Dispatch From the Director: The Supply Chain Has Links of Different Dimensions
By David Fisher, TSC Institute Executive Director
Collectively, we are now referring to our global supply chain as being in crisis. A crisis is defined as any event or period that will lead, or could lead, to an unstable and/or dangerous situation affecting an individual, a group, or indeed all of society. Crisis, particularly when it is not resolved quickly, can have consequential impacts lasting well into the future.
Last week, in the Transportation & Supply Chain Institute’s Transportation Talk series, we talked with Dr. Noel Hacegaba about this crisis and our collective, unstable situation with the supply chain. He suggested, and indeed we agree, that our situation could lead to consequential impacts to society lasting for quite some time.
The links of supply chain are not simply the modes of trains, ships, trucks, air cargo, warehouses, and the like but also dimensions in size, capacity, and time. Recently Dr. Hacegaba, of the Port of Long Beach, made the decision to operate 24/7, and that was very welcome news for shippers and carriers. The Port of Los Angeles will also have 24/7 coverage. The Union Pacific will also operate around the clock at the San Pedro facility. Additionally, FedEx, UPS, and other major carriers have made the similar pledges where they are facing critical pinch points. This solves issues in many elements in the whole of the system. However, for the bottlenecks to be truly relieved solving for the dimension of time will not be the only dimension.
Harder to do is to solve for the issue of capacity: capacity in terms of acreage for containers at various exchange points; capacity in terms of total available warehouse space; and capacity in terms of total train, truck, and ship capacity. Those pinch points have limitations that are very hard to solve for in a short amount of time. Total supply chain elasticity in capacity, when overall volumes have increased by 30%, is awfully hard to adjust to. This is a hard lesson for all the organizations that relied on just-in-time manufacturing and distribution as an operating model.
The statistics are hard to hear for the transportation and supply chain industry. Normally, this part of our economy operates silently in a concert of coordination and smart application of technology. Now the issues have compounded and have been further aggravated by panic buying of goods and freight capacity. Cooler heads did not prevail, and now we will collectively reap what we have sown. The next challenge will likely be more unwelcome news for the economy. Transportation is a leading economic indicator. The indications of inflation are manifesting. The time it will take to get back to normal is many challenging months ahead.
Consult our recent and previous Transportation Talk archive on our News & Events web page.