Supply Chain Kinks May Grinch the Holidays

October isn’t normally considered the hub of the Christmas shopping season.

That’s what Black Friday signaled, in the "Before Times."

This year, however, supply chain issues threaten to grinch the 2021 holidays. It may prove wise to order gifts now rather than wait until the last minute –because those last-minute orders may very well not arrive in time.

Not just to your home, but to the United States.

And You Thought Boston Traffic Was Bad?

Each year, approximately $1 trillion worth of toys, electronics, clothing, and other favorite holiday items enter the U.S. from Asia.

This year, the supply chain is severely clogged, and the odds of straightening it out anytime soon are not looking good.

COVID-19 unleashed a perfect storm of consumer demand. Disposable income spent on dining out and entertainment segued into purchases of more tangible goods. Demand for imported bicycles, exercise equipment, electronics –you know the drill –skyrocketed. A supply chain wracked by a virus found demand higher than ever.

In late September, 73 container ships were anchored off the southern California coast, waiting to unload at the Port of Los Angeles or the Port of Long Beach. The two ports combined handle 36 percent of U.S. imports.

Lack of Truckers

Once the freight is finally unloaded, another issue arises. As with many industries, the ports are facing a severe worker shortage. Truck driving positions have been especially hard to fill.

Before the pandemic, cargo that was supposed to travel by truck to rail lines – there are no adjacent rail yards to the ports in Southern California –sat on the dock for two days. Now, that cargo sits there for more than a week.

A year ago, the ports had to open overflow lots to store the thousands of backlogged containers. The situation remains the same.

A Costly Clog

Shipping costs have risen astronomically in the age of COVID-19. As of September, the median cost of shipping a container from China to the Ports of Los Angeles or Long Beach was $20,586. Just two months earlier, the price was half that.

While giants such as Amazon or Walmart can absorb these huge price increases, that’s not the case with many smaller companies. Of course, the giants have negotiated better contracts, so their orders are more likely to arrive in a timely manner than smaller enterprises.

Target has decided to charter its own container ships, as has Costco, Walmart, and Home Depot. That may help these companies avoid delays, but backed-up ports are still an issue.

The Bottom Line

If you're hoping to get your kids/grandkids the hottest toy of the season, you might want to start your holiday shopping now. Many retailers are concerned about the shortage of inventory, and demand/prices for the hot gifts this year will be decidedly higher.

Certain gifts will arrive on time - that’s true of gift cards, subscriptions, or virtual lessons (and you can always shop local retailers or craft shows to find those special not-so-commercial gifts).

In these strange times, it’s critical to appreciate the truly important things in life. You know the best ways to convey that message to your friends and loved ones.