We are a mere two weeks before the Black Friday holiday shopping kick-off, and a mere six weeks before the actual Christmas holiday and the severe congestion that is crippling U.S. west coast ports essentially remains the same.
In last week’s Supply Chain Matters commentary we described what many are calling the “perfect storm” of supply chain disruption. Another week later, the crisis is cascading across industry and transportation channels, affecting both imports as well as time-sensitive exports. An NBC News broadcast in the U.S. notes that as of yesterday, 13 ships are anchored off the coast waiting to be unloaded and describes container shipping at “full stop”. While that may be a bit of journalistic sensationalism, it is descriptive.
The on-the-ground realities seem little changed from last week’s situation.
Public finger-pointing among the ILWU labor union and the Pacific Maritime Association (PMA) has become a public spectacle vs. any perceived constructive progress. Union officials continue to point to chronic shortages of truck chassis, the impact of having to unload far larger container ships and rail bottlenecks. Meanwhile, at least one container shipping line, U.S. Lines, is placing a Port Congestion Surcharge, effective November 17, amounting to $800 for a twenty-foot container and $1000 for a 40-foot container. That is sure to add additional heartburn for retailers and manufacturers alike.
A published report from the Journal of Commerce reports that air freight forwarders with operations in the Asia Pacific region are observing space shortages with shipping costs rising dramatically. That should not be a complete surprise considering that Apple and other consumer electronics providers had previously locked-up air freight capacity to overcome their own production backlogs.
The National Retail Federation (NRF) continues to lobby for the personal intervention of President Obama but that effort, even if it did occur, is unlikely to relieve the current congestion any time soon.
As we stated last week, regardless of the finger-pointing, the situation is indeed the perfect storm scenario that many had feared and industry supply chains need to deal with the current realities. Noted in this week’s Wal-Mart commentary, retailers have already kicked-off holiday promotional merchandising and are de-emphasizing the singular Black Friday shopping event in favor of a steady stream of promotions extending through the end of November and probably well into December.
Last year, UPS, and to some extent FedEx, were thrown under the proverbial bus by retailers for non-performance at the most critical time period. In 2014, the creditability of west coast ports and indeed the surface shipping industry is inching closer to being the Grinch’s of Christmas.