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In the News

Record shortages, shipping delays expected this holiday season. Here’s who shoppers blame

By Lauren Thomas, CNBC

Containers are shown at Ningbo-Zhoushan port on August 15, 2021.


Experts warn shoppers can expect to find record out-of-stocks messages as they scan retail websites and may face prolonged shipping delays. Fortunately for retailers, customers are more likely to cast blame for late packages on delivery carriers, one survey found.


Out-of-stock messages on the internet are expected to be up 172% this holiday season compared with 2020 levels, and up 360% on a two-year basis, according to new data from Adobe Analytics. The apparel category is forecast to have the highest out-of-stock levels, Adobe said, followed by sporting goods, baby products and electronics.


In reality, the slowdowns stem from a number of factors. There are container shortages, floods, Covid-19 outbreaks that backlogged ports, and a dearth of truck drivers and warehouse workers, to name a few. It’s all putting retailers in a crunch to get enough goods to keep shelves fully stocked.


“The problem goes beyond just the couriers,” said Rod Sides, vice chair of Deloitte’s U.S. retail and distribution practice. “There’s a ripple effect back into the country of origin.”


“There are a bunch of different players who have to have seats at the table to be able to make that happen,” Sides said about Biden’s efforts. “Working around the clock is perfectly fine. The challenge is going to be that [labor] costs are going to continue to go up.”


Shoppers are getting the messaging to plan ahead. Thirty-nine percent of people polled by Deloitte said they intend to start shopping early to give enough lead time for orders and to avoid finding items are unavailable. Consumers are most concerned about not being able to purchase electronics, toys and home items on their holiday wish lists, Deloitte found.

The shipping crisis is getting worse. Here's what that means for holiday shopping

By Hanna Ziady, CNN Business


The vast network of ports, container vessels and trucking companies that moves goods around the world is badly tangled, and the cost of shipping is skyrocketing. That's troubling news for retailers and holiday shoppers.


More than 18 months into the pandemic, the disruption to global supply chains is getting worse, spurring shortages of consumer products and making it more expensive for companies to ship goods where they're needed.


Unresolved snags, and the emergence of new problems including the Delta variant, mean shoppers are likely to face higher prices and fewer choices this holiday season. Companies such as Adidas (ADDDF), Crocs (CROX) and Hasbro (HAS) are already warning of disruptions as they prepare for the crucial year-end period.


“The pressures on global supply chains have not eased, and we do not expect them to any time soon,” said Bob Biesterfeld, the CEO of C.H. Robinson, one of the world's largest logistics firms.


The latest obstacle is in China, where a terminal at the Ningbo-Zhoushan Port south of Shanghai has been shut since August 11 after a dock worker tested positive for Covid-19. Major international shipping lines, including Maersk (AMKBY), Hapag-Lloyd (HPGLY) and CMA CGM have adjusted schedules to avoid the port and are warning customers of delays.


The partial closure of the world's third busiest container port is disrupting other ports in China, stretching supply chains that were already suffering from recent problems at Yantian port, ongoing container shortages, coronavirus-related factory shutdowns in Vietnam and the lingering effects of the Suez Canal blockage in March.


Shipping companies expect the global crunch to continue. That's massively increasing the cost of moving cargo and could add to the upward pressure on consumer prices.


“We currently expect the market situation only to ease in the first quarter of 2022 at the earliest,” Hapag-Lloyd chief executive Rolf Habben Jansen said in a recent statement.


The cost of shipping goods from China to North America and Europe has continued to climb over the past few months, following a spike earlier in the year, according to data from London-based Drewry Shipping.


The company's World Container Index shows that the composite cost of shipping a 40-foot container on eight major East-West routes hit $9,613 in the week to August 19, up 360% from a year ago.


The biggest price jump was along the route from Shanghai to Rotterdam in the Netherlands, with the cost of a 40-foot container soaring 659% to $13,698. Container shipping prices on routes from Shanghai to Los Angeles and New York have also jumped.


“The current historically high freight rates are caused by the fact that there is unmet demand,” Soren Skou, CEO of container shipping giant Maersk, said on an earnings call this month. “There's simply not enough capacity,” he added.


Port congestion

The terminal shutdown in Ningbo will add to bottlenecks arising from the closure in June of Yantian, a port about 50 miles north of Hong Kong, after coronavirus infections were detected among dock workers.


While a partial reopening of Yantian took only a few days, a return to normal services took nearly a month to achieve, according to S&P Global Market Intelligence Panjiva, as the congestion spilled over to other ports.

Cargo containers stacked at Yantian port on June 22 in Shenzhen, China.


That spells trouble for retailers and consumer goods companies trying to restock inventories heading into the crucial year-end holiday shopping season. “The closure at Ningbo is now particularly sensitive as it may hold up exports for the peak season of deliveries into the US and Europe which typically arrive from September through November,” S&P Global Panjiva said in a research note on August 12.


Drewry Shipping said Friday that congestion at nearby ports Shanghai and Hong Kong is “spiking” and spreading elsewhere in Asia, as well as in Europe and North America, “particularly the West coast” of the United States.


Some 36 container ships are anchored off the adjacent ports of Los Angeles and Long Beach, according to a report Thursday from the Marine Exchange of Southern California.


That's the highest number since February, when 40 container ships were waiting to enter. Ordinarily, there would be just one or zero container ships at anchor, according to the Marine Exchange.


The congestion in California is starting to spread to “pretty much every port in the [United States],” according to Biesterfeld of C.H. Robinson. “The chances of your vessel arriving on time are about 40%, when it was 80% this time last year,” he told CNN Business.

Container ships sit in the Pacific Ocean outside the Port of Long Beach, California on August 11, 2021.


The backlog at ports will have a ripple effect on jammed warehouses and stretched road and rail capacity. Logistics networks have been running at maximum capacity for months, thanks to stimulus-fueled demand led by US consumers and a pickup in manufacturing. Truck driver shortages in the United States and United Kingdom have only exacerbated supply disruptions.


US imports in March and May exceeded levels seen in October 2020, typically the peak of the shipping season, said Eric Oak, supply chain research analyst at S&P Global Panjiva.


“This means that logistics facilities have been running flat out for most of the summer,” he added.


It's not just ports that are under pressure. Air terminals are receiving increasingly large amounts of freight as companies turn to alternative methods to transport their goods. At some of the larger US airports such as Chicago, there are delays of up to two weeks to claim cargo, according to Biesterfeld.


Efforts to contain Covid-19 outbreaks have recently disrupted traffic at Shanghai Pudong and Nanjing airports in China.


Retailers brace for impact

“Name almost anything and it seems like there's a shortage of it somewhere,” Biesterfeld added. “Retailers are struggling to replenish inventory as fast as they're selling, let alone prepare for holiday demand.”


Supply chains were discussed on nearly two thirds of some 7,000 company earnings calls globally in July, up from 59% in the same month last year, according to an analysis by S&P Global Panjiva.


Consumer goods producers are taking drastic steps to meet demand — such as changing where products are made and moving them by plane instead of boat — but companies such as shoemaker Steve Madden (SHOO) say they're already missing out on sales because they simply don't have enough goods.


The company has moved half the production of its women's range to Mexico and Brazil from China in an attempt to shorten delivery times.


“In terms of the supply chain ... we could talk about this all day. There are challenges throughout the globe,” CEO Edward Rosenfeld said on an earnings call last month. “There is port congestion, both in the US and China. There are Covid outbreaks at factories. There are challenges getting containers. We could go on and on.”


It's one of several major apparel brands hit by factory shutdowns in Vietnam over the past month. Data from S&P Global Panjiva shows that nearly 40% of the volume of goods imported into the United States by sea over the 12 months to July came from the Southeast Asian country.

Adidas CEO Kasper Rorsted said the sportswear company will be unable to fully meet the “strong demand” for its products in the second half of the year due to the shutdowns, despite switching production to other regions.


Supply chain difficulties have been “leading [to] significant delays and additional logistics costs, particularly as we have been making more use of airfreight,” he said on a recent earnings call.


Andrew Rees, the CEO of Crocs, said that transit times from Asia to most of the company's leading markets are approximately double what they were historically. “That's been the case for some time, and we're expecting [to] live with that,” he told investors last month.

To ensure product availability during the holiday season, Hasbro, which makes Monopoly and My Little Pony, said it is increasing the number of ocean carriers it works with, utilizing more ports to expedite deliveries and sourcing more products earlier from multiple countries.


For consumers, the supply chain crunch is likely to mean higher prices. Hasbro, for example, is increasing prices to offset rising freight and commodities costs. The company is projecting that its ocean freight expenses will be on average 4 four times higher this year than last, according to chief financial officer Deborah Thomas.


Shoppers should also brace for longer than normal delivery times and may need to have several different gift ideas up their sleeves.


“As we've been forecasting for months, shoppers are going to see some bare shelves at the holidays,” said Biesterfeld. “And if you buy most of your presents online, get it done early. Delivery time may be four to six weeks.”

$24 billion in goods is floating outside California's biggest ports

By Matt Egan, CNN Business


New York (CNN Business) Extreme port congestion has become a major nuisance that just won't go away this year. Unfortunately, it could be one of the biggest problems of 2022, too.


Backlogs and elevated shipping costs are likely to persist “at least” through the middle of next year, Goldman Sachs warned clients in a note Monday.


“No immediate solution for the underlying supply-demand imbalances at US ports is available,” the bank's economists concluded in the research report.


That's bad news for the economy and for everyday Americans, because supply chain bottlenecks are raising costs, delaying shipments and leaving shoppers with fewer options.


Consumer prices are rising at the fastest 12-month pace since 2008. The amount of products that were out of stock online is up by 172% when compared with January 2020, according to Adobe Analytics.


The most glaring evidence of the supply-chain crisis: the dozens of container ships floating outside the Ports of Los Angeles and Long Beach just waiting to get offloaded. Goldman Sachs estimates there is a staggering $24 billion in goods sitting outside those two ports alone.


But once ships are able to dock and unload, shipping containers have still dwelled at the ports for days.


In September, about one-third of shipping containers at the ports of Los Angeles and Long Beach sat for more than five days after making it off the ship, Goldman Sachs found, compared with low-single digit percentages before the pandemic.


Earlier this month, the White House announced commitments from the Port of Los Angeles, unions and several major companies to move to 24/7 operations.


Goldman Sachs said the move “may help at the margin,” but also requires cooperation from other ports, truck drivers, rail operators and warehouses. And the biggest issue remains a shortage of workers, including truck drivers.


This is a broader problem beyond the California ports. Nationally, the time it takes loaded ships to make it through US ports has tripled from historical norms, Goldman Sachs found.


That's why Goldman Sachs expects congestion at ports to ease just “slightly” in the coming months as the United States moves beyond the peak for shipping demand related to the holiday season.


As long as there are no “further shocks” to supply chains (such as Covid outbreaks and lockdowns), congestion should “ease more meaningfully” after the Chinese New Year in February, Goldman Sachs said.


“However, congestion will likely persist to some extent through at least the middle of next year, and our analysts expect that freight rates will likely remain meaningfully above pre-pandemic levels for at least the next year,” the report concluded.


Moody's Analytics similarly warned last week that supply chain stress is intensifying and showing “no sign of subsiding just yet.”


Earlier this month, Transportation Secretary Pete Buttigieg told CNN that US supply chain problems will "certainly" continue into 2022.

New executive order aims to alleviate congestion at California’s ports

By Vanessa Yurkevich, CNN Business


To alleviate cargo congestion at shipping ports in California, Governor Gavin Newsom issued an executive order Wednesday tackling the shortage of truck drivers and container storage needed to move critical cargo out of the ports.


“California's ports are critical to our local, state and national economies and the state is taking action to support goods movement in the face of global disruptions,” said Governor Newsom in a statement Wednesday. “My administration will continue to work with federal, state and industry partners on innovative solutions to tackle immediate challenges while also bringing our distribution processes into the 21st century.”


The executive order directs state agencies to find state, federal and private land for short-term container storage while identifying freight routes for trucks so the state can temporarily exempt weight limits on the road.


Effective immediately, the executive order comes after hundreds of cargo ships have been stuck off the coast of California over recent months -- with 64 cargo ships at anchor as of Wednesday in Los Angeles and Long Beach. In Los Angeles alone, 200,000 containers sit stuck at sea.


Those two ports move roughly 35% of all containers in the United States and approximately 40% of US imports and 25% of exports, according to the governor's office.


A key reason for the backup at the ports is what is happening on land. A nationwide worker shortage -- specifically in the trucking industry -- has slowed supply the supply chain. Trucks move the cargo from the ports, everything from food, electronics, to toys -- to warehouses or retailers. Because of the shortage of drivers, cargo sits at the port and ships can't unload.


The executive order tackles this a few ways. First, it directs the state to identify both state-owned and “non-state sites, including private, locally owned, and federally owned parcels, that could be available to address short-term storage needs to address the supply and distribution chain crisis.”


And second, the state will temporarily lift limitations on how much cargo trucks can carry. It will “identify priority freight routes to be considered for a temporary exemption to current gross vehicle weight limits,” the order reads.


For example, an 18-foot tractor trailer with five axels is currently capped at 34,000 pounds. That would be temporarily lifted -- allowing trucks to carry more cargo.


Addressing the labor shortage

The executive order also moves to address educational programs and training for port workers and others in the supply chain. The US is short 80,000 truck drivers, according to the American Trucking Association, and is projecting a shortage of 160,000 drivers by 2030 if no action is taken.


The order directs California's Labor and Workforce Development Agency to use “existing resources to identify potential high road training partnerships to increase education, career technical education, job training, and workforce development opportunities for port workers and other workers across the supply chain.”


While California has little control over the ships and routes they take into the privately owned ports -- the federal government does. President Biden asked the Port of Los Angeles and Long Beach to move to 24/7 operations. But there is little demand from importers to use the overnight hours because of the lack of trucks and drivers used to move the cargo, according to the Port of LA.


“While goods movement and supply chain management challenges are largely within the purview of the federal government and industry, the state can take action to reduce the congestion in California's ports to ensure people in California and across the country and world can access goods and supplies,” the order reads.

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