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September 22, 2021

Supply Chain Woes Worsen With Record-Breaking Port Congestion

Backlogs at key U.S. ports contribute to inventory replenishment delays in the promo products market and many other industries.

By  Christopher Ruvo

Somehow, it’s gotten worse.

The number of cargo ships idling off the coast waiting to deliver imported goods at the twin ports of Los Angeles and Long Beach in California stood at 73 on Sunday, Sept. 19 – a record-breaking bottleneck that highlights the challenges facing product importers in the promo industry and beyond.

The number of ships had lessened to about 65 by Tuesday, Sept. 21, but large-scale backlogs are expected to continue as importers across industries clamor to get product stateside in anticipation of the holiday season and as general consumer demand remains high in the post-COVID-lockdown economic recovery.

This infographic tells the story of supply chain impacts on promo with quick-hit numbers.

“The American’s buying strength is so strong and epic, that we can’t absorb all this cargo into the domestic supply chain,” Port of LA Director Gene Seroka told CBS. Elsewhere, he added that a “significant volume of cargo” was bound for port through the remainder of 2021 and into 2022. “We continue to monitor a host of variables; disruptions continue at every node in the supply chain,” Seroka said.

Prior to the pandemic, a single ship waiting for berth offshore at L.A./Long Beach was a rarity. On many days through the third quarter of 2021, roughly 40 ships were at anchor off those ports, which are the primary seaborne gateways to get products into the U.S., handling 40% of all cargo containers entering the country. Counted by tonnage, about 70% of all U.S.-international trade passes by water through the nation’s ports.

Speaking of L.A./Long Beach in particular, the twin ports are the prime conduit to the U.S. for products produced in China, the country that manufactures the vast majority of items sold in the North American promo industry. Tie-ups at port can delay promo suppliers’ ability to replenish much in-demand stock.

Along with raw material shortages, domestic transport delays and other factors, the port congestion has contributed to inventory shortfalls in promo throughout 2021.

Simply rerouting cargo ships to other West Coast ports isn’t a feasible option at scale. While some ships have diverted to other ports, the fact is that the primary importing path via ocean to the U.S. runs through Los Angeles and Long Beach, and the supply chain has been built up over decades to accommodate that influx. Other West Coast ports, for instance, simply don’t have the capacity – and necessary supporting infrastructure like rail, warehouse space, trucking service, etc. – to take in ships en masse from L.A./Long Beach.

“It would just take a very small portion of L.A./Long Beach to overwhelm those ports,” Craig Grossgart, senior vice president of global ocean for Seko Logistics, an Itasca, IL-based freight forwarder, told The Wall Street Journal.

Relatedly, importers told the Journal that mitigation tactics that worked early in the port space crunch, like shifting some importing to East Coast ports, aren’t as effective anymore as many importers have started doing the same thing, creating backups elsewhere. In recent weeks, the Port of Savannah has had 20 or more ships at anchor. Plus, it’s more expensive and takes longer to import to the East Coast when bringing in product from China and elsewhere in eastern Asia – America’s sourcing hub.

“The going rate for a shipping container from China to L.A. is $16,000 to $20,000, while to New York it ranges from $20,000 to $24,000,” Jeffrey Nanus, CEO/president of New Jersey-based hard goods promo supplier AAA Innovations (asi/30023), recently told ASI Media. “I do believe the situation will peak in December and January, when there will be a mad scramble for space and containers could break the $30,000 mark.” Prior to the pandemic, a container to Los Angeles cost around $1,900.

How will promo’s supply chain hold up in the busy holiday season and beyond? What will inventory levels be like? Find out in this Promo Insiders podcast.  

The Global Port Tracker study, conducted by Hackett Associates on behalf of the National Retail Federation, said that major U.S. ports will handle a total of 25.9 million containers in 2021, crushing the previous record of 22 million containers set in 2020. In August alone, ports are estimated to have processed 2.37 million containers – a record for any single month since record-keeping began in 2002. In a related note, China’s exports to the United States rose 15.5% year over year in August.

In 2021, rising raw material prices, congestion at ports, insufficient labor and domestic transport capacity, skyrocketing costs for shipping containers/ocean freight, unfavorable monetary exchange rates and more have resulted in promo experiencing inventory shortfalls, higher product prices, lower customer service levels, longer production times, shortages of important decorating materials like screen-printing ink, and delays in order delivery.

The Atlantic’s Amanda Mull offered perspective on the supply chain crises.

“Everyday life in the United States is acutely dependent on the perpetual motion of the supply chain, in which food and medicine and furniture and clothing all compete for many of the same logistical resources,” Mull wrote. “As everyone has been forced to learn in the past year and a half, when the works get gummed up – when a finite supply of packaging can’t keep up with demand, when there aren’t enough longshoremen or truck drivers or postal workers, when a container ship gets wedged sideways in one of the world’s busiest shipping lanes – the effects ripple outward for weeks or months, emptying shelves and raising prices in ways that can seem random.”