Small businesses unable to cope with increased prices caused by port congestion

Small businesses are feeling the brunt of the congestion in America’s ports and supply chains. While larger corporations are expanding their operations to keep up with demand, smaller businesses can’t scale up their services and are being left in the dust.

Multiple companies have committed to expanding their operating hours to help ease the congestion at the ports, particularly at the Port of Los Angeles and the Port of Long Beach in California. These companies include Walmart, UPS, Home Depot and FedEx.

With the expanded operating hours comes higher shipping costs. These costs are hurting small businesses while mega-corporations like Walmart and Amazon have no problem absorbing the additional expenses.

“Having UPS and FedEx ramp up their delivery process doesn’t do a lot for the challenges we have with lumber and labor shortages that are handicapping our industry and creating a shortage of new houses,” said John Fowke, a representative of the National Association of Home Builders, during a panel organized by the House Small Business Committee on Wednesday, Oct. 20.

“This in turn has put a stress on existing housing stock. Therefore the possibility of affordable housing has left the scene.”

Subcommittee Chairman Rep. Den Philips of Minnesota noted that large corporations like FedEx and UPS have the capital and the flexibility to increase operational hours. But “small firms engaged in international trade have to accept the prevailing market price and are therefore more adversely impacted by the increased cost of shipping.”

Philips pointed out that mega-corporations like Walmart or Amazon are able to ignore smaller competitors with their ability to “negotiate more advantageous freight contracts to ship larger volumes.” This, he said, allows them “to more reliably get their goods across the ocean while smaller companies struggle.”

The massive increases in freight costs have helped fuel profits for the seven largest publicly traded ocean carriers in the world. Philips said those carriers “reported more than $23 billion in profits in the first half of this year, compared with just $1 billion in the same period last year.”

Small businesses will continue to suffer

Chris O’Brien, chief commercial officer of the third-party logistics company C.H. Robinson, testified before the committee regarding the labor shortage.

“It’s especially challenging for small businesses,” said O’Brien. He pointed out that the trucking industry is the “weakest link” in the supply chain due to the shortage of drivers. This shortage, coupled with the heightened need for deliveries, is making the trucking industry work under a lot of pressure. (Related: Empty shipping containers being DUMPED in neighborhoods near ports in California.)

O’Brien asked the committee to support pending legislation that would allow truck drivers below the age of 21 to move cargo between states. He also supported legislation promoting women truck drivers.

“It’s no secret that truck driving is not adequate labor, and anything we can do to help the lifestyle and improve the attractiveness of that role is important,” said O’Brien.

Christine Lantinen, president and owner of snack food company Maud Borup Inc., told the committee that the labor shortage across all parts of the country’s supply chain is keeping businesses like hers from flourishing. “We need to see action to relieve the bottlenecks.”

Expanding delivery hours doesn’t solve backlog problems at California ports

Despite the expanded operating hours in the ports of Los Angeles and Long Beach, the backlog of cargo ships waiting to dock and offload their shipping containers has still reached an all-time high.

On Tuesday, reports indicated that more than 100 ships were waiting outside the ports of Los Angeles and Long Beach. This massive backlog has resulted in dozens of ships idling in the waters outside these ports for weeks at a time.

This massive congestion is expected to continue well into next year despite the pledges from the administration of President Joe Biden to help relieve the situation in the ports.

Transportation Secretary Pete Buttigieg claimed the administration is working to deal with the problems along all the points in the supply chain, including the ports, truckers, rail companies and retail companies.

White House officials are also reportedly considering deploying the national guard to the ports to help reduce the backlog.

But the federal government’s current intervention – expanding operating hours to twenty-four hours a day, seven days a week – is clearly not working. Union Pacific Corp., one of the two major railroads that haul cargo inland from the ports of Los Angeles and Long Beach, reported handling only several dozen more shipping containers after switching to round-the-clock operations.

This means the Biden administration’s attempts to deal with congestion have not made any big dent at all.

“We’ve seen four dozen incremental domestic intermodal loads come through,” said Union Pacific CEO Lance Fritz. “It helps somewhere, and it will stay open 24-seven if that’s what it needs.”

The ports of Los Angeles and Long Beach together move 40 percent of container imports and 30 percent of exports in the United States.

Learn more about the congestion at America’s ports and how Biden’s administration is failing to fix the supply chain crisis by reading the latest articles at MarketCrash.news.

Sources include:

FreightWaves.com

TheGuardian.com

HellenicShippingNews.com