On Wednesday, October 13, President Joe Biden announced that the Port of Los Angeles would go into 24/7 operations to help clear a historic backlog of cargo ahead of the holidays.
The move is the latest in several efforts in recent months to clean up the supply chain, which is currently overwhelmed.
But, as several executives said Wednesday, the supply chain is complex — so you’re likely to have questions.
Well, here are some answers.
What is a supply chain – and why should I care?
In simple words, the supply chain is the route through which goods are moved from where they are made to store shelves or, increasingly, to your door.
Here’s an example: Let’s say you’re shopping online and find something you like. For example, a barbecue grill. You just add it to your cart, check out and pay.
If the company you bought it from already has a warehouse, employees can package it up and ship it to you quickly.
But what if it isn’t? Okay, so, the company may need to order from a factory – possibly a foreign one.
The barbecue is flown from the factory to a foreign port, placed on a ship and sent across the ocean. US port workers unload the cargo and put it on a truck or train, which then takes the cargo, including your barbecue. goes. , for a regional distribution center.
Only then can your barbecue begin a relatively short trip to your home.
And why does this backlog matter? What is the effect?
The impact is potentially massive.
Because most of what you buy comes from abroad.
Last year, for example, imports into the U.S. amounted to about $2.8 trillion, according to data from the U.S. Census Bureau.
The ports of Los Angeles and Long Beach, meanwhile, represent about 40% of them – making them the first and second busiest ports in the country.
So if there is a backlog, it means delay in reaching the goods to their destination.
So you may have noticed a shortage of some stuff lately. This is why retail executives warn people to rush their holiday shopping
Wait, so this might make buying a gift harder?
We’ll let Ed Desmond, executive vice president of the Toy Association, take it:
“Get out and buy toys now,” she said in mid-September. “If you see toys you think kids want for Christmas, pick them up now and put them away to make sure you have them. Right now, there’s a fairly healthy supply in stores. We don’t know what. What’s going to happen when we hit the road closer to Christmas.”
Why is there a backlog?
The short answer is the coronavirus pandemic.
The long answer is supply chains – which officials have long worried were vulnerable to being overwhelmed – have not been able to keep pace with rising consumer demand due to changes in shopping habits during the pandemic.
So my online purchases are to blame?
Well, not at all. Consumer spending is great for the economy.
But before the pandemic, people spent a huge chunk of disposable income on vacations, dinner out, concerts and the like.
It went away in 2020. And after cargo numbers crashed early in the shutdown, consumers adjusted and began spending whatever cash they had on online purchases.
The result was a spike in cargo that led the LA and Long Beach ports to break records in the second half of 2020 and much more this year.
And the supply chain is so vast that if there is a hiccup in one corner of it, it will soon be felt in every other corner.
Dockworkers could handle them or truck or train could carry them out, containers arrived at ports faster.
Ports already saw long-term labor shortages several times last year because of COVID-19. Then there was a shortage of trucks.
This led to a pile-up of containers both at ports and at regional warehouses. After all, there was no place to put containers – so they sat on the ships.
The line of ships waiting to dock at the ports got longer and longer and longer. That line now extends regularly to South Orange County.
It sounds bad. So how do we solve it?
Well, port and White House officials know how to solve it in principle: Make the supply chain more efficient, including by expanding hours.
That’s the key from Wednesday’s announcement.
But here’s the rub: in practice it’s not easy. You need enough workers to expand operations at ports. You need ample truck drivers to transport cargo—many of whom are independent and underpaid—and be able to avoid or navigate rush hour traffic.
Trucks and trains need somewhere to store goods – so warehouses cannot be filled to capacity.
As of Wednesday, there weren’t many details on how to actually get to it.
But it probably won’t happen overnight.
So I should definitely get my holiday shopping done early?
That would be wise.
450 billion: Approximate value of cargo passing through the twin ports of LA and Long Beach, in dollars
one crore: Number of containers moved by the Port of LA in the last fiscal year, a 12-month record for any port in the Western Hemisphere.
3 million: Number of jobs created by Twin Ports across the US
138: Number of ships at ports on Wednesday
40: Percentage of US trade that goes through twin ports.