'There are no ships:' Behind the scenes of the global supply chain crisis

Monday, November 1, 2021
Behind the scenes of the global supply chain crisis
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"It's just the most unusual time in our country's history."

WILMINGTON, N.C. (WTVD) -- At least we've moved on from sailboats.

The simple fact remains, however, that the modern means of transporting goods from one continent to another cannot keep up with the speed of modern communication. Nor can it satisfy the insatiable need from consumers for the expectation for instant gratification.

"All the ships - whatever has a propeller and able to swim and keep on the water - they're underway," Nils Haupt, an executive at global container shipping line Hapag Lloyd AG, told the ABC11 I-Team in an exclusive interview. "There are no ships."

For decades, if not centuries, the business of importing and exporting goods has long been an industry with thin margins for error; excess time and excess inventory all have their costs. It's also an industry largely organized and operated outside the United States.

Hapag Lloyd, based in Germany, is just one shipping line among dozens of international freight companies reporting historic delays and congestion in its operations. Hapag-Lloyd is also part of THE Alliance, along with Yang Ming (Taiwan) and Ocean Network Express (Singapore), whose fleet often docks at the Port of Wilmington.

"Capacity is theoretically sufficient but if you take into account that on a journey from Asia to the United States or Asia to North Europe, ships on average have delays of 14 to 18 days," Haupt explained. "That means containers are much longer on board. Ships are bound longer until they're at the final port and they're not available for the next service. So we lose capacity - we lose about 20% of capacity just because of the congestion at the ports."

The congestion is well known at the Ports of Long Beach and Los Angeles, California, the busiest in the country. About 40% of all shipping containers entering the U.S. come through the Los Angeles and Long Beach ports. As of Oct. 30, moreover, upwards of 80 ships stacked like rush hour gridlock traffic in L.A. were waiting to offload containers.

There are similar reports of delays at major U.S. ports in Portland, Tacoma, Galveston, Miami, Savannah and Bayonne, NJ, though not nearly on the same scale.

According to Nils Haupt at Hapag Lloyd, however, what's happening in the U.S. is more of the rule for intermodal transportation of raw materials and manufactured across the world, from Hamburg to Hanoi, Barcelona to Busan.

"We see that in Singapore, their crane operators can't come in because they live in Malaysia, and the borders were closed for COVID so they couldn't go to work," Haupt said. "We were seeing in China there was one positive COVID case among one port worker, and they closed an entire terminal. Ships can't get a berth and ships need to avoid this port so all of other ports were running full within hours."

Ripple effects reach North Carolina

The United States is home to vast terrain and a wealth of resources, but for myriad reasons there is only so much raw materials harvested, mined or produced within the United States. Manufacturing, as well, has also relocated to other countries across continents and across oceans.

In High Point, North Carolina, the few remaining American furniture manufacturers are trying to make the best with what they have.

"There is a disruption, but I think it's more than that," Phil Miller, an executive at Thayer Coggin, told the ABC11 I-Team. "When we go into a typical recession things cease to be bought and you're in an economic downturn. This time around it wasn't an economic situation, and when COVID hit the government actually pumped more money into the economy."

RELATED: Home furnishing customers met with unprecedented furniture wait times

More than 100 employees work at the sprawling Thayer Coggin facility. Every couch, sofa, bed, chair, ottoman and everything in between, is made by one of those American workers, but they can only work with what materials are in stock.

"We do bring in our metals from overseas, leathers from Italy, and fabrics from Turkey and Belgium and Italy," Miller said. "They closed at different times because of COVID-related issues and that created this chain reaction of disruption."

Other issues beyond ships

At the Thayer Coggin loading docks, trucks are arriving more sporadically and with varying levels of accuracy in their manifests. Miller said the company is also dealing with "hyper-inflation."

"I mean we're faced with raw material cost now," Miller lamented. "Our foam costs is up 100%, hardwood and plywood up 100%. In normal time, inflation is 3-5% a year maybe. Here we're looking at hyper-inflation."

The cost imposed on the manufacturer, thus, must then trickle down to the customer. Shoppers are also waiting much, much longer for their purchases. According to Thayer Coggin, a couch that takes eight to ten weeks to produce now could take up to six to eight months.

"It's just the most unusual time in our country's history."

As the holidays approach, Miller said the company wants to scale up production and is prepared to hire another dozen staff which could boost productivity by 35% - if they could find them.

"There are obviously some very capable people out there and they can earn a good living," Miller asserted. "You find individuals who come in here sometimes and say, 'Wow I like doing this. I like to make things.'"

Perhaps unlike the service industry, however, the search for capable candidates is not a reflection of wages or a desire to work. Instead, Miller explained, it's emblematic of a decades-long trend among young Americans to prioritize jobs in computers and technology instead of trades.

"Sometimes there's this perception that maybe that's not a sophisticated profession, and it's unfortunate it's implied that way because that's anything but the truth."

Port of Wilmington operations

While Thayer Coggin tries to add on to its workforce, a great deal of investment is taking place at North Carolina ports, including Morehead City and Wilmington. The State of North Carolina, in fact, has allocated some $260 million into infrastructure improvements at those ports.

"We are in growth mode," Brian Clark, executive director at NC State Ports Authority, said to the ABC11 I-Team. "When the ship arrives everything is extremely efficient here."

On the east coast, Savannah and New York/New Jersey are the dominant ports for the European, Asian and South American trade routes. Savannah, for instance, processes some six million TEUs (20-foot equivalent units), compared to Wilmington's 330,000 TEUs per year.

Wilmington, however, has added new cranes, new berths, new refrigerated processing facilities and US Customs & Border Protection security infrastructure to handle more freight. Along with eastern ports like Charleston, Baltimore and Chester, PA, Clark said Wilmington offers opportunities for shipping alliances to choose alternate ports of call to ease congestion.

"On an Asian trade it's furniture, apparel, DIY hardware merchandise, toys," Clark added. "On the export side there's frozen poultry, pulp and paper. On the Europe trade we'll see auto parts, chemicals. South America is typically textiles and we have a very strong export market with poultry."

The Asian trade, however, is still where Clark noticed delays in a ship's arrival to port.

"It's a challenge and not predicted to end anytime soon."

When will things get better?

The holidays are undoubtedly the busiest times of year for retail, and this year's holiday season may be arriving at a perfect storm of unpredictability for the supply chain.

Storms, by the way, aren't just a metaphor.

"So now having bad weather, the typhoon season, having some heavy storms on the Atlantic," Nils Haupt at Hapag Lloyd AG said. "So this is all preconditions to get back to normal."

In California, the L.A. Harbor Commission voted unanimously to put pressure on carriers to speed up the pace moving containers off the docks, making room to offload ships.

"In the case of containers scheduled to move by truck, ocean carriers will be charged for every container dwelling nine days or more," the Port of L.A. said in a statement. "For containers moving by rail, ocean carriers will be charged if a container has dwelled for six days or more."

To further ease the burden at the ports, Gov. Gavin Newsom and the U.S. Department of Transportation also announced a strategic partnership to help facilitate innovative projects and financing opportunities for multi-billion dollar infrastructure improvements in California.

According to Haupt, more flexibility is also needed from businesses and consumers.

"If a business says it only accepts containers between 7:00 a.m. and 12:00 p.m. - that doesn't help. They should accept containers during the night as well because they pile up at the port and this will void getting the system running again," he added. "We would wish, as an industry, there's a 24/7 operation. We know it's challenging, we know it's difficult, but that would help. So we need more flexibility of all players."

Ultimately, though, Haupt emphasized the only true way out of the crisis is to end the COVID-19 pandemic.

"So we would expect that after Chinese New Year and around the New Year and first quarter we will see normalization provided COVID cases don't go up. If we're running into new lockdowns and new restrictions and new rules and regulations, this will further harm the regular traffic in container ships."