The “My Turn” by Cliff Rieders (Feb. 1) raised a lot of great points about the state of our economy and the numerous challenges we face with regard to trade, tax, monetary policy and fighting inflation. The national debt is now more than $30 trillion and it’s way past time for both parties to sit down and figure this stuff out.
I have one point to emphasize. In my opinion, supply chain issues are a large part of this current inflation problem and will continue to be for some time, regardless of what policies we enact. Moving things from place to place was already a significant chunk of total goods and services expense, and in the last two years, it’s gotten bigger. It used to cost $3,000 to ship a Pacific Ocean container port to port — it’s now $12,000-$15,000 and even more if you want to expedite it. That’s inflation on steroids.
If you can’t get goods reliably on time the downhill effect on nearly every business is a brutal combination of lost revenues and higher costs.
That’s because the pandemic exposed fundamental, pre-existing weaknesses in our global logistics that are now being driven to the breaking point. It is likely to get worse before it gets better and last much longer than anyone wants.
American ports and many others around the world are badly in need of infrastructure investment to update their facilities and have been for decades. The largest carriers operating today can transport up to 24,000 containers. That’s a train 45 miles long or 10,000 tractor trailers to unload. Ports are full of unloaded ships, and because of that containers aren’t located in exporting countries where they are needed so we end up sending empty containers back to China.
Long before COVID we had a shortage of truck drivers and tens of thousands are needed yesterday. Add other labor shortages in warehouses and related services and dock worker union negotiations in the United staes and Europe and the problem is exacerbated. For the past 40 years many, if not most, manufacturers large and small adopted Japanese, “just in time” inventory and quality practices and when shipments were delayed they had to stop production because they ran out of parts. Now many firms are ordering more than they need for safety stock and facing a future scenario where they end up with much more inventory than they need to meet demand; meaning more slowdowns and unplanned layoffs-in addition to reconfiguring production spaces to the new realities.
So who are the winners in all of this? Think Amazon, Walmart, Apple. The first two are the best examples of massive companies with the resources to book their own ships. The last is a company shipping small, light products capable of being transported by air and with the profit margins to support that exorbitant expense.
Who else can do that? Building products here sure would help; I love the recent announcement about building a $20 billion chip manufacturing facility in Ohio and lessening our reliance on China. If we started fixing Long Beach, Savannah and all our other ports right now we might be able to bring them online about the same time, in 2025 … assuming they don’t run into any construction supply chain issues.
Jim Mathias lives in Lewisburg.
