Looser supply chain a holiday gift

More open ports a factor as shoppers feel inflation relief

The container ship Ever Libra is moored at the Port of Los Angeles on Nov. 21. The supply backlogs of the past two years have improved dramatically since summer. More photos at arkansasonline.com/128supplies/.
(AP/Damian Dovarganes)
The container ship Ever Libra is moored at the Port of Los Angeles on Nov. 21. The supply backlogs of the past two years have improved dramatically since summer. More photos at arkansasonline.com/128supplies/. (AP/Damian Dovarganes)


In January, 109 container ships waited off the California coast to unload cargo in Los Angeles and Long Beach, the nation's two largest ports. Consumers, stuck at home amid the covid-19 pandemic, had unleashed an avalanche of orders for goods that overwhelmed factories and ports.

Importers were paying upwards of $20,000 to send a single container from China to the United States -- sometimes more than the goods inside were worth. Businesses had to back-order everything from bedroom furniture to kitchen fryers, if they could get them at all.

Now, no freighters are lingering off the Southern California coast. Containers from China go for just $2,000. And restaurants can order fryers and other equipment, having the goods delivered in a couple of weeks.

The supply backlogs of the past two years -- and the delays, shortages and steep prices that came with them -- have improved dramatically since summer. The web of factories, railroads, ports, warehouses and freight yards that link goods to customers has nearly returned to pre-pandemic conditions.

"We are in a very different place than we were," said Phil Levy, chief economist at the supply chain consultancy Flexport. "If you ask, how long does it take to move stuff, there has been notable improvement. If you measure it by how long would it take to get a cargo from Asia to a destination port, dramatically better."

The easing of supply bottlenecks has begun to provide some relief from inflation that this year reached a four-decade peak, pummeling consumers and businesses. Progress has been modest and so far short-lived.

Yet it's still provided a glimmer of good news in the holiday shopping season: Gift items are much likelier to be in stock, perhaps at lower prices. The U.S. government's latest inflation report showed that prices of toys, jewelry and girls' apparel fell in October.

"Supply chains are really not the problem anymore," said Timothy Fiore, who leads the Institute for Supply Management's manufacturing survey and is chief procurement officer at the transportation firm Ryder System. "We've had four or five months of supplies looking better. Prices have dropped, too."

The main factor behind the improvement has been diminished demand for manufactured goods. Spending on goods has fallen for three straight quarters, according to the Commerce Department. Higher borrowing rates, engineered by the Federal Reserve to try to tame inflation, appears to have reduced Americans' willingness to buy more nonessentials.

Rather, consumers have increasingly shown a desire to venture out and spend on experiences. Demand thereby has shifted toward services -- restaurant dinners and plane tickets, hotel rooms and entertainment.

AVOIDING DELAYS

At the sprawling Southern California ports, the shipping backup has eased in part because companies have sent cargo to Gulf Coast and Atlantic ports to avoid delays. Port Houston says its cargo volume is up 18% from this time last year.

An index that measures demand for freight shipments had hit a high of 115 earlier this year; now it's below the five-year average of 53.

"We're returning to the mean and the trend lines that existed pre-covid," said Chris Adderton, senior vice president for the Council of Supply Chain Management Professionals.

In addition to the reduced demand that has lightened the strain on supply chains, ports have become more efficient. Additional ships have increased transportation options.

When inflation first began surging last year, economists had mostly blamed snarled supply chains. Fed Chair Jerome Powell, echoing the views of many analysts, predicted that soaring prices would prove "transitory" and ease once it became easier and cheaper to ship products.

Things didn't prove so simple -- especially after Russia invaded Ukraine in February, disrupting trade in energy and grains, and sending oil, gas and food prices soaring worldwide.

Other problems remain, too. A chronic shortage of computer chips, for example, will likely hamper auto production into 2024, Kristin Dziczek, an auto-policy adviser at the Fed Bank of Chicago, wrote in a recent paper. Although the shortage has eased, factories remain slowed by a lack of chips.

The average price of a new vehicle remains near a record high, some $46,000, and isn't expected soon to fall. Used vehicle prices, by contrast, have dropped since late summer. Analysts expect them to fall further but not to pre-pandemic lows

Automakers are still struggling to acquire enough chips, largely because the number of semiconductors required per vehicle has multiplied. That is a consequence of more sophisticated auto equipment, from automated safety systems and internet connections to infotainment, Dziczek wrote.

What's more, computer chips used for vehicle production are harder to manufacture than chips for consumer electronics because the former must be built to withstand heat, cold and vibration.

Coronavirus lockdowns in China, along with the scattered public protests against them, are expected still to disrupt global production and shipping.

The consultancy Resilinc has identified 13,800 Chinese sites -- from factories to warehouses to testing facilities -- that are at risk from protests, rising covid-19 cases and lockdowns.

Potential problem spots exist in such key cities as Beijing, Chengdu, Nanjing and Shanghai.

On Wednesday, in a move that offered potential relief from its zero-covid policies, China rolled back restrictions on isolating people with the virus. The move will boost hopes that Beijing is scrapping its "zero covid" strategy, a moved expected to propel manufacturing and global trade.

  photo  The Container ship Cam Cgm Arctic (MT) is moored at Maersk APM Terminals Pacific, Pier 400, at the Port of Los Angeles on Monday, Nov. 21, 2022. The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. (AP Photo/Damian Dovarganes)
 
 
  photo  The Container ship Cam Cgm Arctic (MT) is moored at Maersk APM Terminals Pacific, Pier 400, at the Port of Los Angeles on Monday, Nov. 21, 2022. The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. (AP Photo/Damian Dovarganes)
 
 
  photo  The container ship Ever Libra (TW), right, is moored at the Port of Los Angeles on Monday, Nov. 21, 2022. The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. (AP Photo/Damian Dovarganes)
 
 
  photo  The APM Terminals' Pier 400 facility is seen in the Port of Los Angeles on Monday, Nov. 21, 2022. The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. (AP Photo/Damian Dovarganes)
 
 
  photo  The container ship Ever Libra (TW) is moored at the Port of Los Angeles on Monday, Nov. 21, 2022. The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. (AP Photo/Damian Dovarganes)
 
 

  photo  The Evergreen Shipping docks are seen at the Port of Los Angeles on Monday, Nov. 21, 2022. The supply backlogs of the past two years -- and the delays, shortages and outrageous prices they brought with them -- have improved dramatically since summer. (AP Photo/Damian Dovarganes)
 
 



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