“The global supply chain was not built for this”: freight delays hit the United States hard

Wayne Kaylor (Wayne Kaylor) knew that his container was parked somewhere in the Chicago railroad yard. He just didn’t know where, 78 days, no one told him.

Due to strong consumer demand, American railroad yards, ports and warehouses are crowded with goods, and there are too few people to move quickly, causing delays and price increases for enterprises and consumers. Kaylor leads Way Interglobal, a distributor based in Elkhart, Indiana, that sells refrigerators, stoves, and other appliances to well-known motorhome manufacturers such as Winnebago Industries. From May 4th to July 21st, Kaylor’s container with dozens of electric fireplaces was lost during the shuffling process.

“This is crazy,” he said, noting that the delay caused the company to lose sales. “Even though everything is marked with GPS, they still lost it at the railway station.”

The ports of Long Beach, Los Angeles, and Oakland in California reported delays earlier this year, and this month Union Pacific and BNSF railroads made it clear that the problem has reached inland. UP stopped freight and BNSF began to measure them because the railroad began to clean up the containers at the Chicago subway station, which were inaccessible like Kaylor.

Manufacturers are increasing surcharges and lamenting lost business, and the industrial group Honeywell International blames supply chain difficulties for up to $200 million in revenue.Retailers are scrambling to ensure enough products for sale Holiday, Large chain stores have ordered more inventory than usual, and hope that at least some of them will arrive on time.

“The global supply chain was not built for this,” said Brian Bourke, chief growth officer of Seko Logistics, a suburb of Chicago. “They were built for the seasonal surge in demand every year. When each model has 12 peak seasons, things start to collapse.”

CH Robinson, a logistics company based in Minnesota, said over-ordering has exacerbated transportation disruptions. According to the company, goods from China were delayed 15 to 20 days after arriving at US ports, and as many as a quarter of the intermodal containers were unusable because some of them were used for temporary storage.

The ports on both sides of the U.S. are very tense. Long Beach shipped more than 907,000 containers in May, the highest number since 1995. Nine of the 10 busiest 10 months at the port in the past quarter of a century have occurred in the past 12 months. Nationwide, the port of Savannah, Georgia, shipped 5.3 million containers in the 12 months ended June 30, a record for the port, an increase of 20% from the previous fiscal year.

Todd Tranausky, a transportation analyst at FTR, said: “I don’t think there is a port in the country that is not affected by congestion.”

Tranausky said that on the railroad, aggressive vacations have left the company without the necessary employees to cope with the surge in demand. Freight rates have risen accordingly, with freight rates being 15% higher than a year ago. Although he predicts that this growth will slow down in the second half of this year and 2022, “No matter what you imagine, it will not become a shipper’s market.”

Shoppers are already feeling the impact. With rising costs, companies that produce everything from tissues to salad dressings have been raising prices to make up for the difference. According to data from the US Bureau of Labor Statistics, consumer prices in the United States rose 5.4% year-on-year in June, setting a 13-year high after rising 5% in May.

Procter & Gamble, the company behind Tide detergents and Gillette razors, plans to increase the prices of some of its products after warning of $1.9 billion in after-tax losses due to rising merchandise and shipping costs in the coming year.

Colgate-Palmolive charges higher. Chief Executive Noel Wallace (Noel Wallace) said on Friday: “The logistics network is subject to taxation, whether it is trucking and warehousing in the United States, or shipping from Asia to the rest of the world.”

General Mills, known for its oatmeal and Haagen-Dazs ice cream, said it is increasing prices in most of its grocery categories and global markets, partly because of rising shipping costs. Conagra, Boyardee pasta and Orville Redenbacher popcorn company Conagra, toy manufacturer Hasbro and motorcycle manufacturer Harley Davidson also implemented price increases, adding a 2% surcharge to cover shipping costs.

Kleenex’s parent company, Kimberly-Clark, said it “decisively” raised prices in June and the beginning of the third quarter to offset inflationary pressures. It had previously announced that it would increase the prices of baby care products and a range of consumer products such as Scott. toilet paper. In some cases, the company increased prices by double digits.

Chief Executive Mike Hsu said Kimberly-Clark is facing “significantly higher” costs, which the company attributes to higher prices for materials such as pulp and distribution costs.

“Since our speech in April, commodity inflation has soared and our supply chain has been challenged,” Xu told analysts on the earnings call.

Although strong demand provides companies with room to increase prices, it remains to be seen how long people are willing to pay. Xu pointed out that other industries have observed reduced spending, which may leave customers with some extra money in their wallets to purchase consumer goods.

However, “in this environment, consumers are facing wider inflation in all categories except consumer packaged goods,” a trend that “makes it more challenging,” Hsu added. Sean Connolly, Conagra’s chief executive, said that the “general increase” in prices at grocery stores and restaurants may lessen the blow to demand.

For Keller, the math is simple. One container can hold 79 electric fireplaces. A year ago, the shipping cost was US$4,500. Now, if his company can get one, $20,000 is a good deal. Each fireplace is nearly 200 dollars more.

“So you increase prices to your customers, and it becomes a trickle-down effect,” he said. “This is indeed everyone’s problem.”

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