Why signs of an improving supply chain are an illusion

Not yet time to call it a day.
Not yet time to call it a day.
Image: Reuters/David Swanson
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It’s been a long 21 months of supply chain emergencies.

When container prices started to tick down in early October, and the number of container ships stuck in the logjam of Los Angeles’ San Pedro Bay suddenly dropped in mid-November, many grasped at these indicators as signs that the supply chain was healing. Interventions from the Biden administration, like opening the Port of LA to 24-hour operations, and private- and publicly-funded innovations like pop-up ports and rail ramps sprouting up in empty lots, further suggested that the US was turning a corner in the supply chain crisis.

However, some of the signs of improvement have turned out to be illusory, and with the complexity of the supply chain, a scattering of small fixes does not add up to a fundamental improvement.

“We’re doing really well at the ports,” said Nathan Strang, director of ocean trade at Flexport, a San Francisco-based freight forwarder. “But does that translate into more things on shelves? Not necessarily.”

A decline in container prices is not what it seems

Container prices skyrocketed as the supply chain crisis worsened. When the prices started decline, some correlated that with an improvement in the supply chain. According to the World Container Index, a leading measure of global container rates by Drewry, a London-based maritime research company, between Jan. 2020, before the pandemic took hold, to Sept. 2021, prices per 40-foot container increased over 470%. By the first week of Oct. 2021, prices began to decline from a September peak of $10,377 to $9,050 by the first week of December, a 12% decrease.

Strang says every year, crisis or not, there’s a lull in container prices during the holiday shopping season. The goods on the shelves now were shipped weeks ago and that rush was reflected in the rising rates of previous months.

Simon Heaney, head of container research at Drewry and the person behind their container index, says that seasonal softening of demand in ocean freight combined with price freezes put in place in late September by shipping lines like Maersk and CMA CGM in the face of customer ire, are the reasons for declining prices.

Heaney puts it bluntly: “We are not seeing any evidence of improvements in the supply chain yet.”

Disappearing and reappearing container ships

Container ship traffic in San Pedro Bay, outside the Ports of LA and Long Beach, has become a potent symbol of a broken supply chain. When the number of ships anchored in the bay dropped by 30% in mid-November, it was seen as a sign of progress in clearing the congestion in the US’s largest container ports.

But that drop in ships was a counting error rather than a sign of improvement. A change in the queueing system by the Marine Exchange of Southern California, an organization that monitors ships entering Southern California’s ports, allowed ships to wait for their day at berth beyond the 40-mile zone outside the San Pedro Bay port complex that counted as being “at port.” This meant that rather than having ship traffic concentrated inside the bay, it stretched out to 150 miles from the port, and as far as Mexico and Taiwan.

On Dec. 5, the Marine Exchange began counting the ships outside the 40-mile zone, and it turned out that there were more ships than ever trapped in the sea traffic of LA and Long Beach: 96 ships were waiting to enter the ports, 56 of them outside the 40-mile zone. An additional 31 ships were docked and in the process of unloading, bringing the tally up to 127.

Pop-up ports spread out container congestion

Containers stacked high at the Ports of LA and Long Beach, and spilling out into the surrounding neighborhoods, clogged port flow. Trucks had nowhere to unload empty containers, so they couldn’t pick up full ones, which meant ships couldn’t unload their cargo.

In November, pop-up ports and dockyards began to sprout up in empty lots surrounding some of the US’s major container terminals, including one by Walmart near the Port of LA, and a pop-up rail ramp by Union Pacific in the Inland Empire east of LA. Pop-up infrastructure was hailed as a welcome innovation, and the Biden administration got behind the idea, redirecting $8 million in funding to set up five pop-up ports to relieve congestion near the Port of Savannah.

However, Strang says, while the pop-up ports don’t hurt, the bottlenecks up the rest of the supply chain—at warehouses, distribution centers, and in long-haul trucking—haven’t been fixed. “Nothing has changed,” Strang said of the supply chain problems beyond seaports. “People just found more creative ways of storing their stuff.”

“Artificial progress” in the supply chain

Much of what appears to be improvements in the supply chain so far, Strang said, amounts to “artificial progress,” pointing to Flexport’s data that measures the time it takes from when a cargo is ready to ship from a factory, to when the container is picked up from the destination port, working in the various delays containers spend on dockyards or bobbing in the water outside a port. According to their data, delays continue to rise. It took about 105 days for cargo to arrive in the 3rd week of Nov., up from an average of about 45 days in 2019.

On Twitter, Ryan Petersen, Flexport’s CEO, said their indicator will “provide information on the true nature of supply chain delays and not allow our leaders to gaslight us by just hiding ships out of sight over the horizon.”


That there are toys, food, and supplies on the shelves for the holiday season has been eked out by retailers, logistics teams, seafarers, longshore workers, truck drivers, dispatchers, warehouse workers, and delivery people pulling 16- or 18-hour days, and planning around a high level of chaos.

“It’s important to say this hasn’t gone away,” Strang said. Whatever functionality that exists in the supply chain, “is being done due to very Herculean efforts.”