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Port Congestion Emerges as Major Supply Chain Stumbling Block

Last month, workers returned to work in the wake of shutdowns caused by labor disputes across the various West Coast port locations. While good news for the electronics industry, these events don't begin to address the larger issues in these ports.

“We need bigger ports and then we need labor and machinery to handle ships that are dropping off 25% more cargo than before,” Tony McGee, CEO of HNM Global Logistics   told EBN in an interview. “Even if you have the strike managed, you still have a lack of equipment and personnel to unload and get containers out.”

McGee has reason to know about the challenges. He has been appointed to the Advisory Committee on Supply Chain Competitiveness, a 45-member committee tasked with “providing the Secretary of Commerce with detailed advice on the elements of a comprehensive national freight infrastructure and freight policy to support U.S. supply chain and export competitiveness.” 

Large OEMs and retailers, who constantly work to drive down cost with shippers, exacerbate the problem. “In the long run it's going to hurt the customer, because getting products will take longer and will cost more,” said McGee. “I'm disappointed that it took government way too long to get involved.”

It's a complex problem, and one that needs a comprehensive solution. First and foremost, the industry has to work at building good port infrastructure. “Ports need to be able to handle bigger ships, and need equipment to unload the ships, but that's just half the problem,” said McGee. “The other half of the solution is automation and hiring more people in the supply chain to offload containers.”

Today, ships arrive in port and have to wait to be unloaded.  Currently these vessals are being delayed by as much as thirty days, said McGee. “This summer going into fall, when everyone is getting ready for the holiday season, if we don't have measures in place by then it could be a catastrophe,” he said.

Especially in the electronics industry, time frames for products are even shorter and timeliness of freight shipments even more critical. “Some companies are diverting to air freight, but there's not as much capacity available,” said McGee. Further, new legislation around lithium batteries severely limits the number of carriers that can handle products containing those batteries.

Smart use of technology would provide visibility and flexibility, McGee contends. Ships could be assigned time slots. “It would take a deep commitment on the side of labor unions, carriers, and government,” he added.

There have been some positive movements in that direction. Last month, the Ports of Los Angeles and Long Beach launched a shared effort to start to address the problem of a lack of chassis by creating a “gray pool” of chassis that will allow 80% of the chassis to be used interchangeably between the two ports, according to one report. International Asset Systems (IAS) ChassisManagement solution will be used to manage the rental, invoice, payment process of the chassis. 

Let us know if port congestion has hit the top of your list of supply chain headaches. What direction is the right one to address these problems? Let us know in the comments section below.

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1 comment on “Port Congestion Emerges as Major Supply Chain Stumbling Block

  1. Sandy Montalbano
    April 7, 2015

    Importers that experienced problems due to the port disputes, unreliable suppliers and
    political instability could avoid these hidden costs and issues by sourcing domestically. Many companies source offshore in an effort to lower costs. However, local sourcing would eliminate the risk and cost of months long delays and stalled projects costing millions in job and revenue losses.

    Reducing imports with domestically manufactured goods i.e. reshoring will reduce our trade deficit. Our companies are much more competitive manufacturing here than exporting due to the additional total costs such as duty, freight, packaging etc. If we balanced the trade deficit by reducing imports, we would create 3-4 million manufacturing jobs and about 6 million overall jobs due to the manufacturing multiplier effect.

    We recommend companies use a total cost of ownership (TCO) analysis to see if domestic sourcing makes sense for them.

    The not-for-profit Reshoring Initiative can help.

    The not-for-profit Reshoring Initiative's free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases, companies find that, although the production cost is lower offshore, the total cost is
    higher, making it a good economic decision to reshore manufacturing back to the
    U.S. The free Total Cost Estimator can be found on the Reshore Now dot org website.

     

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