Supply chain bottlenecks are squeezing businesses big and small. One expert explains why it's so hard to iron out the major kinks affecting global trade.
"There really is a perfect storm going on," Adam Compain, senior vice president at project44, a supply chain technology provider, told Yahoo Finance Live (video above). Compain laid out three major reasons why ports are so backed up and there's red-hot demand for truckers.
"First and foremost is customer expectations have risen only in one direction — and that's up," explained Compain. "Second to that is a capacity constraint. There are limitations to the supply chain network in terms of the quantity of drivers that are available to ship things within the United States and abroad."
Third, "things are complex in the supply chain," Compain said. In his view, the process of turning raw materials into a finished good and bringing it to a consumer's home across the globe relies on "a whole bunch of interdependencies," and "logistics has reached a point that the existing software data and tools to make that job a reality are really strained."
As a result, supply chains are "hugely challenged right now," Compain stressed, which has led to delays increasing by 425% year-over-year.
Container ships have been waiting for days off the coast of Los Angeles and Long Beach, and container fees have correspondingly skyrocketed, according to HSBC and Oxford Economics (chart below).
As of September 30, 62 container ships are anchored or in drift areas between LA and Long Beach, and 28 are berthed, the Marine Exchange of Southern California tweeted.
All of this points to the fact that consumers are likely to face a difficult holiday shopping period.
The "overall number of ships is close to a record high, with all that backlog accumulating since July," Capital Economics' Paul Ashworth wrote in a note on Oct 1, referring to the number of ships off the ports of LA and Long Beach. "The upshot is that we should expect shortages to continue to worsen as we head into the key Holiday season."
And "it's going to get quite challenging," added Compain.
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Aarthi is a reporter for Yahoo Finance. She can be reached at [email protected]. Follow her on Twitter @aarthiswami.
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