The Ripple Effect on a Global Scale: Delays, Shortages, and Price Increases
This week, I sat in on a webinar, Global Supply Chain Disruption. Keith Prather, co-founder of Armada Corporate Intelligence, had prepared it to shed some light on the current shipping delays affecting people worldwide. I’m sure we’ve all experienced these, as manufacturers struggle to fulfill orders and send out shipments. Raw materials can’t make it fast enough, and ships are sitting outside harbors full, ready to be unloaded.
According to Keith, everything can be summarized in one word: dislocation.
As the economy fluctuates and COVID continues to rage around the world, countries react differently. With China favoring aggressive quarantines and a desire to minimize cases, workers tested positive in the 3rd-largest port in the world, closing it down and cutting off any movement for a while. (As of 9/18, China has more ships sitting outside of this one port than COVID cases there). This closure has a ripple effect, causing several other ports to slow down, even reaching across the world. With around 150 ships waiting to unload, each with dozens of containers, things have slowed down.
In the meantime, container prices have skyrocketed, going from a typical $3000 per container to over $20,000. Some companies are changing strategies to deal with the increased costs, ordering individual pallets instead of full containers, prioritizing what they need most. Even still, traffic at a port like L.A. is up 50% over this time last year.
Transportation is in high demand on ships, trucks, and rail. This increased demand gives carriers all the pricing power, so they’ve been dumping clients, able to pick and choose the exact shipments and customers they want. As things settle, this imbalance may take a few years to correct. The DAT Trendlines show prices for trucks up 30-70% from last year, depending on the kind of truck. Not only this, more loads are ready to be shipped than last year, up to 3x as much compared to the available trucks.
The trucking industry has bigger problems with many companies in desperate need of drivers to manage all these loads. Truckers are older on average than those in other jobs, so retiring last year was an opportunity too good to pass up for many. Especially with COVID concerns, older drivers felt safer at home than on the road for weeks at a time.
With these driver shortages, companies have bumped up salaries, benefits, and incentives, all to no avail. With more jobs than applicants nationwide, 10M openings, to 8.3M unemployed, you’d think things would resolve themselves. Unfortunately, other factors play a part, with 40% of new applicants for a CDL unable to pass a drug test.
Rail has suffered too, with traffic up 12% from 2020, but a desperate need for more engineers and employees persists.
Raw material prices are up across the board, from steel to aluminum, with some interesting sources influencing this trend. Scrap metal is harder to find with people holding on to used cars (a glimpse of the bizarre state of the automotive industry). New laws from the E.U. are doing their part, too, with taxes levied against products from countries with high carbon emissions. Notorious for its environmentally unfriendly production, China will have to change its ways or pay the tax, while other countries are rewarded for caring about the environment.
Prices remain high, and delays still affect tons of goods worldwide, but many predict a resolution in late 2021 or early 2022. Time will tell, but until then, be patient with your manufacturer as the effects ripple throughout the world. Hopefully the gap in employment, shipping times, and prices will start to close.
Todd Miller has spent his entire career in the metal building products manufacturing industry. He is president of Isaiah Industries, an organization recognized as one of the world’s leading metal roofing manufacturers. Todd is currently Vice President of the MRA (Metal Roofing Association) and a Past Chair of MCA (Metal Construction Association). Through his website, he strives to raise the bar on standards and practices to provide property owners with the best possible products for successful roofing projects.
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