This story is part of, CNET’s coverage of the push and pull to manufacture more products in the USA.
When COVID-19 hit almost two years ago, it did more than close offices, business and national borders. The pandemic also put the global supply chain under enormous strain 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 airplanes that have long powered globalization and the consumer economy wasn’t prepared for what the pandemic would throw at it. Suddenly, the thing that we’ve long depended on to move things cheaply and efficiently around the globe started moving much slower.
The signs are everywhere, from higher shipping costs and longer delivery times (when you can find something in stock, that is) to a fleet of ships waiting to unload at the Port of Los Angeles.The list of reasons is long, starting with a skyrocketing increase in online shopping. Equipment shortages and workplace social distancing measures to keep workers healthy are also to blame and ongoing COVID outbreaks are causing some facilities to temporarily close down.
Zvi Schreiber is the founder and CEO of Freightos, a digital booking platform for global freight. He says when the pandemic first hit, most people in the industry expected consumers to spend less. But that didn’t happen, and the year over year growth in shopping from 2020 (15% versus an expected 3%) caught everyone off guard.
“The whole international supply chain — the shipping, the ports, the trains, the trucks — just didn’t have that kind of slack built in,” he says. “The whole system came under terrible stress…when people started buying more stuff than ever before, you found many parts of that chain collapsing.”
I talked with 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 holiday shopping.
What is going on?
An unprecedented combination of intertwining factors is to blame:
- The biggest cause was that instead of spending their money on travel, entertainment and other experiences, US consumers spent it on goods. Pandemic-related checks also put more money in their pockets. Both caused an explosive demand in everything from furniture to household goods to .
- Early in the pandemic, factories and ports in Asia had to suspend operations due to lockdowns and sick workers. That slowed productivity or created backups at critical points where goods are transferred between links in the chain. Later COVID-19 waves caused similar stoppages. In August, for example, container terminals at the Chinese port Ningbo closed completely to get a delta variant outbreak under control and a cargo facility at Shanghai Pudong Airport had to go into lockdown.
- As the pandemic progressed, ports in importing countries also had to care for sick workers. The disease also swept through distribution centers, where products are sorted for final delivery, which led to more delays. Workplaces also had to implement social distancing measures to keep employees safe. Though the disruptions from the measures were usually temporary, businesses had to instantly change how they operate.
- As they resumed operations, factories, retailers and shipping companies struggled to keep up with what consumers wanted. Suddenly, a reliance on a Just in Time manufacturing — where businesses keep inventories low to avoid overproduction and keep costs low — became unworkable.
- The boom in online shopping also quickly congested every link in the supply chain. Ship capacity became constrained and some places suffered from a shortage of containers. At the ports, not only were too many ships arriving at once, but they also ran out of room to store unloaded containers before they were picked up. And with no room to store a newly arrived ship’s cargo, it couldn’t unload it even if a berth was available.
- The congestion then rippled downstream. Intermodal yards, where goods are transferred from truck to train and vice versa, felt the crunch. In June, Union Pacific had to suspend service between the West Coast and its giant yard near Chicago for a week to clear a freight backlog. The pandemic also took a heavy toll on truckers, who play a huge role in keeping the supply chain moving (all imports ride on a truck at some point). Drivers risked their health to keep goods moving.
What could happen now?
Shortages in some everyday products may happen again, but it shouldn’t be as bad as the early pandemic days. Last month, Costco said it would limit the number of cleaning supplies customers are allowed to buy. Supply chain problems are a cause, but so is hoarding. Your holiday shopping is likely to be more impacted.
Though some reports have suggested the different supply chain players in the US could better integrate and share information to handle disruptions, the supply chain depends on fixed resources that can’t be expanded overnight.
“You can’t build a container ship in the day or even in the year,” Schreiber says. “There is more infrastructure being ordered across the whole supply chain, but that will take time. So, the only thing that can give us relief in the short term is indeed if consumers, maybe after the holidays, calm down a little bit with their shopping.”
Looking forward, the big questions are whether the supply chain can return to “normal” and whether there’s even a normal to return to. Though consumer spending will swing back to travel and entertainment at some point, no one knows when it will happen or to what extent.
The supply chain is a “very large industry, which you can completely ignore when it’s working smoothly as it has done for years,” Schreiber said. “When there’s a big hiccup, then everyone suddenly becomes aware of all this stuff.”
In the long term, businesses also might look to shorten supply chains by reshoring or moving manufacturing back to the US. The Biden administration, especially for what it identifies as “critical products,” including information and communications technology, national defense, health care, and medicines. Another option is “nearshoring,” or making things in other countries in the Americas that don’t need to be shipped over the ocean.
Biden also has appointed a special envoy on port congestion to its previously announced Supply Chain Disruptions Task Force and last month the White House worked with the Port of Los Angeles to start 24/7 operations.
Though Schreiber isn’t convinced working around the clock will help given that the bottlenecks aren’t limited to the port, he says the government is wise to do something.
“[The bottlenecks] may be downstream from the port in the container yards, the trains and the trucks,” he said. “But it’s an extreme situation — it’s a threat to the economy, when you can’t get the goods on the shelves. It could well be that sensible government intervention could help you in the short term.”