From grocery stores to school systems, Americans continue to feel the supply chain troubles that emerged with the pandemic.

“Capacity is normally bowstring tight during this time of year leading up to the holidays,” Steve Gordon, a veteran Northwest trucking executive, told me. “Restarting the global economy when large portions of the global supply chain are still hobbled removes a lot of alternative options. You can’t go to your No. 2 or No. 3 supplier to fill the gap when your No. 1 supplier has a disruption, because they’re already tapped out by operating somewhere below peak efficiency.”

One reader suggested that the problem was severe enough to bring in the military to operate ports. That probably wouldn’t work because of the military’s limited skills in this area. Even in World War II, the private sector handled most of the loading from the “Arsenal of Democracy.”

President Biden already negotiated with the Port of Los Angeles, unions and users to operate 24/7, following similar moves at the adjacent Port of Long Beach. The mega-ports of LA/Long Beach account for 40% of the country’s seaborne imports and in early October some 60 container ships were sitting offshore, waiting to unload.

By contrast, the Northwest Seaport Alliance, which consists of the ports of Seattle and Tacoma waterfront operations, doesn’t need to have mega-ports to succeed.

The alliance said it handled 330,517 20-foot equivalent units — the industry container metric — in September, an increase of 7.1% compared with the same month in 2020. Year-to-date imports grew more than 22%.

Advertising

That’s good in normal times.

Still, port officials said it was “an all hands on deck” moment to unsnarl the supply chain bottlenecks.

In a news conference earlier this month, alliance CEO John Wolfe said, “We are seeing unprecedented times in the global supply chain. … When any portion of the supply chain starts to be stretched to the limits, it’s like a domino effect. … When one domino falls … the other pieces of the supply chain then start to fail, and that’s what we’re experiencing.”

Those dominoes run from overseas factories to railroads and trucks in the United States.

For example, Bloomberg reports that in Hong Kong a coffee-machine maker must now wait up to nine months for critical electronic components to arrive, while the cost of moving a container from Asia to America has increased from $2,000 before the pandemic to $20,000.

Gordon said ports “are the least resilient part of the supply chain,” not least because of restrictive port labor and resistance to adding technology that would increase efficiency. “They’re lousy places for truckers, and only a very small subset of the trucking industry without other customer options serves the port. Big (trucking) fleets with modern capacity usually shy away from that business.”

Not only that, but truckers are always in short supply.

Railroads are feeling the pressure, too, especially the BNSF and Union Pacific, which serve West Coast ports. Intermodal trains, carrying containers on flat cars, are backed up in terminals.

Advertising

It’s hard not to blame globalization for much of the troubles. In the 1960s, say, almost everything Americans used was made here (while we were the world’s largest exporter). Addressing pandemic shortfalls would have been much easier than with today’s complex, highly concentrated, 10,000-mile supply chain. One example is that 80% of our active pharmaceutical ingredients for domestic production come from China and elsewhere in Asia. The pandemic shows how fragile it is.

Journalist Barry Lynn warned early on that the downside of cheap, efficient goods from Asia created a fragile situation. He first saw this when a 1999 Taiwan earthquake led to a semiconductor shortage that shut down factories in California and Texas.

In a 2020 interview, he said experts discounted his worries, so he turned to his reporter skills.

“I found people in the semiconductor industry, people who were CEOs, who knew what was going on,” Lynn said. “Over time, I came to understand that it had to do with this radical change in how we do competition policy, pushed by the Chicago school (of economics) in the early 1980s. It used to be that when we saw monopoly, we saw danger. After Chicago, we only saw efficiency.”

And, as the pandemic shows, vulnerability.

Some companies were thinking the same way before the pandemic, Trump’s trade war or Biden’s “Buy American.”

A 2016 paper by the Organization for Economic Co-Operation and Development examined how some multinationals were rethinking their reliance on global supply chains. While it found that so-called reshoring was more “a trickle than a flood,” the experience of the past year and a half might give it a shove.

Advertising

Gordon, the trucking executive, predicts “the free market will fix this, but it will take some price and cost disruption over the next six to 18 months (not weeks). The last thing we need is government trying to solve this problem that is way too complex for them to understand or impact.”

I don’t agree with the last part. Government has an essential part to play, not least in encouraging and even requiring vaccines.

We won’t get past this crisis until most of the population is vaccinated.