Sandi Siegel has had a pretty good seat for the chaos taking place in global supply chains. She’s the president of M.E. Dey & Co., a freight forwarder and customs broker, which means she’s regularly working with her team to move freight, figure out which methods of transportation to use and how to route it to its final destination.
M.E. Dey works with importers and exporters, and, besides arranging for the movement of cargo, the Milwaukee-based company also deals with compliance and customs issues.
This fall, when supply chain issues broke through into mainstream news with images of ships waiting outside of ports in Los Angeles and Long Beach, it actually made the work a little easier as customers better appreciated the scale of the ongoing chaos.
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Even once supply chain issues became a national story, Siegel said people she knows would ask if it was just about microchips or offer their own theory about why the country was facing logistics issues.
“The most misunderstood issue is it’s not one single thing, and there’s not one solution,” Siegel said.
She will be among the speakers at the BizTimes Media Economic Trends event on Jan. 27 at the Italian Community Center. The event is sponsored by Annex Wealth Management and BMO Harris Bank.
Some people will blame the issues on a shortage of truckers. There is a shortage, but even if the number of drivers doubled, there would still be a shortage of chassis to put containers on, Siegel said. Even if the chassis problem were solved, ports are backlogged because of labor issues and infrastructure challenges. Ships are waiting to get into ports, so their empty containers are not making it back to Asia in high enough numbers to keep up.
“There’s so many parts of it and it’s so interwoven that there are a lot of things that have to change,” Siegel said.
She said there are two main drivers of supply chain issues currently: Demand outweighs supply because buying habits have changed, and COVID continues to impact the workforce at ports and suppliers.
“If COVID were more under control … then our buying patterns might change, right? Then we’re going to go back to going on vacation and doing some of these things and buy a little less (consumer goods),” Siegel said.
The challenges for the supply chain system are substantial. Daily import shipments have reached all-time highs and are up 40% from where they were two years ago, Siegel said. There were 91 ships waiting to get into the ports of L.A. and Long Beach at the end of the year, and the spot rate for ocean containers from Asia to the West Coast has been five to 10 times what it was for the past decade.
“Everybody expects rates to remain escalated well through second quarter 2022,” Siegel said. “Where they are after this is somewhat unknown.”
She said variables like the spread of COVID and trade negotiations will shape how things play out.
Another issue is ocean carriers increasingly looking to negotiate directly with the owners of cargo instead of working with freight forwarders, Siegel said. Many are looking to lock those cargo owners in at set pricing for two years instead of the standard one-year contract to take advantage of uncertainty.
“Are you locking in at a good rate or is the market going to drop all of a sudden in six months? That’s the unknown,” Siegel said.
One result of that trend might be freight forwarders having less space available to offer to their clients.
For businesses in southeastern Wisconsin, Siegel said relationships with providers will be more important than in the past.
“Everybody has more business than they can handle, so what happens? You pick and choose who you’re going to work with,” she said. “If you weren’t in the habit of quarterly or routine meetings with your carriers, your freight forwarders, do that now – not only to kind of position yourself, but also to understand the details. The details matter more now than ever.”
Siegel said that while there is chaos everywhere, the level of congestion or delay can be “extraordinarily different” from port to port or even at different terminals within a port.
“You really need to drill down and look at all of your routing options and transportation options down to the detail and look at them holistically,” she said.
If a ship waiting to unload in L.A. is going to add three weeks of transit time, it might make more sense to bring cargo in through the Port of Tacoma in Washington, even if it is a little more expensive. Siegel also pointed out the situation is fluid.
“Tacoma might be a better option today, but not in three weeks from now,” she said.
Siegel said it might also make more sense to take cargo to a warehouse on the West Coast, unload it and then put it on a truck to drive it to a destination instead of trying to get it to Chicago by rail.
“It’s expensive, but not when you compare it to something that’s sitting at the rail yard for one or two months,” she said. “You have to really challenge yourself to rethink some things that we’ve all relied on for so many years.”