The U.S. Supply Chain Makes No Sense

[Muda69]

https://www.nationalreview.com/2021/10/the-idiocies-of-the-u-s-supply-chain/#slide-1

Quote

If there is one universally recognized principle in American political life, it’s that the president of the United States should want Christmas to come off without a hitch.

Surely, this is one of the reasons Anthony Fauci rapidly backed off his comment in an interview the other day that it’s too early to say whether people should gather for the holiday. No sooner had Fauci relented than the national focus shifted to an ongoing crisis of the global supply chain that is clearly going to crimp the Christmas shopping season, forcing the Biden administration to scurry to try to alleviate a long-running, highly complex mess.

We’ve gone from fruitless “infrastructure weeks” in the Trump administration to fruitless “trying to pass infrastructure and reconciliation” weeks in the Biden administration to, now, an “attempting to make our infrastructure work” week that might have to be constantly repeated.

As part of the push to get our logistics unstuck, the president is prodding the Port of Los Angeles, one of the most important in the country, to operate on a 24/7 basis. This is welcome news, although it might cause most people to stop and think, “Wait a minute — our ports don’t already operate 24 hours a day?”

No, which speaks to the thick layer of irrationality encrusting our supply chain.

It is experiencing its worst disruption since the advent of the shipping-container era in the late 1950s, driven, at bottom, by the pandemic. A surge in e-commerce, coupled with a labor shortage, helped to create a spiraling series of bottlenecks.

Ships are idling, waiting to unload their cargo at ports, while containers are waiting at the ports to be shipped further inland, while cargo is waiting outside full warehouses on chassis that aren’t available to use to pick up other containers, and so on.

There’s no underestimating the challenge here. Yet the situation also highlights how, as Scott Lincicome of the Cato Institute persuasively argues, our logistics system is beset by idiotic policies and practices that make it hugely inefficient.

Consider our ports. U.S. facilities are nowhere near the top-performing facilities around the world. They are generally less automated and less efficient. Ports in Asia operate 24 hours a day, matching the 24-hour-a-day pace of factories, whereas, until now, the Ports of Los Angeles and Long Beach were operating only 16 hours a day.

The main culprit for this massive inefficiency is the incredibly powerful International Longshore and Warehouse Union, which has a lock on the ports up and down the West Coast. It hates automation and has won extraordinary pay for its workers and strict work rules.

As Peter Tirschwell writes in the Journal of Commerce, “Huge cost increases, limited ability to automate terminals, chronic avoidable disruption during contract negotiations, and far lower productivity and working hours compared with ports in Asia and elsewhere around the world are at the core of the issue.”

Meanwhile, long-haul truckers around the country need about 20,000 more drivers and have also been hit by a shortage of chassis. In the midst of a major logistical nightmare, the U.S. International Trade Commission imposed roughly 200 percent duties (on top of Trump-era duties of 25 percent) on the world’s biggest manufacturer of chassis, China Intermodal Marine Containers. The head of the Harbor Trucking Association, representing port truckers on the West Coast, complained, “Now we’ve created scarcity and increased the cost.”

Then, as Lincicome points out, there are long-standing rules such as the Jones Act, which makes it much more expensive to ship goods from port to port within the U.S., putting a premium on the overtaxed ground systems.

Eventually, U.S. logistics will reach a new equilibrium. Still, this crisis should prompt a rethinking of the needless inefficiencies we foist on ourselves. It will be too late to hold this coming Christmas harmless, but it will serve us well going forward, whatever the season.

Yep, labor unions screw up pretty much everything, all to make sure their members can have their cake and eat it too.

 

[DanteEstonia]

California also has split speed limits. 55mph for trucks, 70mph for everybody else. That is doing more to the "supply chain" than the longshoremen. 

[swordfish]

The Union, coupled with the PROC (Peoples Republic of California) having so many rules and regs on semi-trucks forcing many trucks to avoid the State and take other runs, it's no wonder the State of Florida is setting out welcome mats to freight companies to come to their shores instead of California's.

https://www.instagram.com/p/CVCQt7nofKN/?fbclid=IwAR2foNQd2fglQVPUpx4-IqhvN0_gzJwhH_4TuVXZTc57HRy8RuaGHfDRmvg

 

 

[Muda69]

21 hours ago, DanteEstonia said:

California also has split speed limits. 55mph for trucks, 70mph for everybody else. That is doing more to the "supply chain" than the longshoremen. 

As if the truck drivers obey those speed limits 100% of the time.    Stop trying to cover for the labor unions you love so much, Dante.  

[DanteEstonia]

38 minutes ago, Muda69 said:

As if the truck drivers obey those speed limits 100% of the time. 

How close do you live to California?

Okay @Muda69 and @swordfish, since you are such geniuses, if the Port of Long Beach was to operate 24/7, where are they going to put the shipping containers?

[Muda69]

3 hours ago, DanteEstonia said:

How close do you live to California?

Okay @Muda69 and @swordfish, since you are such geniuses, if the Port of Long Beach was to operate 24/7, where are they going to put the shipping containers?

It won't operate 24/7 no matter how much smoke Mr. Biden blow because:

a.  It will take months to hire additional union workers to staff such an endeavor,  if the union allow it in the first place

b. Like you alluded to you can unload all the container ships you want but if there isn't sufficient ground or rail transportation to take the containers somewhere then now you just have thousands of container sitting in a yard somewhere instead of on a ship. 

All of this has happened on Biden's watch. He is to blame, right?

 

[swordfish]

4 hours ago, DanteEstonia said:

How close do you live to California?

Okay @Muda69 and @swordfish, since you are such geniuses, if the Port of Long Beach was to operate 24/7, where are they going to put the shipping containers?

Maybe on the chassis that (if you looked at the instagram link I posted) are sitting at the dock where the drivers who are currently there are waiting for over 4 hours so they could leave the port?  IDK - or any of the intermodel container transfer sites nearby where they could be loaded onto rail cars.....Yeah my industry is relying on those longshoremen to actually get their job done.  I may not live close to California, but I have been to Long Beach and seen the operation.  When those dudes are working, they are really moving, but when it shuts down, it SHUTS DOWN and nothing or nobody moves until the next start up.

[DanteEstonia]

15 hours ago, swordfish said:

(Peoples Republic of California) having so many rules and regs on semi-trucks forcing many trucks to avoid the State and take other runs

Again-

https://gridirondigest.net/topic/4869-the-us-supply-chain-makes-no-sense/?do=findComment&comment=116278

 

[Muda69]

I know of several manufacturing plants in central Indiana that have resorted to driving their own trucks, usually with a forklift, and driven by their own employees all the way up to Chicago area container yards so they can unload critically needed parts and material and drive it back to their manufacturing plant.  Local transportation companies that would normally pick up that container in Chicago and deliver it to the manufacturing facility simply don't yet have the manpower and trucks to handle the demand/backlog.

 

[swordfish]

In the meantime - the US Transportation Secretary is on the job......

[Muda69]

Good job Joe:

 

[swordfish]

Could it really be this simple?  Remove a local regulation that prohibits stacking containers over 2 high?

https://thezvi.wordpress.com/2021/10/28/an-unexpected-victory-container-stacking-at-the-port-of-los-angeles/?fbclid=IwAR2MaRYsHjKjOGbpjHrvH4ksgfUCBcHyvFcf0mb9Yl6ByYjTz56S-4ZcxTs

 

[Muda69]

11 minutes ago, swordfish said:

Could it really be this simple?  Remove a local regulation that prohibits stacking containers over 2 high?

https://thezvi.wordpress.com/2021/10/28/an-unexpected-victory-container-stacking-at-the-port-of-los-angeles/?fbclid=IwAR2MaRYsHjKjOGbpjHrvH4ksgfUCBcHyvFcf0mb9Yl6ByYjTz56S-4ZcxTs

 

Apparently this two-stack rule did not cover the area owned/ran by the Port of LA, but was a local ordinance for the surrounding container/truck yards in Long Beach and Los Angeles:

https://news.ycombinator.com/item?id=29026781

https://losangeles.cbslocal.com/2021/10/22/long-beach-eases-rules-on-container-stacking-to-ease-the-backlog-of-cargo-ships-waiting-to-unload/

 

 

[Muda69]

Port Congestion Is Not a Market Failure

https://www.nationalreview.com/2022/01/port-congestion-is-not-a-market-failure/

Quote

On January 2, Ryan Petersen was interviewed by Noah Smith about the supply-chain crisis. Petersen is the CEO of Flexport, a company founded in 2013 that uses and develops new technologies to modernize American logistics.

Modernization is exactly what American logistics needs, and Flexport is doing great work toward that end. Scroll down to the bottom of the interview, and you’ll find a list of all the new technologies that Flexport and companies like it are developing. Petersen is a very smart entrepreneur, and the logistics sector needs more people like him and more companies like Flexport.

It’s because Petersen gets so much right that it’s worth pointing out something he gets wrong. He calls port congestion a “market failure.”

Here’s the part of the interview where he makes that claim, with his comments immediately preceding it as context:

I think many of us imagined that we live in a world where there’s a wizard behind the box. That there’s actually somebody in charge of all of this, and that that somebody must have made a mistake. And of course, it must be the president of the United States. But that’s not actually the world that we live in. It’s a market-based system. We’re lucky to live in an economy that’s built on the principles of free enterprise, and so while it’s easy to cast blame and point fingers at the administration, we have to recognize that they’re not really in charge of all of these things. They didn’t create this situation and I’m not 100% convinced that they’re the ones that are going to be best equipped to solve the problem.

That said, there’s a very clear role for our government to intervene in markets when you have systemic failures. As much as we love the idea of a free enterprise system, the reality is that markets often fail. And when they do, we need our leadership to step in and help resolve problems. I think what we’re observing at West Coast ports right now can best be described as a market failure. So there must be some role for government to step in here.

Most of the things he says in this excerpt are spot-on. Many people likely did believe supply chains were more centrally coordinated than they actually are. Many people also likely believe that the president can fix the problem because, as Kevin Williamson has written countless times, the president is viewed by many as an emperor who can effect change in the economy at will. Neither of those things is true, and supply chains are indeed a market-based system. As NR’s editors have noted, and as I have noted multiple times before, there is not much the Biden administration can do to improve the situation.

It’s also true, though, that markets are not perfect, and sometimes government intervention is justified. But Petersen jumps from saying that sometimes governments should intervene, as a general statement, to saying that the government should intervene in West Coast ports, as a specific call to action.

 

Just because markets are not delivering a perfect result does not mean that it’s a market failure that justifies a government intervention. We don’t have much reason to believe that more government involvement would improve the situation in San Pedro Bay.

Petersen proves that he understands the bad incentives politicians face when they make decisions. He says, “For example, I live in San Francisco and our main port is the Port of Oakland, which is owned by the City of Oakland. The mayor of Oakland has a lot of local issues to focus on and probably won’t prioritize multi-billion-dollar investments in their port as the city simply can’t afford it.”

He’s exactly right about the incentives the mayor of Oakland faces, and he’s exactly right that given those incentives, the port will be ignored. What he describes, though, is a textbook case of government failure. The political structure created the bad incentives that caused underinvestment.

Petersen says that instead, ports need to be “managed as a strategic national asset” and talks about how the national government in the Netherlands owns the port of Rotterdam, which is much more efficient than any American port. But the U.S. federal government faces many of the same bad incentives that local governments do. The president also has a lot of other issues to focus on — more than the mayor of Oakland does — and Petersen never says why the president would be more likely to prioritize port investment than the mayor.

 

He says, “The Dutch government has pushed for infrastructure innovation for decades and has a great working relationship with unions and employers through a polder model, which is based on consensus.” But American labor-relations law is not based on consensus. As Oren Cass points out in his book The Once and Future Worker, the National Labor Relations Act of 1935 still applies today, and it’s based on the outdated idea that employers and employees are enemies. He writes, “The NLRA’s model of hyperadversarialism offers [workers and labor organizers] much less upside than it once did and lots more downside, guaranteeing a conflict-ridden relationship with their employers and producing only short-term ‘gains’ that over time reduce workers’ value and opportunities.”

We’ve seen that play out with the International Longshore and Warehouse Union on the West Coast. ILWU members get the short-term gains that Cass described (six-figure salaries and generous benefits), but ILWU membership continues to dwindle, and our ports have become some of the least efficient in the world. The ILWU doesn’t look for consensus; negotiations are an ordeal every six years, and its president told his members late last year that “there may be battle in 2022,” so “be prepared.”

Repeal or reform the NLRA then, you might say — but then you’re implicitly saying that this is a government failure because the government’s rules are standing in the way of a better outcome.

 

When the federal government does give ports attention, as it did in the bipartisan infrastructure law, it didn’t see ports as “strategic national assets.” As Eric Boehm wrote for Reason in November, “The subsidies doled out as part of President Joe Biden’s bipartisan infrastructure deal are expressly forbidden from being used to automate operations at American ports. Instead, taxpayers will spend billions to upgrade existing cranes with lower-emissions alternatives that won’t actually work any faster or cheaper.” More efficiency means fewer union jobs, and politicians prized pleasing the unions above increasing efficiency. That’s what federal government intervention looks like in practice.

Another way the federal government prioritizes special interests over nationwide efficiency is on the issue of chassis, the trailers used to carry containers. Petersen correctly says that “we have a real shortage of chassis and without them, you can’t clear the bottleneck.” But he fails to mention the approximately 250 percent tariff on importing them. Countless industry groups told the federal government that this tariff was preventing them from acquiring more chassis when the Department of Transportation put out a notice of request for information in September. But the federal government has left it in place as part of the domestic manufacturing push that began under President Trump and has continued under President Biden. U.S. manufacturers haven’t been able to pick up the slack, and now we have a chassis shortage. Government failure, yet again.

Petersen’s strongest case for a market failure is this:

In my opinion, what’s caused all the supply chain bottlenecks is modern finance’s obsession with Return on Equity (ROE). To show great ROE, almost every CEO stripped their company of all but the bare minimum of assets. “Just-in-time” everything with no excess capacity, no strategic reserves, no cash on the balance sheet and minimal investment in R&D. We stripped the shock absorbers out of the economy in pursuit of better short-term metrics. Large businesses are supposed to be more stable and resilient than small ones, and an economy built around giant corporations like America’s should be more resilient to shocks. However, the obsession with ROE means that no company was prepared for the inevitable hundred-year storms. Now as we’re facing a hundred-year storm of demand, our infrastructure simply can’t keep up.

Here, he is pointing to decisions that businesses made that have contributed to our present problems, so it’s a possible market failure. It is true that businesses run leaner than they used to, and just-in-time isn’t very well designed to respond to “hundred-year storms.”

But remember, just pointing to a situation where the market isn’t perfect doesn’t on its own justify government intervention. What is government supposed to do instead on this issue? Should it mandate which suppliers companies can use? Should it require different supply-chain practices? What reason do we have to believe that government would manage supply chains better?

Crediting the shift to just-in-time to greedy shareholders isn’t quite right, either. American business-management conventional wisdom in the ’80s saw Japan as the future, and Japanese business practices, such as just-in-time, were emulated all over the country. And as Petersen says elsewhere in the interview, “The globalized supply chain and shipping containers have brought down the cost of shipping goods and manufacturing by close to 90% over the last 50 years.” Bad as our current situation is, it doesn’t wipe out 50 years of progress.

To Petersen’s credit, he doesn’t propose domestic-content requirements or a general retreat from globalization as some have done in response to the crisis. His idea of government intervention is to “put a team in charge.” He says, “Right now, there isn’t a dedicated team within the federal government to coordinate all public and private sector activities to help resolve the supply chain crisis. It’s spread across multiple regulatory agencies, jurisdictions and levels of government.” He wants that team to be “calling in favors and asking people to do their part on behalf of their country.”

But there has been a White House Supply Chain Disruptions Task Force since June 2021. It has a ports envoy, John Porcari, who has been leading conference calls with industry stakeholders for months now. And the line of ships waiting for berths at Los Angeles/Long Beach is at an all-time high.

Of course, the task force is spread across multiple regulatory agencies, as Petersen says, but such is the nature of the federal government. The commerce, agriculture, and transportation secretaries all have legitimate interests in the functioning of our supply chains. So do many other agencies, offices, and commissions. If you’re looking for streamlined leadership, the federal government is not the place to go.

Back in October, Petersen toured the Port of Long Beach, and based on that experience, he recommended waiving Long Beach’s container-stacking regulations. That was the right call, and it demonstrated the right attitude when approaching this crisis: Take in the evidence and propose measures to address each problem, one at a time. Simple and obvious as that may sound, government will never approach a problem in that way. It has too many interest groups to satiate, too many bureaucrats to placate, and too many politicians who want to get credit for coming up with the grand plan that ended the crisis.

How are we going to get out of this crisis? People and companies such as Petersen and Flexport are an excellent start. It won’t happen all at once, and it won’t be centrally coordinated. But it’s already happening, with record levels of private investment flowing into the supply-chain sector and more attention on inefficient processes than ever before.

The government failures that Petersen identifies in his interview should give him pause before calling for government intervention. Beyond the ones he mentions, there are also the environmental regulations that prevented BNSF from expanding rail capacity at Long Beach, the regulatory process for fuel-efficiency standards that left truck-trailer manufacturers in limbo for five years, and the Jones Act and Foreign Dredge Act that combine to make new port construction cost prohibitive. And government hasn’t learned its lesson, either: Federal regulators are looking at introducing new inefficiencies to supply chains right now.

Port congestion isn’t a market failure that justifies a government response. What we need is more markets, more innovation, more technology — and less government.

Here! Here!

[DanteEstonia]

On 1/12/2022 at 11:05 AM, Muda69 said:

Port Congestion Is Not a Market Failure

https://www.nationalreview.com/2022/01/port-congestion-is-not-a-market-failure/

Here! Here!

All of this is from someone who never went to the ports. 

I shot this video at LBCT-

*coming soon; going to GIF

 

Edited July 9, 2022 by DanteEstonia

[DanteEstonia]

 

[DanteEstonia]

Notice how high the containers are? 

Also, this port is an exception to the rule, as it's "automated". However if LBCT is servicing a train, the trucks sit and wait. It's not the busiest port, however. That award goes to West Basin, which processes more freight because it charges lower rates. 

[DanteEstonia]

On 10/18/2021 at 6:20 AM, swordfish said:

The Union, coupled with the PROC (Peoples Republic of California) having so many rules and regs on semi-trucks forcing many trucks to avoid the State and take other runs, it's no wonder the State of Florida is setting out welcome mats to freight companies to come to their shores instead of California's.

https://www.instagram.com/p/CVCQt7nofKN/?fbclid=IwAR2foNQd2fglQVPUpx4-IqhvN0_gzJwhH_4TuVXZTc57HRy8RuaGHfDRmvg

 

 

It is more on the individual companies running each port that cause the problems. 

95% sure that instagram post was from Everport, and they are normally pretty efficient. 

[DanteEstonia]

On 10/15/2021 at 8:52 AM, Muda69 said:

The main culprit for this massive inefficiency is the incredibly powerful International Longshore and Warehouse Union, which has a lock on the ports up and down the West Coast. It hates automation and has won extraordinary pay for its workers and strict work rules.

The main culprit is the ports themselves, as each company does their own thing using their own system, with no coordination. 

[DanteEstonia]

@Muda69 do you have any comments now, since direct video evidence contradicts you? @swordfish do you have anything to say?

Also, here's APM, the other "automated" terminal-

 

[Muda69]

On 7/9/2022 at 4:57 PM, DanteEstonia said:

@Muda69 do you have any comments now, since direct video evidence contradicts you? @swordfish do you have anything to say?

Also, here's APM, the other "automated" terminal-

 

Big deal, you supposedly visited one port.  Did the port security chase you away after they found you supposedly filming this?

And I still stand by this original statement:

Quote

What we need is more markets, more innovation, more technology — and less government.

It is government control that suppresses innovation and technology in the marketplace.  I currently work in an industry where billions are wasted every year due to government "oversight".

 

[DanteEstonia]

44 minutes ago, Muda69 said:

It is government control that suppresses innovation and technology in the marketplace. 

There is absolutely ZERO "suppression" of innovation and technology at play here. The terminal companies are too cheap to do the infrastructure upgrades, and no one makes them upgrade. 

[DanteEstonia]

59 minutes ago, Muda69 said:

Big deal, you supposedly visited one port.  Did the port security chase you away after they found you supposedly filming this?

True to form, you not only contradicted a lived experience, you had the gall to insult federally secured areas. 

[Muda69]

13 hours ago, DanteEstonia said:

There is absolutely ZERO "suppression" of innovation and technology at play here. The terminal companies are too cheap to do the infrastructure upgrades, and no one makes them upgrade. 

So we need government regulation,  aka legalized force,  to compel free enterprise to do something.  Got it.  How about a terminal companies doing a better job than their competitors,  causing those competitors to lose business,  which in turn will compel them to either upgrade of go out of business altogether.  aka the market working as it should, without government interference.

 

 

 

12 hours ago, DanteEstonia said:

True to form, you not only contradicted a lived experience, you had the gall to insult federally secured areas. 

? Please explain.

 

[DanteEstonia]

42 minutes ago, Muda69 said:

So we need government regulation,  aka legalized force,  to compel free enterprise to do something.  Got it. 

Yes we do.

42 minutes ago, Muda69 said:

How about a terminal companies doing a better job than their competitors,  causing those competitors to lose business,  which in turn will compel them to either upgrade of go out of business altogether.  aka the market working as it should, without government interference.

That's clearly what we are doing now, and it's not working. 

 

44 minutes ago, Muda69 said:

? Please explain.

It takes a federal background check to enter the ports, most ports don't allow passengers, and breaking into one of the ports is 6 months in prison.