Small Businesses

The supply chain crunch

  • 4 min Read
  • October 5, 2021

Author

Escalon

Table of Contents

If your company relies on supply from overseas or relies on any of the thousands of other companies that do, you’re well aware of the supply chain bottlenecks impacting the country. Unfortunately, it doesn’t look like supply chain issues will be letting up any time soon.

What’s causing these bottlenecks?

One big issue slowing down delivery in the U.S. is that the two biggest ports, Los Angeles and Long Beach, don’t see transport activity overnight or on Saturdays and are closed Sundays. With limited hours in the week, traffic backs up in the dockyard. And even if the yard were open 24 hours a day, an extension Long Beach is planning to try soon, the next issue is having enough labor to move the containers to their destinations. 

The truck appointment system was developed to help improve congestion in busy ports during peak pickup and delivery times. The port’s terminal operators determine how many trucks can enter at a time to help ease the flow of traffic. But with the massive trucking labor shortage, up to 1 in 3 truck appointments aren’t being kept. The problem has a domino effect. 

Containers back up in the port, preventing arriving ships from having a place to drop off. The freight trains that move up to 30% of these containers to distribution ports across the U.S. aren’t receiving the trucks they need to get the containers off their freight yards to the end user. And thousands of empty containers are taking up valuable space at the shipping yard due to a lack of trucks to return the empties. 

Scarce warehouse space also factors into the supply chain bottlenecks. With warehouse space becoming increasingly expensive and hard to find, some container owners leave their containers at the shipping yard. It’s cheaper to pay storage fees at the yard than to rent the warehouse space needed to unload the containers. 

Supply is increasingly unpredictable

With compounding problems slowing the transportation of shipping containers, stores are struggling to receive the supply they need. 

Stores like Home Depot, Ikea, Nike and Costco are all facing seriously low inventories going into Q4. Even as they pay higher and higher shipping costs, reliability is decreasing. In response, some of these companies are passing higher prices along to their customers, while others are absorbing the higher costs into their margins. Some companies are simply discontinuing the items with the greatest shipping delays. 

Potential solutions to the supply chain shortages

Big companies with healthy cash reserves and strong demand have resorted to chartering their own ships to help guarantee the delivery of their goods. Walmart and Home Depot, for example, have signed deals to secure their own cargo ships for the months to come. As a result, Walmart reports they are confident their inventory will remain strong for the holiday season, offsetting the extra costs associated with chartering. While this option allows companies greater control over their goods, it doesn’t do much to help the trucking and train labor shortages contributing to the bottlenecks.

Air cargo is also an option for companies, though it is significantly more expensive than using cargo ships. The air freight market is extremely tight, with demand greatly exceeding the capacity of existing cargo aircraft. Under normal circumstances, a large portion of air freighted goods are sent in the belly of regular passenger flights. But with frequent flight cancelations and delays due to the ever-changing COVID situation, a large portion of the air freight market is unpredictable. 

A third possible solution to help ease supply chain shortages is simply ordering ahead of time. Many companies are extending their lead times, building in 2-3 times the lead time they typically need. And for good reason, Nike executives report they now wait about 80 days to receive cargo that used to arrive in only 40. Increasing lead times protects companies’ inventory levels and ensures they have adequate labor scheduled to transport the goods once they arrive in the US. 

Key takeaway

Supply chain shortages are likely to persist into 2022 as pent-up consumer demand returns to normal levels. But, if trucking companies are able to add the workers they need to help ease the flow of container deliveries, and if retailers continue ordering from their suppliers with longer lead times, these bottlenecks might just release.

Talk to our team today to learn how Escalon can help take your company to the next level.

  • Expertise you can trust

    Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.

  • Quality and consistency

    Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.

  • Scalability and Flexibility

    Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.

Contact Us Today!

Tap into the latest insights from experts in your industry

Accounting & Finance

Outsourcing vs. In-House: A Strategic Guide for Growing Companies

Expanding your team and capabilities is critical to sustaining growth—but the question often arises: Should you build an in-house department...

Read More
Accounting & Finance

The CFO’s Role in Driving Operational Efficiency in a Mid-Sized Company 

A Chief Financial Officer (CFO) isn’t just a numbers person anymore. Modern CFOs play a pivotal role in shaping strategy,...

Read More
Technology & Security

What Every $10M+ Business Should Know About Data Privacy Laws 

Once your annual revenue surpasses $10 million, you attract more attention from regulators, partners, and customers, especially regarding data privacy....

Read More
People Management & HR

The Cost of a Bad Hire: How to Improve Your Recruiting Process

Hiring is one of the most pivotal processes in any organization, particularly for a medium-sized business looking to scale. Yet...

Read More
People Management & HR

Key Insights from the 2025 CBIZ Not-for-Profit Pulse Survey 

At Escalon, we are committed to keeping our clients informed about the latest trends, challenges, and opportunities across the industries...

Read More
People Management & HR

Scaling Culture: How to Keep Employees Engaged as Your Business Grows

Growth in headcount brings exciting opportunities for a business, but it also poses a key challenge: How do you maintain...

Read More
Accounting & Finance

Managing Multi-State Compliance as Your Workforce Becomes More Distributed

Rapid expansion and remote work trends have empowered medium-sized businesses to hire talent nationwide. Yet with multi-state operations come multi-layered...

Read More
Leadership & Growth

How to Build Leadership Pipelines to Sustain Growth 

Growth often hinges on capable leadership at every level. Yet many medium-sized businesses focus on filling immediate management vacancies rather...

Read More
uncategorized

How to Avoid Operational Bottlenecks When Scaling Beyond $10M ARR 

Reaching $10 million in Annual Recurring Revenue (ARR) is a major milestone, but scaling further brings new operational hurdles. From...

Read More