(The following article by Eric Johnson was posted on the Long Beach Press Telegram website on October 11.)
LONG BEACH, Calif. — Not enough dockworkers. Not enough rail workers. Not enough truck drivers.
Judging from the concerns of those in the retailing and shipping industries, you might think Southern California has 100 percent employment.
That is, of course, not the case, but shortages of skilled workers all along the imported product supply chain have caused a massive backup of cargo ships outside the ports of Long Beach and Los Angeles.
All this despite nearly half the part-time dockworkers hired in August to deal with the backup being trained and ready to go.
The backup of ships stretches from Palos Verdes to Huntington Beach, and it could have big consequences for Southern California retailers as the Christmas shopping season approaches.
Turnaround times (the number of days, from arrival to departure, it takes to unload a cargo ship) have been running eight days, with one ship reporting a 10-day turnaround. The average is three to four days, according to the Marine Exchange of Southern California, traffic control for the San Pedro ports.
There were 50 ships at anchor Sunday night, the most yet in the so-called “congestion period of 2004,” which began in June. Before then, about six or seven ships typically anchored offshore each day.
“You have goods just sitting offshore, waiting,” said Jack Kyser, chief economist of the Los Angeles Economic Development Corp. “Just getting it off the ships is not the only problem.”
There’s labeling, putting hangtags on, and packaging at distribution centers, many of which are located in the Inland Empire.
“You’re talking about running overtime to get goods out, or not having enough product on the shelf for Christmas,” Kyser said.
As the waiting times for cargo ships get longer and longer, Kyser said there will be a breaking point.
“Three to four days you could live with,” he said. “Six to seven days and you’ll start to get more nervous.”
It’s a nightmare scenario for the shipping lines and terminal operators that lease the docks in Long Beach and Los Angeles. Together with the International Longshore and Warehouse Union, shipping representative Pacific Maritime Association hired 3,000 part-time employees in August to help work through the backlog of cargo.
The jobs were fiercely sought after because they pay a starting wage of $20.66 an hour and require minimal training.
Even though 1,405 of those employees have been trained, according to PMA spokesman Jason Greenwald, the cargo backup has only worsened.
Kevin Klowden, research analyst with the Santa Monica-based Milken Institute, said the backups are worrying retailers who are accustomed to having inventory arrive as they need it, known as “just-in-time delivery.”
‘A supply issue’
“It’s not a price issue as much as it is a supply issue,” Klowden said. “A lot of retailers shifted to shorter delivery times and lower inventories.”
But many factors are conspiring against that philosophy this year:
oA dearth of truck drivers in the ports truckers say the fees they’re paid to haul containers to distribution centers aren’t enough to cover their expenses, so they don’t drive.
oGrowth in railroad usage that rail lines were unprepared for “Rail for years has been looking to cut costs, and now they’re looking at growth,” Kyser said.
oUnreliable projections of container volumes “People haven’t figured out the right metrics to use and a lot of the statistics are just fiction,” Kyser said.
For instance, cargo growth in the Port of Long Beach has been double the projections for 2004.
Port officials, shippers and retailers all underestimated the surge of imported products like toys, apparel and electronics from Asia.
All the retailers except Wal- Mart, that is.
“Wal-Mart decided to push all their imports through Southern California in August and September,” Kyser said.
Frayed nerves
While that move may have soothed the psyches of officials at the world’s biggest retailer, it’s only frayed the nerves of everyone else trying to get product through the local ports.
Klowden predicts there will be one major toy, if not two, that will be missing on retail shelves come December.
“It’s a lot of anticipation, but there’s only so many items that people can predict,” he said. “By the time you see it peaking, it’s too late to get it to market by Christmas.”
Meanwhile, a local small retailer said the delay at the ports could wreak havoc with the large retailers’ region-wide advertising campaigns for Christmas.
“The large retailers are more susceptible to the backup because you’re talking larger quantities,” said Garry Bowie, owner of Toto’s Revenge on Second Street in Belmont Shore.
Bowie spent nine years with Target Stores as well as shorter stints with Toys “R’ Us and Fedco.
Large retailers run advertising campaigns that are planned only a few weeks out and are timed to coincide with the arrival of product.
If that product is delayed, it’s sometimes too late to cancel the ads, which is a huge problem if the product is a hot seller for Christmas, he said.
“The store can run a retraction saying there are distribution problems, or they can issue rain checks,” Bowier said. “Neither option is good.”
A smaller retailer, like Toto’s, will have finished its Christmas purchasing by July, about the time the ships began piling up outside the local ports.
“There’s an incentive for small retailers to do earlier buys,” he said.
Whether or not the armada of ships abates at the end of the year, however, it’s certainly grabbed people’s attention.
“You hear people saying, ‘I was driving on PCH and this is how many ships I saw,” Kyser said. “This is now a topic of conversation.”