Speaker 1: It's Monday, October eleven. I'm Oscar Mirrors from the Daily
Speaker 1: Dive podcast in Los Angeles, and this is reopening America.
Speaker 1: America's supply chain is broken, and there's no better example
Speaker 1: than looking at all of the ships sitting off the
Speaker 1: coast of California. The pandemic has caused the major shift
Speaker 1: in consumer spending, and it triggered a huge influx of imports,
Speaker 1: and it's all bottleneck due to a lack of coordination
Speaker 1: and worker shortages. Ships are at ports waiting to be unloaded.
Speaker 1: Not enough workers there can offload containers in a timely manner,
Speaker 1: and a shortage of truck drivers is delaying shipments to
Speaker 1: the rest of the country. This all results in price
Speaker 1: hikes for everyone and possible shortages for holiday shopping. David Lynch,
Speaker 1: global economics correspondent at the Washington Post, joins us for
Speaker 1: the broken supply chain. Thanks for joining, David, Sure, let's
Speaker 1: talk about the supply chain. You know, throughout the pandemic,
Speaker 1: pretty much every industry had been hit very hard. Supply
Speaker 1: chain issues were popping up all over the place. I
Speaker 1: think the country kind of started getting a better understand,
Speaker 1: ending an education on what was going on. We were
Speaker 1: seeing backlogs, you know, from everything, right the great toilet
Speaker 1: paper shortage and how manufacturing will slow down. But right
Speaker 1: now what we're seeing is that problem continuing to persist.
Speaker 1: And one of the key things that everybody's seeing is
Speaker 1: all of these shipping containers off the coast of California
Speaker 1: with tons of containers on them, just waiting waiting to
Speaker 1: be moved inland, waiting to be shipped across the country.
Speaker 1: And we're just seeing how everything's been clogged up. Nobody
Speaker 1: really knows how to fix it. We're seeing shortages of
Speaker 1: truck drivers, all sorts of things really compounding on top
Speaker 1: of each other. So David, help us walk through with
Speaker 1: how the supply chain has been broken so badly. Sure, well,
Speaker 1: it's as you said, this has been going on really
Speaker 1: since the beginning of the pandemic, when Chinese factories shut
Speaker 1: down during the initial lockdowns to try and beat back
Speaker 1: the virus, and the disruptions that started from that, they
Speaker 1: have just been rippling through. Uh. You know, we Americans
Speaker 1: have been trapped in our homes, so many of us,
Speaker 1: for much of the last year or so, and so
Speaker 1: rather than spending money at restaurants, ballgames, movie theaters. We
Speaker 1: were spending it on stuff. Everybody was buying a new
Speaker 1: iPhone or a laptop, or a desk so they could
Speaker 1: work from home, or a new furniture to make the
Speaker 1: house more comfortable. And all that stuff comes from China
Speaker 1: and Southeast Asia by large, and so the normal seasonal
Speaker 1: patterns have been completely disrupted. That means a lot of
Speaker 1: the equipment that's needed once the shipping containers get onto land,
Speaker 1: the trucking, the chassiss you know, really every piece of
Speaker 1: the of the chain has been discombbulated, has been put
Speaker 1: out of sync. And this system is designed to work
Speaker 1: like runners in a relay. I run my lap, then
Speaker 1: I handed baton to you. You run your lap, et cetera.
Speaker 1: When I'm done with my lap. If you're not, they're
Speaker 1: waiting to take the baton. We've got a problem, Yeah, definitely.
Speaker 1: I you know, obviously we know how big of a
Speaker 1: shift the pandemic was. Right things stopped in its tracks
Speaker 1: and are spending habits changed just that quickly. And as
Speaker 1: you said, you know, the more demand for all that stuff,
Speaker 1: whatever it was, you know, started kind of exposing all
Speaker 1: of the problems in that supply chain. Ruining that relay race.
Speaker 1: As you just said. Okay, so let's talk about the
Speaker 1: US and how we handle this stuff. It seems like
Speaker 1: we've never been particularly good at the flow of this,
Speaker 1: at least when it comes to coordination and information sharing,
Speaker 1: and that's part of the big problem why things are
Speaker 1: so backloged. On the one hand, the system does a
Speaker 1: pretty good job of working under normal conditions pre pandemic,
Speaker 1: none of us had much trouble getting our hands on
Speaker 1: the stuff we wanted. But relative to an optimal system,
Speaker 1: for instance, comparing of US port to a top line
Speaker 1: port in Europe or Asia, we're we're not where we
Speaker 1: should be. You know, for a country that prides itself
Speaker 1: on high technology, we don't have fully deployed the sort
Speaker 1: of seamless information systems, databases, all the high tech wizardry
Speaker 1: that would allow everybody who's involved though on the supply
Speaker 1: chain to see the same information at the same time,
Speaker 1: to be able to track containers, to track equipment, so
Speaker 1: that everybody has full visibility into what's happening. We're not
Speaker 1: as good at that right now as others are. And
Speaker 1: some of that's because the data privacy concerns competitive concerns.
Speaker 1: If I'm a retailer, I might worry that if if
Speaker 1: you that you know, at the ports, have full visibility
Speaker 1: into what I'm ordering and when it's coming, you know,
Speaker 1: that might be useful information for my competition to have.
Speaker 1: There are ways around that, but we need What experts
Speaker 1: tell me is we need to get beyond those concerns,
Speaker 1: resolve them, and put in place the sort of systems
Speaker 1: that others already have deployed. Right now, we're seeing a
Speaker 1: huge backlog on the West sports in l a Long Beach.
Speaker 1: All that is this happening all over the country. Why
Speaker 1: are we seeing this mostly off the coast of California, Well,
Speaker 1: because that's where that's where cargo from Asia lands in
Speaker 1: the US. That so all the all the factories in
Speaker 1: coastal China, Vietnam, Cambodia, Southeast Asia, across that part of
Speaker 1: the world. When container ships pick up the cargo there,
Speaker 1: they take it to l a Long Beach to a
Speaker 1: lesser extent, as those ports have gotten crowded, they move
Speaker 1: up the coast to Oakland and Seattle. But those facilities
Speaker 1: are are farther away from the consumer heartland and they're
Speaker 1: not as as big as l A and Long Beach.
Speaker 1: Now you are seeing the port of Savannah, for instance,
Speaker 1: has got a lot of ships waiting offshore. Nothing like
Speaker 1: l A, but relative to Savannah's normal operations, they're seeing
Speaker 1: a lot of demand. Uh and up to New York
Speaker 1: as well, even Houston. Some of the ships that were
Speaker 1: diverted through the Panama Canal that would have normally have
Speaker 1: gone to the West Coast that came up through the
Speaker 1: canal and and hit our Gulf ports ports there. So
Speaker 1: you've seen the congestion spread in that regard. You know,
Speaker 1: this is an unusual obviously an unusual episode, but it's
Speaker 1: exposed some some vulnerabilities in the system that need to
Speaker 1: be addressed going forward. You made note in the article
Speaker 1: the US is importing a historic amount of goods and
Speaker 1: that l A Port is expected to handle a record
Speaker 1: ten point eight million containers this year's I mean, obviously
Speaker 1: that's just a ton. Let's talk about costs, because cost
Speaker 1: of all the shipping stuff has gone up tremendously. Twenty
Speaker 1: dollars for a container. You made mention that it's twice
Speaker 1: what it costs in July, and that's twice what it
Speaker 1: costs in January. So the prices of shipping have gone
Speaker 1: up exponentially, and it's obviously affects smaller companies more than
Speaker 1: bigger players like you know, Walmarts and stuff that can
Speaker 1: absorb those costs a lot easier. Yeah, exactly. I mean,
Speaker 1: if you're if you're a Walmart or an Amazon or Costco,
Speaker 1: you're able to sign long term, annual contracts with the
Speaker 1: ocean carriers, and because you bring them so much business,
Speaker 1: you're going to get a decent rate, and you're almost
Speaker 1: more importantly, you're going to have certainty that your stuff
Speaker 1: is going to get on their boats. If you're a
Speaker 1: smaller guy who's importing a hundred containers in the course
Speaker 1: of a year rather than hundreds of thousands of containers,
Speaker 1: then you're just not as important to the carriers, and
Speaker 1: so you might get bumped off a vessel as the
Speaker 1: carriers have had to skip sailings because their boats are
Speaker 1: getting tied up. All those ships that are waiting off
Speaker 1: the coast of l A. They should be already on
Speaker 1: their way back to get more stuff out of China,
Speaker 1: but they're not in position to do that. So somebody's
Speaker 1: got to lose out. It's not gonna be Walmart. It's
Speaker 1: gonna be a little guy that forces the little guy
Speaker 1: into the spot market where he's got to pay through
Speaker 1: the nose. It's like trying to get to a ball game.
Speaker 1: You buy the tickets at the beginning of the season,
Speaker 1: you get one rate. If you want to buy a
Speaker 1: World Series ticket the day of the game standing outside
Speaker 1: the stadium, you're gonna have to pay a scalper and
Speaker 1: that's going to cost more. Tell me a little bit
Speaker 1: about just in time production, because I know that figures
Speaker 1: into a lot of the way companies operate. It helps
Speaker 1: them keep inventories and costs low. But when things get
Speaker 1: backlogged like this, you know it really you know, we
Speaker 1: start seeing some weaknesses in that. And you know sometimes
Speaker 1: businesses have to turn down companies have to turn down
Speaker 1: business because they can't get the right ingredients equipment to
Speaker 1: to complete their orders and stuff. Yeah, that I mean,
Speaker 1: we've we found that in talking to companies out in
Speaker 1: the Midwest to have their operations set up and and
Speaker 1: this is you know, this was a great innovation because
Speaker 1: it brought tremendous efficiency to production. Instead of keeping enormous
Speaker 1: stockpiles of material around, if you do that you've got
Speaker 1: to pay to store them. He's got to pay. He
Speaker 1: has already purchased the stuff, but you're not getting paid
Speaker 1: for your goods yet. So just buying sort of as
Speaker 1: much as you need to produce this week's output or
Speaker 1: this month's out was a great innovation, but again it
Speaker 1: was efficiency at the cost of resilience. And so when
Speaker 1: something goes wrong, and the pandemic isn't the only thing
Speaker 1: that's ever gone wrong in history. We've had bad weather
Speaker 1: in Texas which knocked offline at pro chemical plants that
Speaker 1: produce a certain kind of resin that's needed for lots
Speaker 1: of industrial plastics. We've had earthquakes, we've had fires. All
Speaker 1: sorts of things can go wrong, and when they do,
Speaker 1: and when they disrupt this finally calibrated supply chain, that's
Speaker 1: when the problems arise. Let's talk about one of the
Speaker 1: last cogs in this whole supply chain, which is the
Speaker 1: truck drivers, which we've seen shortages of two. But you know,
Speaker 1: as we've been talking about, right there's backlogs at the ports.
Speaker 1: It takes time to get those containers unloaded and onto trucks,
Speaker 1: and what we're seeing is just a big backlog of
Speaker 1: truck drivers awaiting hours to get into the ports to
Speaker 1: get those containers out of there. You talked about one
Speaker 1: man who was a truck driver, and in normal circumstance,
Speaker 1: he can make seven round trips and an eleven hour
Speaker 1: work day to get those containers out of there. Now
Speaker 1: he's just doing one or two trips and spending time.
Speaker 1: I think he learned salsa looking at YouTube videos or something.
Speaker 1: That's all the time he's kind of wasting just sitting
Speaker 1: there waiting to get in and out. And the important
Speaker 1: thing here is the way all of these disruptions feed
Speaker 1: on themselves. Right, he can't get in and out of
Speaker 1: the rail yard as quickly as he'd like to to
Speaker 1: pick up containers because the rail yard is jammed with containers,
Speaker 1: and they're jammed with containers because the porch are dealing
Speaker 1: ultimately with record volume and sending in more stuff to
Speaker 1: the rail lyard than they can process. That discourages the trucker. Uh.
Speaker 1: It discourages others from getting into truck driving because they
Speaker 1: look at what's going on and they said, well, jeez,
Speaker 1: you know that's not easy money. I'm gonna do something else. Uh.
Speaker 1: And as you say, that you know, the trucker we
Speaker 1: profiled uh is wasting so much time that he's you know,
Speaker 1: he's listening to audio books and he's uh watching Conan
Speaker 1: O'Brien comedy bits uh and and even learning how to
Speaker 1: dow to dance. This's also by watching YouTube videos. But
Speaker 1: but the trucking situation is a tough one because you know,
Speaker 1: the trucking companies tell me that they're having a hard
Speaker 1: time getting young guys to come into the business because
Speaker 1: you know, it's it's a tough way to make a living.
Speaker 1: And you know, the short haul guys, that's one thing,
Speaker 1: but those long haul drivers, when you're away from home
Speaker 1: four or five nights uh in a row, a lot
Speaker 1: of guys don't want to do that. Yeah. And finally,
Speaker 1: you know what we've been hearing right start buying your
Speaker 1: Christmas presents early. The holiday shopping season is going to
Speaker 1: be rough, low supply, higher prices. Um. You know, people
Speaker 1: are saying that these headaches, these supply chain headaches are
Speaker 1: gonna last through Yeah this and you know these are
Speaker 1: problems that early on in the pandemic, people were saying, Okay,
Speaker 1: maybe it's gonna be a quarter or two uh, and
Speaker 1: then we'll be back and sink. Now it's it's clear.
Speaker 1: You know, it was all last year, it's all of
Speaker 1: this year, and it may well be all next year
Speaker 1: for the holiday season. Uh. Yeah, I wouldn't. I would
Speaker 1: wait around. Uh. You know, I don't think this is
Speaker 1: going to be the apocalypse. I don't think people are
Speaker 1: going to go to stores uh and find you know,
Speaker 1: completely barren shelves. But if you've got your heart set
Speaker 1: on a particular toy or a particular piece of electronics,
Speaker 1: I'd start looking forward early because there's no guarantee it's
Speaker 1: going to be there, you know, if you wait till
Speaker 1: the last minute. David Lynch, Global economics corresponding at the
Speaker 1: Washington Post, thank you very much for joining us anytime.
Speaker 1: I'm Oscar Ramirez, and this has been reopening America. Don't
Speaker 1: forget efforts days big news stories. You can check me
Speaker 1: out in the Daily Dive podcast every Monday through Friday.
Speaker 1: So follow us on I Heart Radio or wherever you
Speaker 1: get your podcast