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November 03, 2021

Fines Help, Says Exec, But Port Logjams Persist

Port congestion is one of the supply chain debacles that have contributed to inventory shortfalls in the promo products market in 2021. Analysts expect the disruption to last for a “long time.”

By  Christopher Ruvo

A top executive says fines aimed at helping relieve cargo container logjams at the United States’ most important ports are starting to have the desired effect, but analysts continue to warn that supply chain issues are systemic and will last for a “long time,” likely resulting in further inflation and shortages of goods.

Last week, the sister ports of Los Angeles and Long Beach announced they would charge cargo carriers $100 for each imported cargo container that remains on the docks for more than three days if it’s scheduled to be transported by rail.

Fines Help, Says Exec, But Port Logjams Persist

If the cargo is to be moved by truck, then carriers have nine days before the penalty fee takes effect. If the cargo continues to occupy dock space, the fee will increase by $100 per container per day.

On Tuesday, Nov. 2, Port of Los Angeles Executive Director Gene Seroka reported that the threat of “last resort” measure, which goes into effect Nov. 15, is beginning to help unclog some of the glut of containers.

“We’ve tried diplomacy. We’ve tried collaboration, operations meetings all around, and nothing has moved the needle just yet,” Seroka said, CNBC reported. “This is a last resort and one I didn’t want to have to take, but we’re starting to see movement.”

Seroka added: “Folks are coming to the table with these daily and twice-daily video meetings to try to figure out what their plans are – liner shippers, importers – and how we’re going to move this cargo away and get the others moving forward.”

While starting to get some more containers on the way to their destinations is a positive development, the pressure on the ports has remained massive as importers across industries, including the promotional products market, clamor to get product stateside to meet consumer demand, which has soared amid economic recovery following the societal shutdowns of the COVID-19 pandemic.

The Marine Exchange of Southern California reported that, as of Tuesday. Nov. 2, 158 total ships were in port at Los Angeles/Long Beach, including 104 at anchor or loitering and 54 at berth – around record levels for backups. Of the 158, 102 were container ships, including 77 at anchor or loitering and 25 at berth. Before the pandemic hit, the ports’ highest record had been 17 ships waiting to anchor.

Some 40% of imported cargo containers that enter the United States do so through the ports of Los Angeles and Long Beach.

Los Angeles and Long Beach are not the only U.S. ports experiencing issues. The Port of Savannah, for instance, is among those struggling to keep up.

Tim Huxley, chief executive of Hong Kong-based Mandarin Shipping, said this week that the supply chain problems are “going to take quite a long time to sort out.” Investments in ports, roads and bridges are necessary, but even if those come it could take years to build the infrastructure, Huxley said. Similarly, even as the shipping industry adds to its container fleets, the increased capacity won’t be available until 2023 at the earliest.

“All of these issues, they are here to stay for quite a while to come,” Huxley said in an interview with Street Signs Asia. “So I’m afraid that this is actually going to end up translating into higher costs for consumers down the line and indeed shortages of some goods.”

The port congestion is one of the supply chain debacles that have contributed to inventory shortfalls in the promo products market in 2021. The cost of importing has skyrocketed too, a factor in price hikes instituted by promo suppliers this year. Corruption in the shipping industry may have contributed to the higher costs of importing: The head of a U.S. commission that oversees ocean transportation said in an interview on Tuesday, Nov. 2, he suspects some ocean carriers have improperly charged importers.

“We need to do a very good and thorough job of investigating,” U.S. Federal Maritime Commission Chairman Dan Maffei told Reuters. “Of course, there’s probably abuses going on. And, you know, I don’t want to go farther than that.”

Meanwhile, some technology leaders see opportunity in the supply chain crisis. Microsoft, for instance, has announced a new manufacturing solution called the Microsoft Cloud for Manufacturing. There’s also Dynamics 365 Supply Chain Insights, a tool designed to give customers more visibility into what’s happening along their supply chain routes and intelligence to deal with issues as they arise. Both products were being announced this week at Microsoft Ignite and were available in preview as of Nov. 2, TechCrunch reported.

The supply chain disruption being experienced by the promo products industry and others in 2021 has been unprecedented.

In addition to soaring costs for shipping/ocean freight and importing delays caused by everything from the port congestion to lack of space on cargo ships, issues have included unfavorable monetary exchange rates, reduced factory productivity in China, rising raw-material prices, insufficient labor levels and inadequate domestic transport capacity.

For promo, the repercussions in 2021 have been inventory shortages, higher product prices, lower customer service levels, longer production times, shortages of important decorating materials like screen-printing ink, and delays in order delivery.

Nonetheless, demand for promo products has increased, and distributors collectively grew sales on a year-over-year basis in both the second and third quarters of 2021. The just-released ASI Distributor Quarterly Sales Survey shows that promo distributors accelerated sales, on average, by 18.4% in Q3.