President Biden announced this week that the port of Los Angeles will be open 24 hours a day to address food shortages in the United States. The news came with the publication of data from the Ministry of Labor, showing that the ongoing crisis in the supply chain is stimulating consumer prices and inflation.
Conservatives are turning this development into a tale of how this supply chain crash is ruining Christmas – and Biden is to blame.
Despite what some people say in right-wing news and social media, the recent problems with the global supply chain cannot be blamed on Biden alone. As his recent efforts have shown, the president is trying to help. In fact, these shortages and delays are the result of many cross-cutting problems that have existed for years, including the Covid-19 pandemic, growing consumer demand, and a global and highly optimized production network that is not adapting to rapid change.
As convenient as it would be to blame just one person for the problems of the American supply chain, the situation and its solutions are too complex to explain so easily. Let’s discuss.
So the supply chain is complex. What does that even mean?
The supply chain is the way the world economy produces and delivers the things that people buy. It covers all people, companies and countries that play a role in this process. Technicians at facilities in Taiwan that make computer chips are part of the supply chain, as are truck drivers who deliver goods from warehouses to retailers in the United States.
Factories that make the plastic used for packaging, cargo ships that move products from Asia to the West Coast, even Amazon’s fleet of aircraft are considered part of this incredibly complex system of global production that has been dramatically disrupted in recent years.
How did the supply chain go so wrong?
It is tempting to blame only the pandemic for the current supply chain catastrophe, but in some respects the pandemic has only exacerbated existing problems with global trade and revealed some new ones.
What the pandemic did was close factories, usually because there were not enough workers, and this created a shortage of products and components. These shortcomings have led to difficulties and delays in the production of products (if the factories do not have parts to build something, this is not done and not sent).
As larger shortages lead to even more bottlenecks, the outage causes problems in other parts of the supply chain, creating even more shortages, new delays and higher prices. For example, car manufacturers have failed to make cars and trucks because they cannot get enough computer chips. Ikea cannot send pieces of furniture from its warehouses to its stores due to a shortage of trucks. The collapse in the supply of petrochemicals has increased the cost of producing everything that includes plastic, including toys.
Who broke the supply chain?
Again, no one is responsible for overturning the global supply chain. Several long-term trends and the complexity of the challenges have created the conditions that have caused this crisis. American companies have been relocating more and more overseas for decades, which means that more and more of the things American consumers want to buy have to be imported. Meanwhile, deteriorating conditions for truck drivers in the United States have made work incredibly unpopular in recent years, although demand for drivers has increased as e-commerce has become increasingly popular. This means that because Americans relied more on online shopping during the pandemic, delivering goods from ports to the doorstep is a challenge.
“It’s been 40 years,” Nick Vyas, director of the University of Southern California’s Supply Chain Institute, told Recode. “We have allowed supply chains to escape without unforeseen circumstances, sustainability and other measures in place to ensure that humanity is never subjected to this.”
The pandemic has exacerbated these problems, which has contributed to the breakdowns in the supply chain we are witnessing. While American carmakers have been importing semiconductor chips from abroad for decades, Covid-19 has forced these companies to compete with laptop and phone makers for the same components. As the pandemic forced many veteran trucks to retire early, new drivers could not obtain licenses as freight schools were closed during the blockade.
Covid-19 has also affected consumer demand – namely which products they want to buy and how much – creating constant changes that the supply chain simply fails to cope with, especially recently.
It seems that we have enough time to solve these problems. Why do they suddenly ruin Christmas?
Global production has been operating at full capacity for more than a year. But without any delay in dealing with labor shortages, bottlenecks and delays, the problems just piled up. These issues have already reached a critical mass. So although American consumers have started ordering much more, there is no flexibility in the supply chain to meet that demand.
“The Delta was basically contributing to our behavior to tell all of us, ‘Hey, this could go on for a while,'” said Ellen Hughes-Cromwick, senior associate for climate and energy at the Third Way think tank. “So we just went out and bought like crazy.”
This record number of imports slows down product deliveries. Cargo ships carrying holiday goods are waiting to unload their supplies off the coast of California, but there are not enough port workers to do the job. These delays mean that there are fewer containers available for manufacturers trying to ship more products to the US, which only returns the supply chain even more.
We can agree that this is a problem for everyone. But what is Biden actually doing to fix it?
Pressing the port of Los Angeles to operate 24 hours a day is Biden’s most direct action to date, and it must ensure that an additional 3,500 cargo ships are unloaded each week. The Port of Los Angeles and the Port of Long Beach, which expanded last month, are responsible for 40 percent of the containers brought to the United States, so expanding their operations should speed up delivery across the country, the White House said.
This move will help reduce the number of ships waiting to dock, but will only affect the later stages of the supply chain problems: delivery and delivery. It is currently unclear what Biden can do to address the difficulties that arise upstream in the supply chain, such as low-component manufacturers and the closure of factories abroad. Although the White House has convened working groups to address these key issues, these efforts are unlikely to yield results in time for the holidays.
“It’s more of a supply and demand situation than a government situation,” said Patrick Penfield, a professor of supply chain management at the University of Syracuse. “The government has a role to play in regulating and enforcing laws, creating laws and trying to stimulate development. But other than that, they are powerless in terms of how trade works. ”
If Biden can’t fix it, who can?
No one can solve the challenges in the supply chain before the holidays because they are too complicated. Factories cannot increase their production capacity immediately, and more people will not suddenly get freight licenses just because American consumers want to buy more. Severe weather in Texas, an energy crisis in China and a fire at a chip factory in Japan have also created new obstacles.
In the long run, it is possible that the US government will change the policies that contributed to this situation in the first place. Politicians could change their approach to trade, which has historically encouraged American companies to produce products abroad. Improving labor standards can raise working conditions for truck drivers and factory workers to make these jobs more attractive – to stimulate vaccine production worldwide and to ensure that workers in other countries are safer than outbreaks of Covid-19. Admission of more people to the United States can address the shortage of suppliers and port workers.
The government may even consider redistributing the Defense Proceedings Act, a Cold War-era law that gives the president certain powers over domestic production during a crisis. For example, the US Department of Commerce is considering how to use this law to deal with US shipments of semiconductor chips.
But these ideas remind us that US supply chain policy does not exist in a vacuum. This is an amalgam of any broader political decisions that are not so easy to change.
When will all this end?
Some experts say it will be months before these problems in the supply chain are resolved. Others believe that these disturbances are a new norm that can last for years. Nevertheless, there is no reason to think that these problems will be solved by the holiday season. In fact, the White House has already said that there is no guarantee that the packages will arrive on time.
So should we blame Joe Biden for ruining Christmas?
No.