Weak links in the supply chain
"We're gonna need a case of lemons; let's hope that they got lemons tomorrow."
Life's not giving lemons to Tony Pertesis, who owns and runs the Southport Diner in Connecticut.
And not just lemons: "You order Heinz, it's not here. I order Gatorade; it took weeks to get Gatorade. The waitress will come out and say, 'I don't know where the whipped butter is.' I'll call my distributor and say, 'What happened to the whipped butter?' They'll say, 'Oh, we're outta stock 'til next week.'"
And when he can get his hands on supplies, he pays a lot more for them. "Used to buy bacon for $2.40 a pound. It spiked up to $6," Pertesis told correspondent David Pogue. "But how are we supposed to sell bacon when it's costing us so much money?"
You've probably noticed something weird going on with the supply chain, too. Suddenly, you just can't buy the stuff you want. Book publishers are having trouble getting paper … car companies can't buy computer chips … builders can't get lumber … container ships in port are waiting for days to be unloaded … and everyone is back to hoarding toilet paper!
What's so strange about the shortages is that there's actually a glut of goods entering the country.
And chances are whatever you're waiting for, is somewhere in boxes like these …
Beth Rooney, deputy director of the Port Department of the Port Authority of New York and New Jersey, explained: "One of these containers can hold 10,000 pairs of sneakers, 200 queen-size mattresses, 70 giant flat-screen TVs. So, 95% of consumer goods come into the United States in these very containers."
"So, those big container ships, how many of these are they carrying?" asked Pogue.
"Anywhere between 9,000 and 16,000 of these boxes at a time."
"And this pile is how many?"
"A couple hundred!" she laughed.
Rooney is in a perfect position to explain the first part of the supply-chain crisis: "As the pandemic hit various parts of the globe, factories overseas shut down. When production began to ramp up, we then saw a significant increase in cargo volume. We are all seeing about a 30% increase in our cargo activity year over year."
And even better (or worse), the holidays are coming.
"Of course, we're also experiencing Christmas," Rooney said. "If the goods are not here, in the port, by mid-September, they're generally not on the shelves for Christmas."
OK, so if there's no shortage of goods, then where's the shortage?
According to Yosi Sheffi, the director of MIT's Center for Transportation and Logistics, "The underlying cause of all of this is actually a huge increase in demand. … People did not spend during the pandemic. And then, all the government help came; trillions of dollars went to households. So, they order stuff. They order more and more stuff. And the whole global markets were not ready for this."
So, wait: There's plenty of goods, and plenty of people who want to buy them – so, where's the problem?
Here's a hint: Trucks.
"I think our drivers are heroes," said Mark Rourke is president and CEO of Schneider, the country's third-largest trucking and logistics company. "They didn't have a work-from-home option, right? And so, the country needed food, the country needed cleaning supplies, the country needed medicine. And they really kept this whole country moving."
Pogue asked, "So, I order something, [it] comes to America on a container ship. Can you outline the steps to get it to my door?"
"Well, the first thing we have to do is get that international box off the vessel, into the port," Rourke said. "And then, we need a trucker to come into that port and bring that generally to another warehouse. And then, we need another driver to come in and then move that across the country or wherever its destination is, a distribution center."
"Sounds like truckers are sort of key to all of that."
"Just about everything that you touch, everything you buy or consume, has been at one point or another on a truck, for sure," said Rourke.
But the national labor shortage plays a role in the supply-chain crisis, too, especially when it comes to truck drivers.
"How short are we of what we would need to handle this huge swell?" asked Pogue.
"Well, for every order Schneider is accepting today, we could do one more that we can't."
"So, you've got half the person power you really could use?"
"I could use right now, absolutely," Rourke replied.
So, there's our problem: an unbelievably perfect storm. A huge wave of stuff coming into the country, a huge wave of people who want to buy it, and a hopelessly swamped transportation system that wasn't ready for either one.
Back at his diner, Tony Pertesis is busy keeping his customers happy, and waiting for the supply-chain nightmare to end.
Pogue asked, "Is this a minor inconvenience? Or is it, like, a losing-sleep situation?"
"Listen, I've lost sleep a lot," Pertesis said. "As long as I try my best, I go out fighting, there's nothing I can do. That's all up to God."
But MIT's Yosi Sheffi thinks that there may be light at the end of the tunnel. Asked when things will be normal again, he replied, "I would say, without government intervention, it will be at the end of the second quarter next year. But the prices will still be high."
And maybe we'll emerge with some wisdom, too.
"We're getting so used to the plenty that we kind of lose perspective," Sheffi said. "And if you didn't get the right color of sneakers, and your son or daughter doesn't have the exact brand, and they have to get another brand --- live with it. It's not the end of the world. It may be even good for you."
For more info:
- Southport Diner, Southport, Conn.
- Port Department, Port Authority of New York and New Jersey
- MIT Center for Transportation and Logistics, Massachusetts Institute of Technology
- Schneider National
Story produced by Gabriel Falcon. Editor: George Pozderec.
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