Molex Supply Chain Report: Response to Congestion at the Ports of Los Angeles and Long Beach
Nearly two years after COVID-19 began to spread around the world, businesses and consumers have been impacted by global supply chain disruptions. The cargo surge into the ports of Long Beach and Los Angeles in San Pedro Bay that resulted in backlogs are impacting the entire U.S., resulting in international repercussions.
The Port of Long Beach has moved more than 7 million TEUs (or twenty-foot-equivalent shipping containers) during the first nine months of 2021, up 24.3% from the same period in 2020. The port is on pace to move more than 9 million TEUs by the end of this year, surpassing the current record of 8.1 million TEUs last year. On October 13, Marine Traffic, a ship-tracking website, counted more than 50 container ships outside Long Beach and Los Angeles waiting to unload cargo, and in September that number was as high as 70. This unprecedented port congestion has called for extended work hours within the supply chain.
This cargo surge is anticipated to last well into 2022.
The Demand Deluge
The surge in the amount of cargo at ports is the direct result of a surge in purchasing activity. While some markets, such as the restaurant and travel industries, have been adversely affected by the pandemic, others have experienced phenomenal growth as people have found ways to keep themselves busy at home. For example, demand for toys, games and sporting goods jumped 74% from pre-COVID-19 levels, and household appliance purchases grew by 49%.
More recently, demand for office equipment and air filters have surged as people return to offices and other workplaces. Furthermore, the holiday season has contributed to an increase in specialty imports, with many ocean carriers carrying items such as Halloween and Christmas decorations.
Unclogging the Logjam
The ports of Los Angeles and Long Beach are pressing on to work 24/7 to catch up with their backlogs, with help from several integral parties: corporate leaders from Walmart, Target, FedEx and UPS; both the Los Angeles and Long Beach Port Authority directors; and the International Longshore and Warehouse Union and Teamster leaders all on board with the plan to work around the clock.
This may provide relief at the ports, but once the containers reach land, another snag threatens to clog up the supply chain: a lack of skilled port workers, truck drivers and rail crew. The Delta variant has contributed to the labor shortage, but so has early retirement, particularly among truck drivers.
Both a lack of drivers and restrictions that cause truckers to have difficulty securing appointments to return empty containers have led to thousands of empty containers sitting at the ports in San Pedro Bay, in lots and even on streets.
Furthermore, pressure is mounting to reduce the backlog of ships at anchor in San Pedro Bay. As part of the ports’ new 24/7 operating plan, they are employing a “push system” to identify cargo owners and get commitments from them to pick up their containers. It also means getting commitments from the liner shipping companies to have an equal number of exports and empty containers returned to give truckers the round-trip economics they need and reduce gate turn times.
Taming the Wild West
Molex is taking steps to alleviate the impact of port congestion on the U.S. West Coast. First, local drayage carrier partners will continue to monitor the situations in the San Pedro ports and secure the first available appointments to retrieve containers from terminals. Additionally, Molex will explore the feasibility of employing Molex chassis along with possibly expanding local drayage carrier options.
Immediate Transportation Strategies
Molex’s response to mitigate the effects of the current worldwide supply chain difficulties incudes:
- Engaging with and developing strategic partner relationships
- Building inventory, where possible, to absorb uncertainty of lead times
- Improving logistics forecasts and planning
- Diversifying the supply base to expand capacity access
- Updating route codes in SAP to reflect actual transit times
Molex is undertaking the following proactive steps to avoid shipping delays in the future:
- Exploring alternate routings of urgent, lower-volume shipments to smaller ports
- Developing port-to-port (PTP) services, such as from Chengdu to Seattle, Los Angeles or Tacoma instead of from Chengdu to Chicago or Detroit
- Reviewing shipping options from ports to inland locations
- Leveraging long-term business relationships and RFQ cycles to mitigate pricing and service disruptions
- Employing premium services to guarantee capacity and avoid loading delays when transit time is critical
- Expanding supplier base across all ocean, drayage and transportation services
- Assessing alternatives and developing scenario plans through the end of 2021 to manage continued high volumes, capacity constraints and cost pressures
- Assisting in backlog reduction by pulling and unloading/returning containers more quickly
- Avoiding premium shipping whenever possible by considering longer lead times and expanding planning horizons
- Employing benchmarking sources such as Drewry and Xeneta for updates on market dynamics and spot and long-term pricing trends
Proactive Steps by Molex Personnel
Molex manufacturing plants and customer service associates can help further ease the impact of shipping disruptions by recognizing that all transportation is constrained, including inland trucking from ports to the Midwest. As a result, communication is imperative to keep customers abreast of the ongoing situation and the fact that Molex must comply with the regulations of two free trade zones (FTZs) for bonded movements.
Molex plants and customer service teams also must partner with our customers to plan for and provide forecasts with additional lead times for production. Furthermore, collaboration with our transportation teams on urgent shipments and line-down situations is key to implementing alternative, cost-effective solutions.
Real-time monitoring, assessment and response to global risks are driven by our acute awareness that supply chain resilience and agility are critical to our customers’ operations and time-to-market schedules. As the volatile supply chain situation evolves, Molex will continue to actively monitor the situation and leverage our experience as a global supplier to apply best-in-class risk mitigation. Stay up to date on the latest global supply chain landscape and learn more about Molex supply chain insights.