Supply chain ripple effects expected to stretch into 2022 and beyond

“If you think about it from the standpoint of a traffic jam … that accident may have occurred 30 minutes or an hour ago, but it has a lasting effect,” says a Texas-based supply chain expert.

By Alexandra Hart, Kristen Cabrera & Sara HutchinsonOctober 15, 2021 1:07 pm, , ,

Disruptions to the supply chain caused by the COVID-19 pandemic are expected to continue for at least another year. Experts say that a combination of factors, including airport closures, increased consumer demand and labor shortages have led to a monthslong backlog at American ports.

William Ellegood, a professor of supply chain management at Sam Houston State University, tells Texas Standard there’s no “quick fix” for a disruption of this size, even with the Biden administration’s announcement this week that it struck a deal with the Ports of Long Beach and Los Angeles to begin operating 24/7 in order to relieve the backlog.

Listen to the interview with Ellegood above or read the transcript below to learn more about what’s causing the supply chain crisis.

This transcript has been edited lightly for clarity.

Texas Standard: How do you explain what’s going on with the supply chain? Are the problems caused by the pandemic? Labor shortages? Both?

William Ellegood: All of the above. Obviously, the disruption from the pandemic brought on shortages with closing airports, closing of countries. The network is really efficient for our supply chain but cannot handle that type of disruption. We are now seeing backlogs on the West Coast, shortages in semiconductors and the ongoing shortage of truck drivers.

Most people never thought about the supply chain because it always seemed to work before.

Ellegood: Yes. If you think about it from the standpoint of a traffic jam, you’re backed up and then you get to a point where all of a sudden it opens up, but there’s nothing there. That accident may have occurred 30 minutes or an hour ago, but it has a lasting effect.

Is there any historical precedent for this? 

Ellegood: No, not really; not to this extent. You can look at Long Beach: the port is currently backed up with container ships. They’ve never seen anything similar to this. The biggest back up they ever had was in 2004, and where we’re at now far exceeds that.

The Biden administration struck a deal to get that port in Long Beach and Los Angeles running 24/7. There have been a lot of shipments that have been redirected to Houston, too. Will that be the fix we’re looking for? 

Ellegood: It’s a start to alleviating the backlog, but you have to consider that there are some estimates that say it will take at least 90 days for them to offload all the ships that are currently off port. Ninety days is well past Christmas. So, we’re going to see this impact not only through the holiday season, but long into 2022. Plus, once you get the containers offloaded, they estimate there’s roughly 500,000 containers off the coast. We need truck drivers. We have been experiencing a shortage in truck drivers for multiple years, so it’s going to escalate. Even when they get it offloaded, there are still going to be delays due to our current infrastructure with truck drivers.

How long could these ripple effects continue?

Ellegood: At least with the semiconductors, we probably won’t see that smooth out until 2023 or 2024. It’s a ripple effect; it takes a long time to work through the system. Once you create a backlog, it’s going to take longer to work through it.

If you had President Biden’ ear, is there anything you’d tell him about what he could do or should be doing to remedy this situation? 

Ellegood: There is no quick fix. Honestly, there isn’t. I mean, you can add labor, truck drivers. As I said, you can free up the ports, but then it’s going to move to the truck drivers, and that’s been an issue for a long time. So, no, there is no real quick fix. It just has to work through.

Any lessons we should extract from this experience? 

Ellegood: Supply chain managers have built an efficient network that can handle minor disruptions. The pandemic is not a minor disruption and not a disruption that we can plan for going forward. So the real lesson is that, yes, this has been painful, but once we work through it, the supply chain will come back efficient. Don’t anticipate people putting inventories and safety stocks to protect against this type of unprecedented disruption [in the future]. We just have to work through it.

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