If you’re not purposely looking, the modern global supply chain is usually invisible. A complex system of materials, manufacturing and transportation that may as well be magic. Wave a wand — or hit that one-click order button — and the world is at your doorstep, sometimes overnight.
The pandemic has thrown that system into disarray, leading to a breakdown that’s manifested in different ways, including empty shelves at the grocery store, school team uniforms undelivered until after the postseason and even new cars sitting idle at the factory, lacking needed components.
The supply chain is now as visible as the dozen container ships anchored in Puget Sound last week, waiting for terminal space to unload their cargo, or the stacks of shipping containers — some of them loaded with goods — piling up at the ports of Tacoma and Seattle.
With the holiday season around the corner, things are expected to get worse before they get better. But these short-term challenges can lead to long-term opportunities for the region.
A cascading effect
Initially, the spread of COVID-19 brought fear of an economic downturn. While demand for services cratered as people hunkered down, the demand for online goods exploded as people increasingly ordered in.
Every link in the supply chain is struggling with that demand, leading to delays and consumer price increases.
Containers, the backbone of international trade as they are shuttled around the world, are in short supply in Asia, which has led to a massive pricing hike. Before COVID, a container moving from China to the West Coast cost less than $2,000 to rent. Today, it can cost as much as $20,000 per container, said Jonathan Song, senior vice president of global sales and marketing with Seattle-based logistics company Expeditors.
There are also bottlenecks throughout the supply chain, with congestion at ports giving way to packed railroads and overwhelmed warehouses, all exacerbated by the long existing shortage of trucks and drivers.
“I’d be tempted to say it’s a perfect storm, but I think it’s more than that,” said Debra Glassman, a business professor at the University of Washington. “It’s this cascading effect of having a system that’s designed with multiple points of failure.”
Supply-chain professionals are always planning for disruptions, but those are usually natural disasters such as hurricanes, or geopolitical tensions around trade. The widespread system stress test presented by the pandemic caught everyone by surprise. This has led not only to adapting to what is happening now, experts said, but also rethinking what the supply chain will look like in the future.
“The past 18 months have been nothing short of basically rewriting a new playbook on logistics,” said Adam Drouhard, managing director of cargo at Alaska Airlines.
The goal of minimizing costs by moving materials just before they are needed for manufacturing and keeping minimal inventory has proven unsustainable during the pandemic. And the wisdom of concentrating manufacturing of certain products in a single region is also being questioned.
In looking for ways to make the supply chain more resilient, the Puget Sound area can capitalize on opportunities for growth. The region’s marine cargo operations already support more than 58,000 jobs and $12.4 billion in economic activity in Washington state.
The Northwest Seaport Alliance, which includes the ports of Seattle and Tacoma, continues to see record-breaking volumes this year and is working with terminal operators and the International Longshore Workers Union to improve efficiency
Congestion at California and Canadian ports has allowed the less-congested Port of Seattle to acquire more business. The January opening of the redeveloped Terminal 5, which will be able to accommodate the largest container ships, will help alleviate some of the local backlog, officials said.
That capacity building takes time and points to the importance of supporting needed investment by the private and public sector.
It is also vital to elect candidates to the Port of Seattle Commission — as well as to the Seattle City Council — who recognize the value of the port will protect its industrial lands and avoid needless politicization, such as getting tangled in the recent standoff that temporarily kept an Israeli-based shipping company from unloading its cargo after activists called for a boycott. The editorial board is researching and interviewing candidates and will publish endorsements soon.
Challenges to the supply chain will continue well into 2022, experts said, but able management of the ports, and support from the region’s leaders, will allow them to emerge from this crisis and improve the region’s competitiveness.