2021 has been a difficult year for supply chains around the world. A continuing global pandemic, labor shortages, skyrocketing commodity costs, unprecedented raw material shortages and supply chain delays continue to plague companies that need to transport goods. Ports around the world are now struggling with congestion, and there is no relief in sight.
Why Is this Port Congestion Happening?
There are several supply chain conditions causing the current crisis:
- On September 16th, the Marine Exchange of Southern California reported a record 65 vessels were waiting to dock at the ports of Los Angeles and Long Beach in the San Pedro Bay. An unprecedented 23 of these vessels are in a drift area, meaning there is no room for them to anchor in the water.
- The high volumes of containers coming into North America’s leading seaport, the Port of Los Angeles, have caused major disruptions across organizations and the global supply chain. The average container/chassis dwell time has increased from three to seven days.
- Unprecedented consumer demand has caused an import surge into the U.S. February set a record of imports in the Port of Los Angeles’ 114-year history.
- With import shipping at an all-time high, many U.S. warehouses and shipping yards are at maximum capacity and unable to manage the heavy influx of cargo.
- Exports have dropped 26 of the last 28 months, and the number of empty containers has tripled the number of loaded exports that leave the docks.
- The inability to move freight at normal speeds has impacted the entire system, and delays at warehouses and shipping yards are now influencing chassis availability and container repositioning throughout the entire supply chain.
- E-commerce has boomed over the past few years as buying behaviors have changed. Consumers have become comfortable with online shipping and their behavior trends show no signs of changing in the future. Shippers have reported tripling their volume (or more) month-over-month, which adds to longer waiting times and port congestion issues for carriers and drivers.
- Another bottleneck in the already strained system has been finding people to work in the warehouses or truckers to move the containers.
- Other countries are now overwhelmed by customer orders, requiring them to push inventory into distribution centers, causing additional port congestion and resulting in mounting pressures throughout the supply chain.
How Can We Solve the Current Port Congestion Problem?
There is no single issue causing this level of port congestion. Pressures of the pandemic indeed add to ongoing issues; however, today’s extreme port congestion is a symptom of underlying supply chain issues that are the proverbial tail wagging the dog.
- Agile supply chain optimization capabilities are critical in a rapidly changing supply chain environment. A colleague of mine recently published a case study for a client where we developed a custom optimization solution to schedule their cargo vessels. You can read the agile planning case study here.
- That solution also has an in-transit dynamic optimization capability. It provides the capability to dynamically re-optimize vessel routes mid-voyage allowing voyage plans to be rerouted while considering factors such as demurrage costs and bunker costs. This is extremely powerful in a rapidly changing supply chain environment, such as the one that currently exists. As an example, suppose a vessel was on a voyage stopping in three ports. Assume the first port was at capacity and unable to take its scheduled tonnage of cargo. This places the voyage in a precarious situation as the draft may now be too deep for the remaining ports. Dynamic optimization allows the planner to quickly re-optimize all their vessels and shift routes in the most economic and feasible manner.
- E-commerce is here to stay. Consumers have become comfortable with ordering everything online from McDonald hamburgers to cars. A strong e-commerce platform seamlessly integrated with production planning and scheduling is crucial.
- Efficient network design and optimizing total delivered cost is now essential. Manufacturing assets are critical hubs in the value chain. For process manufacturers, the network structure for production assets determines the lion’s share of the value chain costs. The biggest opportunities for cost optimization and savings are available when you assess or re-design the network you have in place. Once manufacturers have established a network and negotiated major transportation contracts, there are limited actions that can further optimize costs. For most process industry manufacturers, the next significant cost savings come from exploring manufacturing capabilities/flexibility options and raw materials sourcing. Using tools such as ProfitPoint’s Strategic Network Analysis Process (SNAP™) and Profit Network™ to analyze and optimize the network ensures the right product is in the right place at the right time.
Port congestion is a symptom of underlying supply chain issues that will have a far-reaching impact on the way companies must conduct business. If you are currently working through some of these challenges, we’d love to come alongside you and share our expertise. You can get in touch with any of our experts here.