Supply Chain Bottlenecks Addressed

Oct. 15,2021
By: Chaney A. Finn

As we have previously discussed, the United States is experiencing tremendous supply chain bottlenecks. In fact, 81 vessels are anchored in the San Pedro Bay waiting to be docked and unloaded, an increase from 40 ships anchored in February. The previous record was 28 ships in 2015. Congestion at sea ports has increased as importers attempt to mitigate inventory shortages, leading to larger than normal purchases that are causing a bullwhip effect. The increased congestion at the ports is causing soaring transportation costs and delays for importers and exporters.

Earlier this year, operations in Los Angeles were reduced for safety precautions and labor shortages due to COVID-related illnesses. The port recently extended operations past 3 a.m., however few trucks had reserved the later hour time slots as there was a disconnect between the port operators and the companies transporting the containers from the port to distribution facilities. The process was burdensome for carriers that had to align specific types of limited equipment to reserve their timeslot.

On October 13^th, President Biden announced that the Port of Los Angeles had agreed to operate 24/7 to clear the backlog of ships. However, because the port does not operate in a vacuum, the administration also called for associated businesses like railyards, warehouses, over-the-road carriers, and retailers to expand their operating hours as well. The President added that retailers such as Walmart, Target, and Home Depot have committed to increasing transportation of their freight during the overnight hours by upwards of 40% - 50%, facilitated by commitments from FedEx and UPS to expand their operations as well. The President also suggested that freight moves 25% faster at night and that increasing nighttime operations would help relieve congestion.

In the longer term the President identified priorities in his proposed infrastructure bill that are relevant to the current supply chain problems. Upgrading roads, bridges and ports that support critical supply chains would allow the country to produce, innovate and pivot quickly to adapt to logistic disruptions. Thus, the President argued that increased operations are a short-term solution, while investment in infrastructure is part of a long-term solution.

Whether the increased operations will be effective is an open question. It is not clear whether all of the necessary business operations will be willing and able to increase operations. Because all of the pieces of the logistics chain are necessary, a snag at any one business may undermine the expanded operations in the others. There are also questions about whether the proposed additional capacity will actually materially impact the current backlog.

If you have any questions about your imports and import operations do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.