3 Numbers That Explain the Supply Chain Crisis
In good times, the supply chain is invisible to consumers. There is no need to think about how everyday essentials are made or delivered. Companies have a variety of choices in suppliers for the corn in your cornflakes or the aluminum can for your seltzer. Logistics managers find carriers to ship finished products quickly.
But these are not good times.
A labor shortage, the pandemic, weather disasters and backlogged cargo bays have pushed the supply chain to its breaking point. Consumers having to wait longer for furniture is an annoyance — waiting for CPG necessities like baby formula or toilet paper is different.
There are a million data points that will tell you the supply chain is in crisis. But we think these three paint the stark picture.
#1: 87 cargo ships got stuck off California’s cost. Normally there is one.
Both the Los Angeles and Long Beach ports, which are responsible for nearly half (40%) of the imports to all of the country, are experiencing a record breaking traffic jam. A reported 87 ships, each carrying thousands of containers, were backlogged in the bay this Sunday. Before the pandemic began, it was unusual to see more than one cargo ship waiting in line.
California shippers say this all-time influx comes after 11 months of sustained traffic and shows little sign of slowing down.
While a large part of the consumer goods industry in the United States operates and sources domestically, port congestion still means trouble for business. Even when containers are offloaded, there need to be trucks available to take them to their next destination — trucks that are in short supply due a severe driver shortage.
#2: For every one truck available, there are 16 shipments waiting to be transported.
Robert Biesterfeld, CEO of shipping and logistics company CH Robinson, told CBS News that he’s tracking the ratio of shipments to available trucks as high as 16:1. It’s gotten so crazy that companies are chartering new planes to bypass boats and trucks, flying in everything from power tools to yoga pants from overseas. The truck driver shortage is projected to be 160,000 by 2028 — and given that the estimate is from 2019, it could be worse than that.
#3: There are 143,000 open jobs in CPG manufacturing — and the industry only added 5,000 in September.
Demand for everyday essentials like breakfast cereal, shampoo, toothpaste and hand sanitizer hasn’t abated. It’s up a whopping 8.7% in the second quarter of 2021 compared to the same time last year when consumer goods (remember the run on toilet paper?) were flying off store shelves.
CPG needs more hands on deck to supply households and families with their daily products. But with nearly a million openings in the broader manufacturing sector, competition is fierce.
Where do we go from here?
Companies are doing everything they can, but the supply chain is in crisis and government needs to play a role. From taking immediate actions to expedite port clearances by running 24/7 operations and expanding the labor pool through training initiatives to longer-term efforts like passing the Bipartisan Infrastructure Framework, every option must be on the table. Waiting, however, is not one of them.
Published on October 13, 2021
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