The New York Times reported last month that a record number of cargo container ships were anchored off the California coast. The logjam continues today. Although few news outlets are giving it much attention, large corporations are certainly taking notice and preparing for serious supply chain delays, and so should every American.
Walmart is in the process of remodeling its stores and reducing its number of shopping aisles. Although it may result in more space for consumers, some are claiming it is a sign that the retail giant is anticipating smaller inventories. Just last month, Doug McMillion, the CEO of Walmart, announced an infusion of $14 billion in supply chain capital investments. Executives claim they are seeing the worst supply chain problems and inventory shortages in their entire careers. Where is this shortage coming from, and what are the potential repercussions for average Americans?
Although supply chains have shown strain over the last decade, the predominant cause in the current supply chain bottleneck is COVID policy. Supplies from Asia have been hindered the most. The main ports of entry for container ships coming from Asia, are in liberal cities like Seattle, Los Angeles, and Long Beach. These cities advocated for some of the most restrictive COVID protocols and have been resistant to getting their citizens back to work. Some large port employers downsized during the pandemic. Additionally, federally subsidized unemployment payments have incentivized many longshoremen to remain at home.
Meanwhile, online shopping has grown exponentially. Modest estimates have e-commerce growing by 14 percent in 2021. Walmart’s online sales grew 79 percent in its most recently completed fiscal year. Unfortunately for Walmart, its supply chain may be incapable of meeting the growing online demand. This is a simple supply and demand problem. So many Americans are ordering items online that the demand is greater than the supply chain can manage. Airfreight does supplement shipping and is recording record profits but is unable to replace maritime supply chains.
The bottleneck at U.S. ports of entry is likely to worsen with the upcoming holiday season. But the repercussions for average Americans could be more detrimental than late Christmas presents. People are already noticing the lack of supplies at retail stores: missing food service items at restaurants, the lack of fall line clothing at department stores, and even stores without shopping bags. The only commonality in the items missing is that they are imported from Asia. Even if products are assembled in the states, the lack of one critical item can be detrimental. Take the car industry: small microchips are essential for anything from touch screens to transmission systems. The lack of microchip production in Asia has resulted in soaring prices for new and used automobiles in the United States.
It seems likely that a real supply chain problem is already here and it may be too late to head it off before online shopping demands increase over the holidays. If the supply chain is bottlenecked with online Christmas purchases, that same sluggish supply line will prevent the delivery of critical food and supplies. It is difficult to forecast exactly what products will fail to be delivered. Business owners are at the mercy of supply deliveries. The best hope for average Americans is for federal and state leaders to recognize the problem now, so they can start working toward policy decisions to get Americans back to work. Without an influx of additional port workers, truckers, and other logistics professionals, Americans are in for a long dark winter.