Where are the Supply Chain Boat-tlenecks?

Written by: Victoria Broehm   |   March 21, 2022

Trade, PISC

Hardly anything is more frustrating than ordering a coveted product, only for the shipper to keep pushing back the date of its arrival at your door. As a consumer, it can be frustrating, but for an industry, it can be concerning. Unfortunately, over the past two years since the COVID-19 outbreaks first began, supply chain issues have become the norm, but many industries are working together to address these challenges and plan for the future.

When I flew into San Francisco last week for the American Feed Industry Association’s Purchasing and Ingredient Suppliers Conference (PISC), one of the first things I noticed off the California coast were several cargo ships waiting in the water. Given I live in the “D.C. bubble,” it struck me that the supply chain bottlenecks I have been talking about on AFIA’s behalf for months (and experiencing personally when buying household goods), was staring right back at me. I could not wait to hear the first PISC speakers present on our “broken supply chain,” and I was not alone, as evidenced by the packed room during their presentation.

Andrew Hwang, manager of maritime business development and international marketing at the Port of Oakland, explained some of the challenges the California port has been experiencing for years, which were only exacerbated during the crisis. These challenges include things such as: ships getting larger, meaning more cargo needs to be unloaded, yet less space for them to turn around; the need for modern cranes that can operate at higher speeds, given older cranes can’t support new vessels; traffic congestion; lack of parking for truckers; and more.

“What we’re dealing with today is a lack of infrastructure investment over decades,” Hwang told attendees. 

Although some temporary improvements are being made to keep shipments moving, such as the pop-up port depot, which opened early March with the help of the Biden administration and California governor’s office, they don’t solve some of the port’s long-term challenges.

The port is currently conducting several studies – on land use, transportation issues, truck operations/container parking, economic impacts, utility infrastructure and environment/air quality – to evaluate what it will need in the future.

“What you see at the port today is not what you will see at the port tomorrow,” Hwang said. The port is looking to “grow with responsibility,” meaning that they aim to minimize the port’s impact on the environment, while building the necessary velocity the port needs. They are also doing this in conjunction with the state’s moves toward reducing its carbon emissions, aiming to be a zero-emissions seaport in the future.

But like all things, infrastructure takes time, he said. For example, currently, the larger vessels do not have much turn radius, but to widen the existing deep draft vessel turn basins, it will take nearly a decade to conduct the necessary environmental studies, design and construct. In making the long-term investment, however, this project could reduce the port’s restrictions and delays and improve in-harbor vessel transit efficiencies and safety, he explained.

Like is the case with most things, time is the enemy. That point was further illuminated when Rodney Nye, senior vice president of business development-dedicated contract services for J.B. Hunt Transport, Inc., took the stage.

“The conversation is no longer ‘what’s it going to cost [to ship my goods],’ but rather, ‘what’s it going to take to get it done’,” Nye said, as many industries are working hard to fulfill orders to meet growing consumer demand, increasing the demand for trucks and making it more difficult to move and complete product deliveries on time.

Not only that, there is a truck driver shortage, which is something the industry faced before COVID-19, but now that “people are spending and spending,” is really exacerbated, he said. Nye admitted that his company is at 100% truck utilization, meaning all available trucks are being used, and despite the fact that they are now getting drivers to come back to work after many left the workforce during the pandemic, “we just don’t have enough.”

“Retirements are happening at a fast pace and the generation coming up behind them just don’t want to do it,” he said, which is especially true for drivers who no longer want to do long-haul deliveries but are instead opting for more local delivery-type jobs (e.g., FedEx, UPS) where they can be at home more.

He said his company increased its sign-on bonus 72% in some areas, with the average sign-on bonus being $7,886 now, as it works to attract drivers, and that although driving schools are working to produce more drivers, it is not at the pace it used to be. According to the American Trucking Associations, he said the trucking industry will need to hire 1.1 million new drivers over the next decade, an average of 110,000 annually, to replace retiring drivers and keep up with growth in the economy.

“We won’t get an influx of employees anytime soon, so the only way we’ll see relief is in demand,” Nye said.

He told attendees that he does not expect things will change much in the near future and that rising fuel costs will only add to the financial pain companies are experiencing shipping their products.

His advice to the industry: position yourself as the preferred customer. Work with your shippers to make strategic decisions to secure dependable capacity.

After listening to this session, I felt enlightened to many of the complexities involved with shipping agricultural goods in the United States and why it’s more important than ever for AFIA members to stay engaged and let us know when they are experiencing supply chain challenges.