Why American ports are blocked, the reason is so simple.

In the past six months, the congestion of American ports and rising prices have been hot spots.

Thanksgiving and Christmas shopping season is approaching, logistics is even more tight, and news of shortages and price increases are everywhere.

Yesterday, I went to buy a car air-conditioning filter, but it was out of stock. The store said that this model is out of stock in North America and is now blocked in ports or factories in China.

I had to buy individual models and reluctantly installed them to make do with it.

Problems in this round of supply chain in North America have two effects.

One is fresh meat, fruits and vegetables. Although they are called powerful online, the overall impact is not big. North America has developed agriculture and animal husbandry. Except in some places, the price of vegetables in Chinese supermarkets has risen extremely outrageously. The overall situation is good, there is a price increase, which is not particularly exaggerated.

The second category is daily necessities and industrial supplies, which has a great influence. If you don't need these products, you won't feel the impact of the shortage at all. If you really want to use it, it's all anxious to death. The air conditioning filter can also be improvised. If it is other auto parts, industrial products, household appliances, etc., it may be troublesome.

As the situation gets worse, the US media and experts from all parties are looking for reasons and solutions. The latest development is the public opinion triggered by the Twitter of the founder of a logistics company.

Ryan Petersen (Ryan Petersen), is the CEO of a startup logistics company in California. He couldn't bear this kind of supply chain collapse. On the 21st, last Thursday, he rented a boat, sailed out to sea, and went to Los Angeles and Long Beach ports to conduct field investigations.

This is the busiest port in the world, and 40% of US imports come from two ports.

On that day, the number of ocean-going vessels waiting to enter the port had reached a record 79, and the average waiting number before the epidemic was 0-1.

Everyone has no idea about the appetite of a huge ship. Let me give some specific figures: On average, a container loaded on an ocean-going vessel requires 8,000 trucks to pull it away.

Therefore, just pulling the containers of 79 ships stranded outside these ports will require nearly 600,000 large trucks. Connect all these trucks together, and the length is nearly 10,000 kilometers!

Think about how terrible this kind of logistics congestion is.

On Friday morning, he sent a series of tweets based on what he saw and heard and his own analysis, which maxed out the Internet.

The first is the huge contrast in perception.

Everyone thinks that the two busiest ports in the world should be in full swing now, and the 7X24 working state has rescued the United States from the collapse of logistics.

But what Ryan saw was that the port was deserted and in a stagnant state. He spent three hours shuttled to and from each terminal of the port and saw less than 10 containers unloading.

There are hundreds of cranes, but only 7 are in operation, and they seem to be running quite slowly.

In the past, truck drivers complained that port workers, especially crane operators, were manipulated by the union and had an annual salary of hundreds of thousands of dollars, but they did very little work.

But the board can't hit the crane driver's ass yet.

The crane does not work because the port is full of containers, and the unloaded containers have nowhere to put them.

Therefore, the real bottleneck is not the truck driver or the port’s handling capacity, but the port’s container yard is full. Regardless of whether the loaded container or the empty container, there is no place to stack it.

This is the bottleneck (bottleneck) leading to the collapse of the entire logistics chain.

But when Ryan delved into it, the full container was just the appearance.

It stands to reason that the cargo yard is full. As long as there are trucks, the energy will continue to pull away the containers in the port. Why are there no trucks to transport these mountains of containers away?

Because the truck lacks a chassis (Chassis).

When Ryan continued to investigate, he found a very strange infinite loop.

If there is no container on the truck driver's base, he can go to the port yard to load the goods.

But if the truck is loaded with empty containers, sorry, no freight yard can let you unload the empty containers, because the port and nearby freight yards are full.

After the epidemic, ocean freight rates skyrocketed. After the freighter unloaded the container, the empty container was supposed to be pulled back to China for loading. But the ship couldn't wait, the empty ship sailed back and put a large number of empty containers in American ports.

There are more and more empty containers until the freight yard near the port is full.

The empty containers had nowhere to go, and the freight company and the driver had to put them on the base of the truck. For example, all the bases of a freight company are occupied by 450 empty containers. Another truck company puts 3 containers on each base.

The pedestal is full, and the truck driver has no cars to use and can only wait.

Some people will ask why the freight yard and truck drivers are so stupid, unloading the container, just find an open space, and put it on the ground.

The core problem came out, it really didn't work.

Because the Long Beach City Government has regulations, containers cannot be stacked on empty ground, and there must be a special cargo yard to place containers, no matter if they are empty or in stock. Moreover, the yard containers can only be stacked two layers, or 8 feet high, and cannot be stacked any more. If the yard puts the containers in disorder, or stacks more than two floors, the yard will be closed.

It was this rule that stuck the neck of the freight yard, causing them to stack empty containers with nowhere to put them on the truck base.

When more and more containers fill up the base of the truck, the truck cannot find enough bases and goes to the port to pull the goods.

When the unloaded containers from the port were not transported away in time, the more they piled up, the cranes at the port had to stop and wait for the trucks to pull the goods.

When the crane stopped, the ocean-going ship had to drop anchor outside the port, waiting for the crane to start again.

The entire shipping system was blocked.

This is a typical negative cycle. The bottleneck is not the cranes in the port, nor the workers, nor the truck drivers, but the capacity of the freight yard. If the bottleneck leading to the negative cycle cannot be resolved, the supply chain will collapse.

Ryan said that if this negative cycle is allowed to continue to develop, the situation will only get worse day by day, even more dangerous than the collapse of Lehman Brothers that triggered the financial crisis in 2008.

The problem of port congestion cannot be solved by the government printing money. All real companies will go bankrupt, the global economy will collapse, and countries that rely on globalization will suffer severe economic losses.

How to solve it? Ryan gave 5 suggestions,

First, an administrative order was immediately issued to abolish the Long Beach and Los Angeles City’s regulations on the number of storage yards and increase it from two layer to six, freeing up space for empty containers. This trick will release tens of thousands of trailers so that they can go to the port to load goods immediately and pull away the mountains of containers. The crane and port can be restarted.

Second, it is recommended to requisition the National Guard and army trailers to all major ports in the United States to pull goods.

Third, suggest the government built a large temporary cargo yard (500 acres) within 100 miles of the port that can be connected to the railway.

Fourth, railway trains are required to pull containers to new temporary freight yards, not to large cities such as Dallas, which are thousands of miles away. In this way, the train can go back and forth quickly in a short time, pulling away the backlog of containers in the port. The trucks then pull cargo from the temporary transfer point without all being blocked in the port.

......

Ryan released this series of tweets on the morning of the 22nd, which triggered a large number of forwarding comments.

On the same day, the City of Long Beach issued a new administrative order to increase the limit on the second floor to the sixth floor. The temporary regulations will take effect immediately and the validity period is 90 days.

Interestingly, this regulation has been implemented for many years. The reason why the municipal government must restrict two levels of containers is: "In order to control the visual impact on the surrounding area"...

In the post-epidemic era, the U.S. ports have been congested, the supply chain has collapsed, and prices have soared. Many people are asking, is the market malfunctioning? Is capitalism powerless to deal with these challenges?

The supply chain in today's world is a super complex network that blocks trucks, trains, ports, truck drivers, crane drivers, etc., involving China and the United States and many other countries, and links the world. Let me talk about my understanding.

The first is a rigid and inefficient bureaucracy.

Just like the tracking and prevention and control of new crown cases, from the CDC to the locality, there are problems in every place, causing the entire system to fail and the line of defense is useless.

The port congestion has been around for a year, and it is getting worse now. From the president to the governor of California and the governor of New York, they are all dealing with it. But apart from shouting slogans, no strong measures and methods were given.

The most surprising thing about this case is not that Ryan found the deadlock of port congestion, but that the supply chain of the United States could be stuck by such a small place. What is even more surprising is that bureaucrats, large and small, have not been able to find the reason for a year. It can be seen how numb and slow actions are from the federal government to local and port management.

Second, the negative impact of excessive control on life and the economy. In my previous articles, I have talked about many cases in the United States and Canada, from raising chickens in the backyard, growing vegetables, to lawn trimming, height of fences, setting up factories, hiring drivers, labor insurance and salary breaks. There are a vast array of regulations. .

Sound laws and regulations ensure welfare and safety, which is of course a good thing. On the other hand, just like this regulation that restricts the accumulation of containers to only two levels, it has also caused a huge drag.

China is moving towards modernization and planning, and there are more and more laws and regulations. It is hoped that the law is not as many as possible, and not as fine as possible. Social activity requires a moderate amount of space and a fuzzy area.

Third, deep reflections on globalization, high dependence on consumption, and global division of labor.

To what extent is North America dependent on the global supply chain?

I read a media analysis last year about the extremely cheap shipping costs in the U.S. postal and express delivery industries. The cost of shipping a mug from all over China is lower than that of a small business across the street to make one.

Isn't it ridiculous? The younger generation in China and the United States have similar bodies, similar education, and similar skills. Why buy a cup in China? Instead of making it locally.

Obviously, something went wrong. Economic theories based on the division of labor in classical economics and free trade are facing challenges.

The cost of a cup, in addition to materials, labor, freight, China's environmental costs, the deprivation of local employment opportunities in the United States, etc., these are ignored in the formula of globalization.

Among the cases of globalization, Boeing passenger aircraft is one of the best cases. How many parts are needed for an aircraft and the collaborative completion of an aircraft in many countries around the world is the pride of globalization.

But now it has become a nightmare. The American Institute of Supply Management estimates that American manufacturers now have to wait an average of 92 days before they can assemble parts and raw materials into products.

The United States is the country that relies on globalization the most, and this time it has been hit hardest.

Whether it's airplanes, automobiles, computers, furniture, or clothing, they all rely on global supply chains. Without a global supply chain, Americans may not even be able to buy tableware, knives and forks. This is no joke.

On the other hand, globalization has also fostered a strong trend of consumerism. I often feel that just opening the basement of a middle-class American family can re-equip one or even several families in another country.

This model must rely on an efficient and cheap production base. In the past half-century, East Asia and China have supported this wave of consumerism and deeply bound China and the United States.

However, this mode of life, and social operation mode, is encountering huge challenges after the epidemic.

North American ports are congested, supermarkets have more and more empty shelves, China's power cuts and capacity restrictions... These are all related to the same thing: the negative impact and shrinkage of globalization.

The cost of globalization should not be calculated only with money. Costs that are not included, such as energy consumption and pollution, and the cost of unfair employment, are gradually being reflected.

This model is unsustainable, and this is a severe challenge facing China and the United States.

For example, China's crude oil consumption, the National Development and Reform Commission has predicted that in 2020, imported crude oil will be 200 million tons. In fact, in 2016, China's crude oil imports will reach 360 million tons.

The global crude oil production growth rate is only 1%, while China's import growth rate is 10%, which is ten times the output. The growth rate of demand for other raw materials is also a similar trend.

China imports so much crude oil and so much iron ore, not all for its own use. A considerable part of it is made into various products and sold to Americans and Europeans.

Obviously, the world cannot satisfy China's unlimited imports of oil, coal and iron ore to expand production capacity.

What we can do may be to reduce the desire to consume. From this perspective, the current supply chain congestion in the United States may also be a good thing, which can force Americans to buy less and spend less.