Marine terminal congestion has become one of the largest issues affecting aftermarket distributors today, especially for those shipping out from the West Coast. Each day, thousands of trucks come to terminal gates to load goods, placing massive demands on the current operating model that ports have in place. GFX recently had to announce price increases due to this issue — but why exactly is congestion raising the cost of goods?
What Causes Port Congestion?
To comment on the problem at hand, we must discuss the causes and effects of port congestion today. When terminals quickly fill to capacity, that means more ships (and the goods they carry) are waiting to dock. Trucks that need to transport containers of goods to and from ports need to wait longer to receive those goods or unload them. Those containers then need to wait on terminal property for longer periods of time than usual.
So, what is it that affects how quickly terminals fill to capacity?
While mega-ships are useful for carrying more goods, this also means that ports need to handle more containers altogether. If they have tons of mega-ships docking each day, the amount of cargo they can store quickly diminishes.
Many ports were not equipped to handle the major rise in imported goods that came about because of COVID-19. With so many more containers coming in, wait times for every part of the supply chain have inevitably risen.
The Impact of COVID-19
Cargo surges are one of the major causes of port congestion, which is exactly why COVID-19 comes into the picture. The pandemic has affected all major facets of our economy, including spending habits.
When the pandemic initially began in Wuhan, many factories in China had to close. As a result, there was a shortage of imported goods in the U.S.
Once COVID-19 reached U.S. shores, our economy took a major hit. While China was reopening its factories, many U.S. companies were not looking to buy.
As the U.S. economy began to reopen again, customers (both individuals and companies) began to purchase goods at an alarmingly high rate. Imagine the amount of stress this put on ports as new imports came rushing in. Terminals ran out of space to store vessels and containers coming off of ships.
Even after the holidays came and went, this surge was still there — and we are still dealing with this issue today.
How Does This Problem Impact Aftermarket Distributors Like GFX?
This issue heavily affects lead times. If a ship with important cargo cannot dock or unload on time, the truckers that need to transport these goods will also be late to receive them. As a result, shipment times are often later than usual. Many times, last minute changes must be made.
Suppliers are unable to maintain proper stock levels, meaning that distributors need to source outside of their regular supply chain. They also need to pay larger premiums to fill the pipeline and maintain customer satisfaction. For a certain amount of time, usually a couple of days, ports will store cargo for free. Once companies exceed that time, ports begin to charge fees, which begin to rack up.
Because of these issues, many aftermarket distributors needed to raise their prices to make up the additional costs. As we mentioned, on April 1st, GFX had to announce that prices were going up for transmission parts. Unfortunately, this decision has been a long time coming. While we tried to cover these costs for as long as possible, it was not sustainable to do so in the long run.
More port capacity cannot solve these congestion issues — which is exactly why many experts are advising ports to switch to best practices.
It is clear that current container operating models will need to change, but we will need to wait and see if they do.