This story is part of, CNET’s coverage of push-and-pull to make more products in the US.
When COVID-19 hit nearly two years ago, it did more than just shut down offices, shops, and national borders. The pandemic has also put an enormous strain on the global supply chain like never before.
As I explained in my feature for CNET’s Road Trip: Made in America package, the complex orchestra of cargo ships, trucks, trains, and planes that have long been driving globalization and the consumer economy was unprepared for what the pandemic meant would bring. Suddenly the thing we had long depended on to move things cheaply and efficiently around the globe was moving much slower.
The signs are everywhere, from higher shipping costs and longer delivery times (if you find something in stock, that is) to a Fleet of ships waiting unloading at the port of Los Angeles. The list of reasons is long and starts with a surge in online shopping. Device shortages and workplace social distancing measures to keep workers healthy are also to blame, and ongoing COVID outbreaks are causing some facilities to be temporarily closed.
Zvi Schreiber is the founder and CEO of Freights, a digital booking platform for global freight. He says when the pandemic first broke out, most people in the industry expected consumers to spend less. But that didn’t happen, and the annual growth in shopping from 2020 (15% vs an expected 3%) surprised everyone.
“The entire international supply chain – shipping, ports, trains, trucks – just didn’t have that much leeway,” he says. “The whole system was under terrible stress … when people started buying more things than ever before, it was found that many parts of that chain were breaking down.”
I spoke to Schreiber to better understand the supply chain crisis. Watch our interview in the video above and read on for an overview of what’s going on and what could happen for our Christmas shopping.
This is due to an unprecedented combination of interlocking factors:
- The main reason was that US consumers don’t spend their money on travel, entertainment, and other experiences, but rather on goods. Due to the pandemic Checks also put more money in your pockets. Both of these created an explosive demand for furniture, household goods and even .
- At the start of the pandemic, factories and ports in Asia had to shut down due to lockdowns and sick workers. This slowed productivity or created backups at critical points where goods were transported between the links in the chain. Later waves of COVID-19 caused similar outages. In August, for example, container terminals in the Chinese port of Ningbo completely closed to get a delta variant outbreak under control and a cargo facility at Shanghai Pudong Airport had to be blocked.
- As the pandemic progressed, ports in importing countries also had to supply sick workers. The disease also swept through distribution centers sorting products for final delivery, adding further delays. Social distancing measures also had to be taken in the workplaces to ensure the safety of employees. Although the interruptions caused by the measures were usually temporary, companies had to change the way they worked immediately.
- When operations resumed, factories, retailers, and mail order companies struggled to keep up with consumer demands. Suddenly, reliance on just-in-time manufacturing – where companies keep inventory low to avoid overproduction and keep costs down – became impractical.
- The boom in online shopping quickly clogged every link in the supply chain. Ship capacities were restricted and some places suffered from a shortage of containers. Not only did too many ships arrive at the ports at once, but there was also no more space to store unloaded containers before they were picked up. And since there was no place to store the cargo of a newly arrived ship, it could not unload it even if a berth was available.
- The jam then splashed downstream. Intermodal shipyards, where goods are transferred from trucks to rail and vice versa, felt the crisis. In June, Union Pacific had to stop the service between the west coast and their huge shipyard near Chicago for a week to clear a cargo jam. The pandemic also took a heavy toll on truck drivers, who play a big role in keeping the supply chain going (all imports are transported on a truck at some point). The drivers risked their health to keep the goods moving.
What could happen now?
Some everyday products may run into shortages again, but it shouldn’t be as bad as it was in the early days of the pandemic. Last month, Costco announced that it would limit the number of detergents customers can buy. Supply chain problems are a cause, but so are hoarding. Your Christmas shopping is likely to be hit harder.
Even though some reports suggested that the various actors in the US supply chain could better integrate and share information to cope with disruptions, the supply chain depends on fixed resources that cannot be expanded overnight.
âYou cannot build a container ship during the day or even during the year,â says Schreiber. âMore infrastructure is being ordered across the entire supply chain, but that takes time. We can only help us in the short term if consumers, perhaps after the holidays, can calm down with their shopping. “
Looking to the future, the big questions are whether the supply chain can return to “normality” and whether there is any normality at all. Although consumer spending will eventually fall back into travel and entertainment, no one knows when and to what extent.
The supply chain is a “very large industry that can be completely ignored if it has been working smoothly as it has for years,” said Schreiber. “When there is a big hiccup, everyone suddenly becomes aware of all of these things.”
In the long term, companies could also try to shorten supply chains by relocating or relocating production back to the US. The Biden Administration, especially for what it calls “critical products” including information and communication technology, national defense, health care and medicines. Another possibility is “nearshoring” or the production of things in other countries in America that do not have to be shipped across the ocean.
Biden has also appointed a special envoy about the port congestion to its previously announced Task force on disruptions in the supply chain and The White House worked last month with the Port of Los Angeles to begin 24/7 operations.
Even if Schreiber isn’t convinced they’re working 24/7, it will help as the bottlenecks aren’t limited to the port, but he says the government is wise to do something.
“[The bottlenecks] Downriver from the port can be in the container yards, the trains and the trucks, “he said.” But it’s an extreme situation – it’s a threat to the economy if you don’t get the goods on the shelves. It could well be that meaningful government intervention could help you in the short term. “