Before the pandemic, the shipping industry experienced periodic "shocks" that caused temporary disruptions, such as labor strikes, shipping company bankruptcies, economic downturns, etc.
However, during the pandemic and recovery, there has been a series of shocks that happened in rapid succession and the supply chain system did not have the ability to adjust before the next shock hit, Tirschwell explained.
These shocks included increased shipping volume due to the consumer spending shift from services to goods, the shutdown of the Suez Canal in March 2021 and pandemic shutdowns in China.
During the first half of this year there was a huge run in inventory which resulted in inbound shipping containers piling up at ports, but a slowdown in the amount and types of merchandise consumers wanted to buy. This resulted in containerloads of merchandise that weren't needed and so they sat at the ports, Tirschwell said.
"The port data shows many of the major ports had huge increases in the number of loaded import containers sitting on the terminals. And this, of course, is the root cause of why ships back up at the ports," he said.
With more containers sitting on the terminals, it takes more time to load and unload the ships, limiting the number of berths for ships to wait in, creating a domino effect down the supply chain.
The second shock to the system this year has been a deluge of empty containers sitting at the ports. As merchandise is being worked through the system, retailers are returning empty containers, but shipping companies no longer have an incentive to dedicate ships to transport only empty containers back to Asia.
U.S. exports have not grown anywhere near as fast as imports have grown over the past two to three years, Tirschwell said. As a result, a much larger percent of the containers coming in to the ports are going back out empty.
Ocean carriers aren't incentivized to remove the empty containers, so the federal government is trying to pressure and cajole the shippers to take the empty containers and send ships solely for the purpose of taking away empty containers.
"This is going to take some time for this to run its course because the level of inventory build-up that we saw in the first half was unlike anything we've ever seen since 2010, which was when the economy was coming out of the Great Recession when there was a very significant import inventory-driven wave," he said.