The COVID-19 pandemic caused enormous upheaval and upended the lives of billions. Those unprecedented shifts disrupted the sensitive system that makes the global economy work.
The global supply chain has struggled to keep things moving amidst these headwinds. There are numerous examples of stress throughout the system, from the energy industry to the massive cargo ships crisscrossing the ocean to the trucks that bring the goods bought from local stores.
Government data can pinpoint where some of the biggest roadblocks exist.
In January 2022, the Federal Reserve of New York created a Global Supply Chain Pressures index. This experimental index created by economists at the Federal Reserve of New York incorporates 27 metrics that measure cross-border transportation costs and country-level manufacturing data. This measure accounts for things like transportation costs, how long it takes for goods to arrive where they’re needed, the time for companies to fulfill an order, and how much inventory companies have built up.
The index is at zero when supply chain pressures are at the average of a specified time period. If supply chain pressures increase, the index’s value goes up. The higher the value, the more unusual the stress placed on the supply chain.
According to this data, the global supply chain has been remarkably steady since 1997. Before the pandemic, the index’s value rarely moved higher than one. Even natural disasters like the 2011 tsunami in Japan did not cause the Global Supply Chain Index’s value to exceed two or more.
Unlike a tsunami or an earthquake, the COVID-19 pandemic affected the entirety of the supply chain. The Global Supply Chain Index jumped to about 3.2 after China imposed lockdown measures in early 2020. It was a record high for the index at this point. After a brief decline in the summer of 2020, it rose even higher that winter and continued to increase throughout 2021. It peaked at a record high of 4.4 in October of 2021.
At the pandemic’s start, most Americans went into state-mandated lockdowns, causing a sharp decrease in spending across the board.
Spending on durable goods, such as appliances, rose 18% from quarter two to quarter three of 2020. Spending on nondurable goods, such as food and clothing, increased by 7% at the same time.
While service spending returned to normal by quarter two of 2021, spending on goods continued to grow. Durable goods spending rose 25.4% from the end of 2019 to the end of 2021. Nondurable goods purchases rose 12.2% during the same time.
The increase in goods spending meant more work for the supply chain, at a time when it was already under pressure due to the pandemic.
The Port of Los Angeles is the busiest seaport in the Western Hemisphere. In 2020, it managed $260 billion in cargo value, owned 17% of the market share nationally and 40% of the market share on the west coast.
When cargo ships arrive at the port, if there is no dock or berth available, they must wait, or anchor, until a spot opens up.
Before the pandemic, fewer than two ships on average waited at anchor, meaning they were within 40 miles of the port. Ships would then dock on a first-come-first-served basis. In October 2021, an average of 33 ships were waiting at anchor, and 17 were at dock. The Port of Los Angeles reports only on all ships within 40 miles. In mid-November of last year, ship crews started anchoring 150 miles off the coast due to environmental concerns. USAFacts omitted data following the change in ship tracking.
Ships also waited at anchor for longer as the pandemic continued. The average number of ships at anchor from October 2020 to October 2021 increased more than tenfold. In the first ten months of 2020, ships waited an average of five days at anchor and docked combined. By the end of October 2021, the average reached 23 days.
This backup is due to a variety of reasons, such as a lack of offloading equipment at US ports and a shortage of truck drivers picking up the merchandise.
While the shipping backlog increased, it also took longer for trucks to pick up goods from the port.
The delay between unloading a ship and pickup by truck grew longer after the onset of the pandemic. In 2019, the average time for a container to move from ship to truck at the Port of Los Angeles was 3.6 days. By 2021, the average delay time had risen to seven days.
While the delay time improved during the first three months of this year, it’s still higher than the pre-pandemic average.
Moving goods from places like the Port of Los Angeles to warehouses and stores across the country relies on trucking. The pandemic amplified the existing challenges to the trucking industry, including high turnover rates and an aging workforce, according to a press release from the White House.
Truckers often face long waits to pick up loads at ports and then deliver them at warehouses. According to a Congressional Research Service report, "this unpaid ‘detention time’ counts toward the maximum hours they can drive each day, reducing drivers’ income." In addition, many truckers also bear the burden of gas, insurance, and maintenance costs, which reduces their take-home pay. These challenges make it harder to recruit and retain drivers with the proper credentials and experience in today’s trucking jobs.
In addition to workforce challenges, commercial trucks are almost entirely dependent on diesel fuel, which comes from crude oil. According to the Energy Information Administration, crude oil makes up about 50% of average diesel prices from 2000 through 2021.
After an initial decrease at the beginning of the pandemic, diesel fuel prices started climbing higher. From October 2020 to December 2021, diesel prices increased by 42%.
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