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| The Long Beach Express cargo ship has its cargo offloaded at the SSA Terminal in the Port of Oakland. Ports in the Bay Area aren't backed up, but there are major delays at other California ports. |
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The supply chain crisis has hit the Bay Area - partly because of epic cargo backlogs in Southern California
San Francisco Chronicle
Sun October 10, 2021
Area: San Francisco, Oakland, San Jose
Nathan Rundel ordered a new refrigerator for his Orinda home remodel in April. It won’t arrive until January, and he doesn’t even have a delivery date for his new dishwasher.
That aggravation is exponentially higher at his job as president of Build Group, a huge San Francisco contractor. Rebar, drywall, metal studs, appliances, cabinets and HVAC systems “are all severely back-ordered,” he said. “It’s both shortages and delays.”
Mac Harman, CEO of Redwood City’s Balsam Hill, is paying 270% more to import artificial Christmas trees and decorations from overseas factories. “Ocean freight rates have gone up like crazy,” he said.
Steve Snodgrass, chief financial officer of Graniterock, a major Watsonville construction materials supplier, paid $2.5 million for spring delivery of 10 concrete mixer trucks. He’s still waiting.
Their travails illustrate how clogged the global supply chain has become. Pandemic disruptions and labor shortages are exacerbating issues with the complex way products are sourced from components made all over the world. A single choke point — such as carmakers’ current struggles to get key computer chips — can create a significant bottleneck for an entire industry.
“These are problems that have always been there but the pandemic exposed a lot of them,” said Trent Willis, president of ILWU Local 10, the union for Oakland longshore workers.
Downstream, all those holdups will translate for consumers into higher prices and longer waits. It won’t mean a return to the early pandemic days when store shelves were stripped bare of essentials. You’ll still be able to buy a laptop, exercise bike or jeans — if you’re flexible about which brand. If you have your heart set on a specific model, however, you may have months-long delays. And there may be spot shortages of some goods, ranging from cars to appliances to home decor.
It’s not just one factor hindering the production and movement of goods.
“Every part of the supply chain has reached capacity,” said Jim McKenna, CEO of the Pacific Maritime Association, which represents the ocean carriers and terminal operators who operate at the 29 West Coast ports. “It’s a global issue, and there are no easy ways to fix it. The volume is unrelenting and it’s forecasted to continue through the first part of 2023. This is far from over.”
Benjie Casino (left), Cosmo Creek (center) and Susanna Hnilo team up to construct a Christmas tree at Balsam Hill .
Why the surge in demand? During the pandemic, homebound consumers are buying lots more stuff and embarking on remodels, in a switch away from spending on services like restaurant meals and movie tickets.
The reasons for delays are legion: Coronavirus outbreaks at factories and docks. Inventory shortages from shutdowns early in the pandemic. Difficulties ramping up production after shutdowns. Labor shortages at factories, ports and trucking. Transitions to next-generation products, such as 5G and new microprocessors. Shortages of shipping containers, rail cars and trucks. Overfilled warehouses. The inflexibility of just-in-time production.
“There’s a zillion of these things happening,” Harman said. “Everything is gunking up the system because there was no slack.”
The Bay Area is hardly immune.
Unlike Southern California, where upwards of 70 ships are stuck at anchor in San Pedro Bay stuffed with goods waiting to be unloaded, the Port of Oakland proudly proclaims that it cleared out its vessel backlog in July, in part due to a labor agreement between the Pacific Maritime Association and ILWU that added several hundred new longshore workers. Coast Guard Sector San Francisco confirms that there are not big cargo ships idling in the bay or offshore (other than oil tankers).
“Today’s ships are getting much larger with more cargo,” said Bryan Brandes, Port of Oakland maritime director. The standard container vessel traveling between Asia and the West Coast holds more than twice as much as 20 years ago. It takes longer to unload each ship’s cargo and then reload it with exports. “That’s why the agreement to bring more workforce to Oakland was important,” he said.
But the Oakland port, plus those in San Francisco, Richmond, Stockton, Sacramento, Benicia, Redwood City, Eureka and Crockett, together account for only 13% of West Coast cargo, according to the Pacific Maritime Association,
By far the lion’s share — 66% — is shipped through L.A., Long Beach and San Diego, where the backlogs are on an epic scale.
The ripple effect of all the backups will be felt for months to come.
“It’s going to delay the next round of construction,” said Rundel from the Build Group, which constructs shopping centers, offices and high-density residential projects.
Meanwhile, he’s trying tricks to mitigate issues, such as buying supplies earlier and storing them. But that adds to costs.
“We’re feeling inflationary pressures,” Rundel said. “Wood and rebar doubled in price over the past year. We don’t have money in the budget to eat those costs.”
Some key building components, such as HVAC systems and electrical parts, are now experiencing critical shortages, he said.
Graniterock, which mines its namesake product 40 miles south of San Jose, also has a business as a contractor. Besides the 10 mixer trucks that are months late, Snodgrass worries about the company’s annual order for 40 GM Sierra pickups.
“Because of the chip shortage, GM is putting pickups on allocation, so to get 40, we’ll have to order 80,” he said. Semi tractors are delayed as well.
One of his employees just bought a Chevrolet Silverado Trail Boss, paying several thousand over the sticker price, even though he’ll have to bring it back to the dealer later to have chips added for features such as steering wheel control for the radio and the auto stop/start switch.
The upshot will be that the company will drive its 700 vehicles longer than it would have otherwise. But it may get in a bind with regulations, as the 10 missing mixers were needed to make its entire fleet compliant with state emission standards.
“It’s going to delay and increase the cost of projects,” Snodgrass said. “We will try to pass the cost we can through to the project, but it’s hard to pass the cost of a pickup truck or concrete mixer.”
Balsam Hill has raised prices 20% to partially offset its higher shipping costs and is juggling shortages of items from its fall catalog, which it mailed last month.
“It’s worse than dominoes,” said Balsam Hill’s Harman. “It’s like a crochet. The cat pulls one piece out, you try to tuck it back, but it’s just a complete disaster.”
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