THE SUPPLY CHAIN

Did America’s Covid-19 Shopping Spree Trigger Port Congestion?

W. R. MEADOWS’ Supply Chain Manager Tony Spedale raised an interesting point during a recent internal discussion about California’s current port container ship congestion issue. It’s one many of us hadn’t factored in, and I thought it was worthwhile to share with you since we are all asking the big “WHY?”

Here are Tony’s thoughts on the shipping delays and supply chain obstacles:

“When Covid-19 hit, people were forced to stay home and get government stimulus, which was meant to be spent.  The problem is, they spent their government stimulus money on goods — and a lot of them.  People normally do not buy as many goods, since they spend their money in other areas such as travel, restaurants, or large purchases, like vehicles. With the auto industry downturn because of the lack of semiconductors, most large purchases weren’t able to be made, and most restaurants were shut down, so what did the U.S. spend on instead? Smaller items like TVs, appliances, home redecorating items, and everything else under the sun. These are all mostly made overseas.

“This huge influx of goods demand has created a bottleneck globally.  Think of it as we are shoving a tennis ball down a garden hose.  Right now, that tennis ball is probably about halfway through the hose, and until that tennis ball is passed, we will have the current conditions.  I am a firm believer that once the auto industry comes back and is able to mass-produce new vehicles again, the majority of the supply chain woes we are seeing will go away since consumers won’t have the expendable income to buy the random goods they are buying now.

“Also, during the pandemic, many people did some home renovations. I know I did, and that is great, but when you have everyone and their mother trying to do the same, there isn’t enough inventory to supply everyone with a new refrigerator. Your local Home Depot may sell 100 of a certain refrigerator SKU per year, but once the pandemic hit, they saw orders for 1,000 of them, all at once. That caused them to order more, which were probably made overseas, and they are now stuck in a container somewhere waiting to get unloaded.

“Now apply that refrigerator example to EVERYTHING. With shipping vessels only having a finite amount of space, container pricing skyrocketing, some shady operations may have happened to get goods ahead in line. Shipping vessels that may have been loaded with say 10,000 containers of raw materials in the past are now only being loaded with 5,000 containers due to so many containers full of consumer goods. Until we can put more raw materials on these ships, MEADOWS — and the nation — will feel the pain and scarcity. With the likes of Home Depot, Wal-Mart, and Amazon now chartering their own vessels, there should be more space on vessels for raw materials.”

Tony Spedale will be sharing more insights shortly in another article about the supply chain, so check back here within the week.

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