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Biden alone can’t end the supply chain crisis

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Industry sources have described the effort as an important step that will help, but hardly end the supply chain crisis that worryingly looms over the U.S. economy this holiday shopping season.

“The White House is doing the right thing,” said Tim Uy, senior economist at Moody’s Analytics. “But I wouldn’t characterize him as a gamechanger. It’s a step in the right direction.”

The move to 24/7 operation should pave the way for a 10% increase in container flow, Moody’s estimates. Without any action, Uy said, the situation would have worsened.

“It’s a global problem”

“The move to 24/7 operations is appreciated and welcome,” said Geoff Freeman, CEO of the Consumer Brands Association, a trade group that represents Coca-Cola, Kellogg and dozens of other big companies.

However, Freeman, who was part of Wednesday’s virtual roundtable with officials at Biden, described it as a “fruit at hand” and a “relatively obvious next step.” He noted that this will not solve the problem of the lack of trucks and drivers to take goods out of ports.

One problem: the federal government cannot do a lot of things on its own. The system is controlled largely by private companies, including trucking companies, warehouses, port operators and railways.

The biggest challenge is the scale of this supply chain nightmare.

It goes way beyond the congestion of container ships parked outside the ports of Los Angeles and Long Beach and includes a global shortage of truck drivers, trucks, computer chips and other components – as well as the hundreds of thousands of sailors stranded at sea due to countries with different Covid-19 and other rules.

Not to mention congestion at other ports, including Savannah, where 80,000 containers would be stacked, even though the port is already operating 24 hours a day.

“This is not a situation where the United States can fix everything on its own. It is a global problem,” Uy said.

Dimon predicts the crisis will fade away

That’s why, despite the measures announced by the White House this week, the Moody’s economist is standing by his call made earlier this week that the global supply chain crisis will worsen before it s ‘to improve.
The majority of CFOs surveyed by Duke University earlier this fall expect supply chain problems to persist through 2022. Only 10% predict those difficulties will go away this year.

Others are more optimistic.

Biden alone can’t end the supply chain crisis
JPMorgan Chase (JPM) CEO Jamie Dimon told reporters on Wednesday that there was a “very good chance” that in a year “we would not be talking about supply chains at all.”

This would be great news, given the significant ripple effects that the supply chain crisis is currently having. Shortages and shipping problems are driving prices up at an alarming rate.

Consumer prices jumped 5.4% in September, tied for the fastest 12-month jump since 2008. New car prices have risen at the fastest pace since 1980, reflecting the global chip shortage computer which forced Ford (F), General Motors (DG) and other manufacturers to reduce production.

Aging infrastructure, shortage of truck drivers

American companies are scrambling to put out the fires caused by these logistical problems.

Costco (COST) limit the purchase of toilet paper, paper towels and other cleaning products. Nike (NKE) warned that container shortages, lack of workers and other issues will impact the production and delivery of its sneakers and other goods around the world. Other retailers, including Adidas, Hasbro and Crocs (CROX) warned of similar problems.

All of this means buyers this holiday season should be prepared for higher prices, fewer options, and longer delivery times.

Although the supply chain crisis was largely due to Covid-19, the pandemic has only exposed vulnerabilities that have been smoldering beneath the surface for years, if not decades.

This includes chronic underinvestment in infrastructure, an issue that would be addressed (over time) by the bipartisan infrastructure bill.

Biden alone can’t end the supply chain crisis
“We rely on supply chains that were built generations ago. This is one of the reasons we have been discussing and working on infrastructure all this year and we look forward to seeing Congress act to bring this infrastructure deal to fruition, ”said Pete, Secretary of Transportation. Buttigieg told CNN’s Brianna Keilar on Wednesday.

The shortage of truck drivers remains the weakest link in global supply chains. It’s the same reason that gas stations in the UK recently ran out of fuel and contributed to gasoline shortages in the US earlier this year.

“If the shortage of truck drivers continues, and I imagine it will, port congestion could very well return,” said Uy, the economist at Moody’s.

Would the deployment of the National Guard help?

This explains why some business leaders are calling for new measures.

Freeman, the CEO of the consumer group, told CNN he urged Biden officials at Wednesday’s meeting to consider new approaches, including the use of temporary visas to fill vacancies and ” targeted use “of the National Guard to remedy bottlenecks wherever they form, including removing cargo from ships or removing cargo from shipyards.

“While we’re not at a point now where this needs to be implemented… we do think it’s important that everything gets on the table,” Freeman said.

Biden alone can’t end the supply chain crisis
This is a measure that has already been taken during the Covid, in particular to distribute vaccines, help hospitals and drive school vans. In the UK, the military has been deployed to deliver fuel to end the days of shortage.

“Everyone I speak to in the consumer packaged goods industry believes the pressure will only intensify in the months to come,” Freeman said.

There is no indication that the White House is actively considering the use of National Guard personnel in the supply chain crisis.

“We are continuing to assess and monitor and all options are on the table,” a White House official said in a statement to CNN, adding that Biden officials would assess the ideas discussed with private sector stakeholders. .

No easy solutions

Supply chain experts have not dismissed the idea of ​​using the National Guard.

“Everyone should welcome original ideas at this point. Because it truly is a disaster, ”said Douglas Kent, executive vice president of strategy and alliances at the Association for Supply Chain Management.

Still, Kent said “band-aid approaches” like the National Guard deployment would not solve long-term problems, including the shortage of workers.

The supply chain crisis had been brewing for years. No one should expect it to go away overnight.

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