Ports And Retailers Hope New Federal Appointee Brings Supply Chain Relief
Late last year, the Port of Long Beach, seeking to facilitate smoother loading and unloading of containers from ships, converted 49 nearby empty acres to a staging area for containers. Doing so moved containers out of the terminals and out of the way so there was more space for incoming ones, Port of Long Beach Executive Director Mario Cordero said.
But the short-term fix has already hit its limits: There is no additional space available to expand at the Port of Long Beach — the second-largest port in the country, topped only by its cousin, the Port of Los Angeles.
“Warehouses are overflowing, rail yards and carriages are maxed out, chassis and containers continue to be hard to come by, ships are coming in and waiting at anchor to get worked,” Port of Los Angeles Executive Director Gene Seroka said during a digital press conference on Aug. 17.
Across the country, a laundry list of interlocking challenges have been playing out where container ships meet the land. The White House on Aug. 27 announced the appointment of Port Envoy John Porcari to its supply chain disruptions task force, which was created in June in response to congestion at major ports that has had a ripple effect throughout the nation, delaying products and increasing costs for businesses that need them.
Though congestion at the ports isn’t necessarily a new problem, the coronavirus highlighted and exacerbated existing challenges. The appointment is an important step forward in alleviating disruptions, which are impacting consumers, workers and businesses alike, National Economic Council Director Brian Deese said in the White House’s statement. Experts who spoke with Bisnow said that a federal appointee might bring additional weight to discussions and encourage more stakeholder participation.
“It’s important that the White House has put an emphasis on this, that it recognizes the importance of the ports and the ongoing challenges we’re facing to overall economic recovery,” said Jonathan Gold, the National Retail Federation’s vice president of supply chain and customs policy.
The NRF said the appointment was encouraging, especially as the critical holiday shopping season looms. Many retailers have already moved up the timing of their holiday shipments because of the ongoing disruption and congestion issues, and this year’s peak shipping season is already here, Gold said.
While Gold said he hopes that the new port envoy can bring together stakeholders quickly to identify some short-term measures to alleviate the pressure of the coming months, he said that much of what is likely to happen will focus on long-term rather than immediate impacts. But it is vital to start addressing these issues and coming up with creative solutions now, Gold said.
Officials with the Port of New York and New Jersey said they look forward to working with the envoy, “particularly on issues facing the trucking and warehousing industries that the [port] is carefully monitoring as capacity in the national supply chain tightens amid the ongoing cargo surge,” Sam Ruda, director of the Port Authority of New York and New Jersey's Port Department, said in a statement to Bisnow.
The White House's announcement named the Ports of Los Angeles and Long Beach as places where the congestion and resultant complications are especially severe. The port complex sees the largest share of cargo containers of any U.S. port.
“If there’s anything that the current [public health] crisis has ignited, it has ignited a conversation that needs to be had about how we create greater efficiencies and more throughput through the nation’s largest port complex,” Cordero said.
The Port of Long Beach has seen a 32.5% increase in inbound shipping containers in the first seven months of 2021 compared to the same period in 2020. The Port of Long Beach has broken monthly cargo records in 12 of the past 13 months, according to the latest numbers, which go up to July, as reported by the Long Beach Business Journal.
Cordero said he thinks the Port of Long Beach will need to shift to an around-the-clock operation, seven days a week, which would require coordination at every level of the supply chain, from truck drivers to warehouses and distribution centers.
The consequences of not addressing these issues sooner rather than later would be far-reaching, Gold said.
“It’s not just retailers who are relying on the ports,” he said. “This impacts everyone across the board. This is about sustained economic recovery as well.”
Even if snarls in the supply chain and complications getting goods on their way to consumers began to be remedied, it is unclear whether that would have a dampening effect on the hot market for industrial space near ports across the country.
Port congestion has played a role in the record demand for industrial space near the LA/Long Beach port complex and in the Greater LA area, but many factors have contributed to the success of industrial as an asset class, CBRE Senior Vice President Greg Dyer said.
Increased consumer demand for goods, especially from e-commerce shoppers, has aided industrial's rise. Companies also increasingly want to maintain additional inventory beyond what they might normally in order to withstand future product shortages after a year and a half that has been rife with them, Dyer said.
"It's a perfect storm,” he said.