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Flexport founder Ryan Petersen rented a ship in October 2021 and took a closer look at the congestion in Los Angeles and Long Beach, the two busiest container ports in the United States. After a three-hour visit, he lit up Twitter with ideas to clear the bottleneck that disrupted the US supply chain.
The main problem he found was that there was no space for new containers in the yard of the port terminal. As a result, more than 70 ships carrying 500,000 containers were idle in San Pedro Bay, waiting for the space to open. He said that backups will only get worse.
Because the terminal is so crowded, truck drivers cannot return empty containers and pick up loaded containers scheduled for delivery in the United States. Peterson calls this situation a "negative feedback loop that quickly gets out of control."
Peterson proposed five repair measures aimed at re-operating the container, and his tweets spread quickly-indicating that the world urgently needs to get its supply chain back on track. Long Beach responded to one of his proposals and increased the restrictions on how tall containers can be stacked by logistics companies outside the port. Bloomberg opinion columnist said Peterson's idea "may be the Twitter storm that saves Christmas."
The impact of the global supply chain crisis can be seen everywhere, from half-empty shelves in grocery stores to soaring fuel prices at gas stations. COVID-19 has played an important role in causing the problems we see today. As many countries enter lockdowns, close factories, and reduce the supply of available goods, the economy shrinks sharply in 2020. As we rebuild from the pandemic, demand soars, and suppliers and logistics companies are trying to keep up.
Governments are working hard to ease the pressure, just as US President Joe Biden announced in mid-October 2021 that the Port of Los Angeles will begin round-the-clock work together with Long Beach. Biden also called on private companies to come forward because the goal "is not only to overcome this immediate bottleneck, but also to address the long-standing weaknesses in our transportation supply chain exposed by this pandemic."
Parissa Kamari, an economist at the International Monetary Fund’s Department of Foreign Policy, said that supply chain disruptions have led to soaring freight costs and delivery times, posing major challenges to the global economy.
Kamali wrote in an article on the World Economic Forum website that when the number of new COVID-19 cases starts to decrease, this should alleviate capacity and labor shortages, and ease some of the pressure on the global supply chain. However, some experts do not believe this will happen.
Kamali writes: “Increased demand in some of the world’s largest economies during the holidays, another wave of new COVID-19 cases and extreme weather events, if they become a reality, could lead to supply chain disruptions.”
William Petty, head of the Global Trade Facilitation Alliance, said that while delays in US ports have highlighted the importance of predictable supply chains for global economic stability, disruptions like these are not unique.
"Poor infrastructure and bureaucratic red tape mean that high costs and long delays may be the norm in developing economies," Petty said. "They put a brake on the economic growth of the countries that need economic growth the most."
The Global Trade Facilitation Alliance is a cooperative organization of international organizations, governments and enterprises led by the International Private Enterprise Center, the International Chamber of Commerce and the World Economic Forum, and in cooperation with Gesellschaft für Internationale Zusammenarbeit.
It aims to help the governments of developing countries and least developed countries implement the World Trade Organization’s trade facilitation agreements, bringing governments and businesses together to find opportunities to resolve border delays and unnecessary red tape.
For example, in Colombia, the alliance has cooperated with the National Food and Drug Administration and companies to launch a risk management system that can promote trade while protecting public health, reducing the average physical inspection rate of food and beverages by 30%, and providing Saved importers USD 8.8 million in the first 18 months of operation.
The alliance is a public-private partnership for trade-oriented growth that supports governments in developing economies to implement trade reforms. It is co-led by the World Economic Forum and funded by the governments of Canada, Denmark, Germany and the United States.
Patrick Henry, senior writer, formative content
The views expressed in this article are those of the author and have nothing to do with the World Economic Forum.
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