Di Leo: Supply Chain Advice Upon Joe Biden’s Request, in a Year of Disaster

By John F Di Leo - 

The global supply chain, and particularly the North American supply chain, have been in crisis for about a year. There are a lot of reasons for this, almost entirely government-created, end it appears that the federal government has finally noticed it.

Joe Biden has been a lifeguard, lawyer, city councilman, senator, and vice president. While it’s hard to tell what he is now, he has gone public with a request to hear from the American people on this matter, and he has said that he will welcome advice. It would be a first for him, but we will try, anyway.

Let’s begin with the big picture. We go to the store, and we see empty shelves. We look at our harbors, and we see dozens of ships, often backed up for weeks, waiting for a berth. We go to our factories, and we see assembly lines idled for lack of components, injection molders idled for lack of resin, stamping lines idled for lack of steel.

These problems have shared roots, and as usual, the first instinct of the statist politician is to go at it from the completely wrong direction.

The easiest punching bag is the containership lines. Most of them are based in foreign countries now, so they are an easy target for the American politician. 

But consider this. Over the past 30 years, the containership lines have been gradually increasing the size of their vessels, as container-izable shipping demands have grown.

The average container ship has grown from 3500 TEUs (20 foot equivalent units, the standard measure for container ship size) to 5000, to 8500, to 10,000, to 12,000, and nowadays, new builds are often 20,000 to 22,000 TEUs in capacity. They are ordering some six million new containers per year to fill these ships. 

While this has been going on, have our seaports been growing along with them? Have they been adding berths, adding gantry cranes, quadrupling their acreage, adding railroad track and truck routes to move this cargo in and out? Hardly. With rare exceptions, our seaports have stayed roughly the same size while the steamship lines have worked to meet demand.  When they have begged the longshoremen to allow expansion and automation in their contract negotiations, they've been laughed out of the room.

Our railroads tell a similar tale. Most of our container yards are hemmed in, located in congested metro areas where roads and industrial construction have surrounded them. The railyards have long needed expansion… long needed to construct additional yardage outside our cities, where land is still available. And some have.

But far too many of our rail yards are simply overwhelmed, and have never expanded, never added the space, the cranes, the staff necessary to handle 5 to 10 times the volume for which they were built. They have refused to recognize the reality of this need, and now it is too late.

The incisive reader may notice some differences between the players discussed thus far. Steamship lines, for the most part, are not unionized. They can meet the needs of the market in a timely manner.

By contrast, our seaports and our railroads are fully unionized… and in fact have long been saddled with the most powerful and inflexible unions of the lot. If you think that Teamsters and the UAW are hard to work with, you can’t imagine the power and selfishness of the ILA and the ILWU.

The longshoremen unions have long fought necessary expansion, no matter how the ports and carriers have begged and pleaded. Real estate values have gone up, crane costs have skyrocketed, construction worker rates have similarly ballooned. Railyard and port expansions that would have been relatively cheap twenty years ago will cost the earth today… but these expansions are imperative.

What can the federal government do to help? Not much. It can and should get out of the way, wherever possible. Authorize permits in a day instead of years… Lift federal restrictions on hours of operation, so that ports and rail yards can switch to 24 hour functionality. Make federal land available for these expansions, at an accelerated pace. Where federal road building is unavoidable, wave the destructive costs associated with Davis-Bacon requirements. 

But beyond that, it is mostly up to the cities and states, the port authorities and counties, the local powers who have it in their hands to either enable progress or stymie it.

But that’s only a third of the supply chain problem. The other two thirds are largely rooted in the destructive energy policies and Covid-19 responses of the federal government, many state and local governments, and far too many foolish private companies.

Mask and vaccine mandates and draconian quarantine policies have made the trucking business, and in fact, most private industry, absolutely miserable for a year and a half.

Sending people home who are perfectly healthy just because of appearance on some contact tracing roster or a symptom-free diagnosis has cost manufacturing, transportation, and the distribution world incalculable resources.

Already suffering from a driver shortage before COVID-19 hit, these measures have increased the need for trucks while driving their drivers out of the industry and discussed. Truck driving can pay well, but not if the driver just sits and wait all day at overwhelmed rail yards or freight terminals… Not if the price of fuel has chewed up all of his profits… Not if the truck terminal experience has been made miserable by understaffing caused by outlandish and unnecessary quarantines.

Already suffering from understaffing at our warehouses, social distancing rules have forced warehouses to tie up trucks and containers for weeks, as they can no longer use three-man crews to load and unload vehicles. If no two workers can be within 6 feet of each other, only one man has to load and unload a 7 foot wide truck. This has tied up equipment (trucks and containers) by factors of four, five, or six.

It all adds up. It all contributes to slow down our supply chain to the speed of molasses.

And what about airfreight? When cargo can’t move fast enough by sea, industry puts it in a plane. But that’s not an option when the planes are grounded.

Only about 15% of the air freight in the world normally travels by cargo plane. The other 85% has always traveled by filling the bellies of passenger aircraft, both domestically and internationally. With passenger travel largely stopped for the past year and a half, almost 85% of the airfreight capacity in the world has been removed. It's gradually coming back, but so very slowly… our traditional safety valve has become unavailable or unaffordable as a result.

On top of all of the above, the Biden regime's outright assault on the energy sector has driven prices up with unprecedented speed, causing shortages and unbearable cost increases. The biggest reason for the unprecedented inflation we see on the store shelves today is the high cost of energy, as a doubling of diesel costs makes the products we buy unaffordable, and increases in heat, air conditioning, and machine power energy have driven up the cost of manufacture and service in our factories, distribution centers, and stores.

So the Biden-Harris regime has asked for input from the public. Fine. Here it is.

Waive all federal restrictions that are holding back our seaports and our railyards from expansion.

Repeal all the executive orders and bureaucratic rulemaking that has hampered American energy production. Let us drill again, pipe again, transport again, and deliver again.

Waive all federal mandates concerning masks, social distancing, and vaccine requirements.  All of them.  Every single one.  Most of these mandates aren’t even legal anyway. Waive them now, and save yourself the court battles, while saving the economy at the same time.

In short, the lesson of Ayn Rand’s book, Atlas Shrugged, 70 years ago, is just as valid today as it was when she wrote it. When an oppressive government demanded that John Galt – the recognized expert of the day and hero of the novel – tell them exactly what the government needs to do to solve all our problems, he told them in five words:

“Get Out Of My Way.”

Copyright 2021 John F Di Leo