Logjam at ports causing low fill rates, high prices for tire importers

BETHESDA, Md.—Tire dealers around the U.S. have been dealing with low tire fill rates from their wholesale suppliers and oftentimes have to scramble to find alternative sources.

It's a problem shared among retailers in nearly all industries as the pandemic has wreaked havoc on shipping and logistics at U.S. ports.

West Coast ports in Los Angeles and Long Beach, Calif., especially, are experiencing severe congestion due to a surge in shipping volume offset by COVID-related challenges, according to a panel discussion during the Auto Care Association 2021 Business Outlook webinar on Feb. 17.

"To state that we're going through chaos right now is an understatement," said Vinay Mamidi, vice president and general manager at CSF Inc., a manufacturer of vehicle cooling systems.

He said importers are facing several challenges in trying to get products distributed to customers: the lack of empty containers for shipping products; extended sailing time; delays in unloading the ships at the ports; and not enough truck drivers to deliver product to distribution centers.

He noted that the ports have been impacted by pandemic protocols and virus outbreaks among employees, thus reducing the work force available. This extends the time it usually takes to unload a ship and transfer products to waiting delivery trucks.

The delays in unloading has caused a back-up in the shipping lanes as ships wait to be unloaded. Mamidi said in early February there were about 42 ships sitting in the ocean outside Long Beach waiting to be unloaded.

The delay in unloading shipping containers has created a backlog in empty containers to send back to manufacturing plants overseas.

"At every stage of these four stages, there is an added cost, a substantially higher added cost, that will eventually be passed on to the consumer," he said.

"No matter what kind of goods you're importing—it could be automotive parts or widgets or consumer goods—the cost that is being absorbed by the manufacturer or importer right now cannot be just washed away. This is a direct cost and it's a substantially higher cost that cannot be ignored, not taking into account the cost of carrying extra inventory and the lost sales," he said.

"Looking back, we thought last year was going to be the toughest year just keeping our warehouses operational and keeping our distribution networks running during COVID and our employees safe," added George Berg, vice president of division logistics for North America at Robert Bosch L.L.C.

"But this year has really started off with a challenge with these container shortages."

He said Bosch, an automotive parts and equipment supplier, imports product in thousands of shipping containers entering the West Coast.

"The challenge, first and foremost, is securing the containers, and we are paying three to four times more just to secure that volume," he said, noting that there can be up to a $2,000/container premium just to get a container unloaded more quickly.

"It's unprecedented how much it's costing to operate our supply chains. We're looking at different routes, and we have three to four different distribution centers in North America, so we're switching to route containers all the way around to other ports, given the congestion in Long Beach," Berg said.

Both panelists predicted the traffic jam at the ports will continue for another couple of months, or until a majority of people in the U.S. are vaccinated against COVID-19.

"If you are a manufacturer, as we are, our plants are facing another headache," Mamidi said.

"They are not warehouses. They are producing as we require them to produce, and there is no storage space because the containers are not available. So that is affecting the production line. ...

"Without containers being available, there is a tremendous amount of logjam of the parts. That's another logistics headache that has to be dealt with," he said.

"All the empty containers are sitting here in the U.S. They have not been sent back. And many of the larger importers, such as a Walmart or a Best Buy or a Target who bring in thousands and thousands of containers, because of the COVID issue, their operations have been shut down.

"They don't have people to unload those containers, and those containers are sitting in their yards—hundreds and hundreds of them—and they have not been returned."

Mamidi said container manufacturers in China are attempting to increase their production of new containers, but they are concerned about creating a surplus once the port situation returns to normal.

"It's a double-edged sword," he said.