Flexport founder and CEO Ryan Petersen made headlines last month with a series of tweets offering concrete suggestions for alleviating the backup at California ports and easing supply chain issues. His tweetstorm went viral and soon California governor Gavin Newsom was on the phone. The mayor of Long Beach implemented the simplest of his suggestions by temporarily allowing empty containers stuck in storage yards to be stacked higher than usual. Petersen's tweets had "saved Christmas," some proclaimed.
Perhaps that was a touch optimistic. Implementing Petersen's suggestion about stacking containers certainly has helped, and the $17 billion for port improvements contained in the recently passed infrastructure bill should help too, depending how that money is spent, Petersen said in a recent interview with Axios. But, he warned, supply chain problems may not be resolved in the six to twelve months some are predicting. And before they are, both consumers and businesses are likely to feel the strain.
"Ordinary people are going to see this in higher prices and that it's harder to find stuff. I went to Walgreens last week to buy nail clippers and they didn't have any nail clippers. Walgreens has got to have nail clippers, right?" Petersen said. "It was a very surprising moment for me--when I'm in the supply chain all day."
Businesses are going to feel the squeeze too, he said, in higher shipping prices they can't afford to pay. For Flexport, a logistics technology company that lets customers see exactly where their shipments are as they travel the globe, supply chain issues have made the last six months "tremendously stressful," he added. "Transit times have fallen off a cliff. Prices have gone through the roof. Service levels have gone down. It's a recipe for upset customers."
Not seeing how things will get better.
Asked if things would get better in six or twelve months, Petersen said, "I haven't seen a mechanism by which [that] happens." As Petersen pointed out in his tweetstorm, the biggest impediment to the supply chain right now is that there are legions of container ships arriving, particularly from China, bearing goods intended to satisfy burgeoning American demand--but not enough trucks or truckers to move those containers on to their destinations. That's led to a backup, with loaded container ships sitting idle outside of ports, waiting their turn to unload.
That bottleneck also means that empty containers aren't traveling back to China, badly exacerbating the problem. The already crowded ports mostly aren't accepting the empty containers and trucking companies don't have enough space to store them, which means many are just sitting on truck chassis--thus preventing those chassis from picking up the full containers that are clogging up the ports. This is why Petersen's suggestion to allow containers to be stacked higher than usual made so much sense. Implementing it may have helped, but the problem of clogged container ports remains. "The throughput of containers coming out of the ports right now is lower than the number of containers arriving on ships at the ports," he said. "As long as that's true, the line of ships will get longer."
Petersen has several other suggestions for alleviating the problem, including using barges and small container ships to transport containers away from clogged-up Long Beach to other ports that aren't as overloaded, and having railroads shuttle containers to empty government land within 100 miles of the port so that trucks can pick them up there. The idea is to "overwhelm" the bottleneck, he tweeted. "We don't need to do the best ideas. We need to do ALL the ideas."
In time, some of these measures, as well as the planned port improvements in the infrastructure bill, should help alleviate supply chain problems. But in the near term, it looks like things may get worse before they get better, especially with the newly discovered Omicron variant of Covid-19 threatening new shutdowns. What can small businesses do?
Begin by planning for the current supply chain disruption to last a while. That might mean seeking local alternatives to goods you might normally have shipped from afar, and doing what you can to plan for higher shipping prices and longer shipping times.
In particular it might mean managing your customers' expectations, and perhaps your own as well. The reality is that supply chain disruptions, like the pandemic that caused them, just aren't going away as quickly as everyone hoped.