The Biden administration and the state of California are working on a medium- to long-term solution to the supply chain problems affecting the nation, but in the short term—extending well into 2022—problems will persist.
President Joe Biden announced 24/7 operations at the Port of Los Angeles last month in an effort to ease backups there by moving an addition 3,500 containers a week. That was just a small part of what’s needed, and the Transportation Department has now announced plans to work with California to provide as much as $5 billion in loans to help upgrade the state’s ports, including by improving rail and road transportation options out of the ports and increasing warehouse space to prevent bottlenecks.
“Our supply-chain infrastructure is outdated,” said David Kim, the secretary of the California State Transportation Agency. “Now’s the time to modernize it and prepare our system for what will be huge growth and huge demand for years to come.”
With shortages at nearly a two-decade high, though, prices are rising and some products are becoming difficult to find. The key problem is that there’s not just one problem: Transportation, which can be partially addressed through the ports, is a problem. But so is manufacturing. So is the labor market. Different reasons for backlogs pile on top of each other, creating multiple bottlenecks.
The coronavirus pandemic is the immediate cause of many of the problems, but the underlying context is that corporations have spent decades moving to just-in-time manufacturing with as little slack as possible—which translates into a lack of the extra capacity needed to weather a pandemic.
“Look, there are so many things that are still happening in our economy - distortions, disruptions, things in our supply chain that are affecting prices that are clearly a direct consequence of the pandemic,” Transportation Secretary Pete Buttigieg said on Fox News Sunday. “Which is why the best thing we can do for our economy in the short term, and to deal with these transitory issues, is to put the pandemic behind us.”
The current supply chain problems hit small businesses first, since they usually aren’t first in line for the most in-demand products and can’t just charter planes when container ships are in short supply. But even the biggest businesses have worries: Companies like Toyota and Nike have had to scale back production, and, Bloomberg reports, “Amazon said its entire fourth-quarter profit could be wiped out by a surge in the cost of labor and fulfillment. Apple said it lost $6 billion in sales because of inability to meet demand, and could lose more next quarter.”
While we don’t want to see early pandemic-style hoarding, this is not a bad time to do a judicious amount of stocking up on nonperishable essentials if you can afford it. But a lot of people can’t afford it—the same people who will be most hurt by rising prices. (As a reminder, the federal minimum wage has been $7.25 an hour for more than a decade.)
President Joe Biden announced 24/7 operations at the Port of Los Angeles last month in an effort to ease backups there by moving an addition 3,500 containers a week. That was just a small part of what’s needed, and the Transportation Department has now announced plans to work with California to provide as much as $5 billion in loans to help upgrade the state’s ports, including by improving rail and road transportation options out of the ports and increasing warehouse space to prevent bottlenecks.
“Our supply-chain infrastructure is outdated,” said David Kim, the secretary of the California State Transportation Agency. “Now’s the time to modernize it and prepare our system for what will be huge growth and huge demand for years to come.”
With shortages at nearly a two-decade high, though, prices are rising and some products are becoming difficult to find. The key problem is that there’s not just one problem: Transportation, which can be partially addressed through the ports, is a problem. But so is manufacturing. So is the labor market. Different reasons for backlogs pile on top of each other, creating multiple bottlenecks.
The coronavirus pandemic is the immediate cause of many of the problems, but the underlying context is that corporations have spent decades moving to just-in-time manufacturing with as little slack as possible—which translates into a lack of the extra capacity needed to weather a pandemic.
“Look, there are so many things that are still happening in our economy - distortions, disruptions, things in our supply chain that are affecting prices that are clearly a direct consequence of the pandemic,” Transportation Secretary Pete Buttigieg said on Fox News Sunday. “Which is why the best thing we can do for our economy in the short term, and to deal with these transitory issues, is to put the pandemic behind us.”
The current supply chain problems hit small businesses first, since they usually aren’t first in line for the most in-demand products and can’t just charter planes when container ships are in short supply. But even the biggest businesses have worries: Companies like Toyota and Nike have had to scale back production, and, Bloomberg reports, “Amazon said its entire fourth-quarter profit could be wiped out by a surge in the cost of labor and fulfillment. Apple said it lost $6 billion in sales because of inability to meet demand, and could lose more next quarter.”
While we don’t want to see early pandemic-style hoarding, this is not a bad time to do a judicious amount of stocking up on nonperishable essentials if you can afford it. But a lot of people can’t afford it—the same people who will be most hurt by rising prices. (As a reminder, the federal minimum wage has been $7.25 an hour for more than a decade.)