused by COVID-19 and resultant shortages don’t exist in a vacuum. They also affect shipping, which is where the supply chain experiences all kinds of disruptions.

To begin, China recently shut down the ports of Shenzhen and Ningbo due to virus outbreaks. China is
so determined to stamp out the virus that Ningbo, the world’s third-busiest container port, was closed for two weeks — after only one dockworker tested positive.

Next, ocean cargo prices have increased by a factor of six, with the median cost of shipping a 40-foot container from Shanghai to Los Angeles skyrocketing from $1300 in February 2020 to nearly $7800 in August 2021. There are also bidding wars to secure space on cargo ships. With shipping prices rising, some exporters have decided to cancel shipments altogether.

What caused the spike in shipping prices? A shortage of another kind. There just aren’t enough shipping containers to go around for lucrative North American and European routes.

Currently, there is a glut of empty containers sitting in South American and African ports and rail yards. But they’re not being picked up because COVID-19 has caused labor shortages across all industries, with shipping being no exception.

A shortage of containers in Asia, North America, and Europe further delays companies from getting their goods on board a vessel. In addition, cargo ships are leaving port much later than normal and losing their docking slots at destination ports.

Will shipping firms pick up empty containers from these less profitable destinations when the world bounces back from the pandemic? Stay tuned!