This is going to be a bit longer than usual. There is just no way to talk about what's happening with the supply chain in a punchy little post. So, fair warning.

Let's start with the obvious - something is very wrong with the entire supply chain system. We have all seen it. From long delays in getting the products we need (or just want) to empty shelves at the local store. To me, the best brief explanation is the old proverb ‘For Want Of A Nail’…

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a nail.

In this case, the culprit is not a nail, but a collection of policies and practices. These date back to at least the 80s, with some being more recent. The main culprits – the nails – are just-in-time inventory and lean manufacturing. In both systems, on-hand inventory is reduced to the absolute minimum. They rely on a stable and smooth supply chain to keep the company stocked. In the textbook model, the new stock or repair part is received the same day the last one is used. In theory, this keeps storage space (and thus cost) to a minimum. And when it works, as it has for years, it’s a thing of beauty.

But all it takes is one glitch in the system, and disaster.

That seems self-evident. A delay in port means your stock is depleted. I saw that myself several years ago, when a vital shipment was delayed in Georgia while the ship was searched for suspected human trafficking. Nothing was found, but that one delay made our stock three weeks late, impacting not only our reputation, but our customer’s reputations…and their business. That was, of course, no one’s fault – it does illustrate how a small change can have a huge downstream impact.

And the situations currently are far from small.

In the wake of the disruptions from COVID, and other disruptions in 2020 and 2021, the current situation is not great.

Warehouses are full, as companies reduced their in-store stock.

Full warehouses mean there is nowhere to put new cargo, so it stacks up at railheads and container yards, unable to be delivered.

For ports in California, any trucks picking up intermodal containers must be no more than three years old, in order to comply with the state’s CARB pollution rules. Most private owner-operators who container dropship have older trucks that don't meet CARB regulatory requirements and are excluded from California highways.

CARB rules also mean 24/7 operations at places like LA and Long Beach are problematic at best. Those rules will limit semi operations at the ports, even if all the trucks themselves are compliant. And there are no electric semis.

Backed up container yards and railheads mean there is nowhere to put new cargo – the trains can’t take it, since it can’t be offloaded, so it sits in port.

With the ports full of containers, there is nowhere to offload new cargo from the ships. So they sit and wait.

And wait. Leading to holding queues of container ships parked offshore, with more arriving daily. There is, after all, no issue in shipping the cargo from it’s ports of origin – they have no backlog to clear before anything can move.

Word out of LA is that the port is full – there is nowhere to put new containers. And there are ships docked to unload. At the normal pace, it is estimated that just clearing what is there today would take about six months.

The more you look at this, the worse it gets. Everything at the port is intermodal – containers and chassis. And chassis pools own the chassis being used. Which is normally no big deal – you get a chassis, pick up, drop off, and repeat. Or drop the chassis back at the pool, and get another one from another pool, since pools have contracts with the ports, and only X pool’s chassis are allowed in certain areas. It’s not the best system, but it works. Mostly.

Until the empty containers aren’t moving through the cycle anymore. Take Long Beach. It’s illegal to stack empty containers, and since no one is accepting them, once your container is empty, it sits on the chassis, effectively taking that chassis out of commission. Since there are only so many chassis available, as they are forced to park, it further limits the ability of the port operations to unload – even if they had somewhere to put them, there are no chassis to move them.

In an effort to ease the congestion, the mayor of Long Beach has authorized stacking containers up to 4 high, 5 in an emergency. The previous limit was 2 high. Two. Like you might see on a train. On container ships, they are stacked 10-12 high. And the ships have far more motion than the port does.

It’s a lot.

And the solutions are, while perhaps obvious, not easy. With the legal limits in California hindering operations, it will take executive intervention, or Federal intervention, to break that logjam.

What does this mean to you, the repair shop waiting on parts to arrive? It means that costs will increase, as availability decreases. Basic supply and demand. Since there is no realistic estimate on when this will be resolved (and best case is sometime Q2 2022), it will get harder before it gets better.

At US Trailer, we are going to bat on prices – we don’t want to see our costs increase any more than you do. But it’s happening. A major supplier just notified us that price increases are being imposed on existing orders. Historically, most suppliers honored pricing in place at time of order. As a result of raw material price fluctuations and global supply chain issues most supplier policies have now changed to the price in place at the time of shipment.

Steel indexes have increased more than 20% since April, and more than 229% in the last year. As raw material and freight costs continue to climb, we can expect to see more increases, and sadly an increase in frequency as well.

So there it is. Prices will keep increasing, freight will keep increasing, and shortages are going to happen. We always have, and doubly so now, encourage you to stock up as much as you can as a hedge against these coming changes. I hear Joe, daily, fighting to keep prices stable, and keep your costs stable as a result. We will continue to fight for you – and we will be honest when we have to pass on the increased costs as well.

We are US Trailer, and we are in it with you as your parts supply partner.