The port authority of Oakland recently reduced the free wait time for shipping containers from seven to four days.
The reason? – Port Congestion.
Port congestion is a major problem for US ports in 2022. According to a recent port congestion report, 8 of the 10 largest ports in the US face average congestion of 7 days. In simple terms, ships have to wait nearly 7 days outside the largest ports in the US before they are allowed to dock and unload their cargo.
What is Causing Port Congestion in 2022?
Port congestion in the US has been a consistently rising problem. There are 3 simple reasons why ports in the US are facing this congestion.
Growth of US Imports:
Over the years, imports into the US have increased gradually. While ports are prepared to handle large volumes of shipments, imports into the US have grown at an almost exponential & unprecedented rate. For example, the port of New York & New Jersey claims that their imports in 2022 have increased by 11.4% compared to 2021. The port of Oakland, on the other hand, saw a 35% increase in imports between 2019 and 2021 despite the pandemic slowdown.
COVID Outbreaks and Shutdowns:
Even in 2022, COVID continues to wreak havoc on the world. Ports are often shut down or delayed due to COVID outbreaks on ships and cities. The constant cycle of shutdowns and restrictions leads to various kinds of delays from docking of ships to container clearance and more.
Worker Strikes & Resignation Drives:
Currently, the worker shortage is a major problem in the USA and it also affects major ports in the US. On average, a port employs more than a thousand people. Post-COVID, the US has been facing mass resignation drives, worker protests & strikes.
How Does Port Congestion Affect Supply Chains?
Port congestion has a direct effect on supply chains in the US. Port congestion slows the logistics of a supply chain affecting the delivery times of your suppliers and VOCCs.
According to the supply chain data I gathered, here is how the current congestion at US ports affects supply chains:
- Inventory Shortages: It is good supply chain practice to keep temporary inventories for your products and raw materials. Port congestions disrupt delivery times slowing down your supply chains. The more a supply shipment is delayed, the more likely it is that you will exhaust your inventory. This can lead to a shortage of either end products or raw materials.
- Limited Stock: Due to port congestion, supply chains will have limited stocks for popular imports driving up prices and inflation within the country.
- Increased Logistics Costs: As discussed in the beginning of the article, the port of Oakland recently revised its free wait time rules & prices. Each additional fine or increase in cost will eventually affect your supply chain and logistics costs. Shipping costs have historically been rising but with congestion, they can and will rise further causing a disruption in your supply chains.
Conclusion
According to current projections, port congestion is yet to reach its peak. 2022 looks to be a booming year for US imports but the constant congestion will probably cause supply chain slowdowns across the US and an eventual stagnancy in imports.
About the author
Name: Jayraj Shetty
Jayraj studies supply chain data and analytics every day to try and figure out what makes global supply chains tick. He is a Content Marketer at Trademo and contributes to leading supply chain publications. He maintains an active Linkedin and you can follow him there.
