The Supply Chain's Troika of Trouble
Updated: Feb 8, 2022
The global supply chain in transporting goods relies on three inextricably linked types of transportation: maritime, rail freight and trucking. Each one can be considered a bridge from one to the other over hard infrastructure which allows goods to be transported from manufacturer to its final destination.
In the present-day landscape all three are alarmingly weak and vulnerable. It has been extensively reported and documented that the maritime and trucking industry have difficulty in securing enough equipment and personnel to meet new demand because of extensive furlough of personnel, shortage of trained personnel and imbalance of availability of equipment.
Little mentioned and equally critical to these links is freight trains which is an indispensable component in hauling imported goods from ports to major cities and distribution points as well as the domestic transport of agricultural products.
SHIPPING & PORT INFRASTRUCTURE
Ocean freight consists of 85% of total global trade which makes it the most critical “bridge” of this troika. Even during the best of times there has always been port congestion and shortage of containers, however because of the extreme supply & demand imbalance, these mundane industry problems have been extraordinarily exacerbated.
The Financial Times article on 10 August 2021 entitled Ports Face Biggest Crisis Since Start of Container Shipping provides a comprehensive overview and challenges of the status of the container industry.
To paraphrase the issues in this article, ports worldwide pre-pandemic have dealt with congestion and delays. For this reason investment is required to increase capacity and change the layout configuration to accommodate the super-sized container ships, deeper docks and bigger.
The largest container ships, the super-size category can carry 20,000 20 ft containers that when laid side to side would stretch beyond the distance from Paris to Amsterdam or 315 miles. The process in normal times of ordering and installing of a new crane to expedite their unloading can take 18 months.
With respect to congestion in the US, container ships are waiting 33 hours in 2021 for a berth for unloading vs 8 hours in 2020.
The following article 11 Incredible Facts About the $700 Billion US Trucking Industry, in Markets Insider, 3 June 2019, provides a comprehensive perspective as to the criticality of truckers’ role in America’s economy and security.
In 2017, the US trucking industry posted revenues greater than the GDP of more than 150 nations.
Approximately 5.8% of fulltime jobs are related to trucking.
Walmart alone employs 8,600 truckers.
Trucks move more than 70% of goods transported around the USA.
More than 40% of all trucking jobs are held by minorities, 6% by women.
Not one of the regulators charged with overseeing the trucking industry was ever a trucker.
Most grocery stores would run out of food in three days if there was no long-haul truckers stopped driving.
Many experts believe that the trucking industry needs to hire 900,000 more drivers.
Most truck drivers earn less than most Americans in annual income.
The average professional long-haul driver logs more than 100,000 miles per year (vs the average American motorist who travels 13,500 miles annually)
Truckers’ Demographic Dilemma
According to the figures a trucker’s average age is 55 in a profession whose working conditions don’t encourage a healthy lifestyle which in turn aggravates underlying health conditions. According to the article published by MSN Money 12 March 2020 How Coronavirus Could Hit America’s 1.8 Million Truck Drivers 38% of truck drivers lack health insurance with unhealthy lifestyles which are considerably higher than the average population encompassing obesity, morbid obesity, cigarette smoking and diabetes. The shortage of qualified truck drivers has persisted for many years.
This has compelled some trucking companies to offer generous signing bonuses up to $8,000. But as observers noted, these bonuses are not attracting “new blood” rather encouraging current drivers to jump too other companies because the profession is demanding with limited upside.
The aforementioned dilemmas are almost identical in Europe and Asia (except Africa) making it a global problem that will not be resolved in the near future.
Rail freight has received far less publicity than their transportation associates yet face the same operational dilemmas. The Wall Street Journal article 22 July 2021 entitled Shortage of Railroad Workers Threaten Recovery discusses the shortage of railroad workers affecting operations.
To paraphrase the article freight companies are running fewer trains with more freight cars because of higher than expected attrition and deeper personnel cuts. This change in operations was initiated by Canadian railroad companies called “precision scheduled railroading” in 2017. It entails running fewer trains, longer distances, tighter schedules which require fewer locomotives, workers and facilities.
With respect to experienced personnel, freight companies are trying to ramp up by recruiting, often with monetary incentives and training. The present-day employment level below pre-pandemic levels currently at 47,444 vs 51,800 according to the Standard Transportation Board.
Even with improvements in maritime, trucking and rail freight, the infrastructure they must traverse has also been on a downward trajectory for decades. The proposed infrastructure bill falls far short of the required repairs financially and technically.
The Wall Street Journal article dated 17 June 2021 entitled One Failed Bridge in Memphis is Costing Business Millions underscores the decades of negligent inspections of America’s infrastructure. According to the artic
le the Arkansas DOT inspections in 2019 and 2020 missed a crack in the 50-year old bridge which carries 40,000 vehicles daily and Memphis a critical distribution hub. For this reason that vehicles must use an alternate, narrower bridge that crosses the Mississippi River resulting in massive congestion while repairs are made.
A superb example as to the criticality of even a small bridge was entertainingly explained by actor Stanley Tucci in the movie Margin Call (2011) about a financial firm at the brink of a meltdown. He brilliantly articulated with a short storytelling narrative on the impact of the role of a small bridge he designed in Middle America:
The following chart entitled Where America’s Bridges Are Crumbling provided by the American Road & Transportation Building Association (ARTBA) gives a startling quantitative figure and areas of extreme need of structurally deficient bridges in 2020:
In their assessment ARTBA stated, “Infrastructure by finding that more than 220,000 American bridges need repair work. 45,000 of them were deemed structurally deficient and Americans cross them 171.5 million times daily. At the current rate, it would take more than 40 years to fix all of them and cost an estimated $41.8 billion. The good news is that the number of structurally deficient bridges has declined for the past five years but that trend has been tempered by more bridges being downgraded from good to fair condition.”
Furthermore, “Out of all U.S. states, Iowa has the most structurally deficient bridges, 4,571 or 19.1 percent of its total bridges. Pennsylvania comes second on the list with 3,353 of its bridges falling into the same category, along with 2,374 in Illinois. West Virginia has the highest share of bridges classified as structurally deficient at 21 percent while Nevada has the lowest at just 1.4 percent.”
The trend for increasingly severe weather has also accelerated decrepitude of these infrastructures in terms of shutdown or collapse.
Although a mammoth bipartisan infrastructure bill has passed, the following chart entitled Infrastructure: The US is Falling Short on Investment provided by the American Society of Civil Engineers, shows the astounding investment gap between funded and unfunded. Whether the newly approved monies for this new bill will be spent in the correct areas – historic mismatch of funding based on politics than engineering and economic need.
According to The American Society of Civil Engineers (ASCE) its report on 17 major infrastructure categories on a range of criteria such as capacity, condition, funding and public safety scoring A to F, USA score climbed from D+ in 2017 to a C- in 2021, the first time out of D range in two decades. Nonetheless the overall improvement was uneven in which 11 of 17 categories were still graded D.
Dammed If You Do
In an area where the US is eliminating an expensive infrastructure maintenance cost is dams. According to the UN Institute for Water, Environment and Health, the US is the world’s leader in dam removal because of the burdensome risk and cost. In the past 30 years the US has decommissioned 1,200 dams. About 18% of US dams are high hazard risk. Texas has the most dams. Most were constructed to provide irrigation to water scarce regions. Only 3% of the dams are for hydroelectrical purposes.
The following chart entitled Where Dams Have Reached “Alert” Age provided by the UN Institute for Water, Environment and Health shows average age of large dams worldwide.
In an era of severe drought this may not seem urgent however there are huge costs and manpower in decommissioning dams.
Infrastructure Bill Provisions
Included in the Senate-approved $3.5 trillion infrastructure bill includes the following for ‘hard’ tangible projects such as roads, bridges, etc. projects:
Hard Projects Senate Approved Amount (in billions)
Roads & bridges $110
Rail: Amtrak and national network $66
Public Transport $39
Airports: runways and terminals $20
Airports: air traffic control $5
Ports & waterways $17
Power Grid upgrade $75
Grand Total $332
Lacking the Brick & Mortar Know-How
America’s failure in the educational sciences to graduate engineers and other technical professionals fall short of personnel regardless how much money is thrown at these infrastructure problems. We’ve spawned a new generation that excels at writing virtual software but not for repairing brick & mortar hardware. America’s multigenerational degradation of math and science technical education and paucity of American students pursuing those fields creates a national security problem.
To eliminate the shortage of experienced professionals and technicians, planners, engineers and the blue-collar operations manpower is a multi-generational endeavor under the best of circumstances. The government can always print more money but is unable to create more qualified technical people as fast.
As the adage goes, “A chain is as strong as its weakest link” which neatly applies to the supply chain and the infrastructure it utilizes. Even of two of the three supply chain bridges were magically brought back to pre-pandemic service, smooth world trade would still depend on every component working in harmony.
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The Cerulean Council is a NYC-based think-tank that provides prescient, beyond-the-horizon, contrarian perspectives and risk assessments on geopolitical dynamics and global urban security.