Here’s what California could do to fix the supply chain


If you’ve never really thought about California ports or the global supply chain before last month, that’s okay. But they’re in trouble now, driven by the pandemic, and it’s causing a shortage of everything from computer chips to kitchen supplies.

California’s problem is also national: the ports of Los Angeles and Long Beach together carry 40% of all goods shipped to the United States by sea. So now everyone from port managers to President Biden is interested in fixing the situation.

The origin story of the backlog is complicated. At the start of the pandemic, factories had to shut down or reduce production. Shipping companies cut their hours, assuming people would buy less. Protective gear was sent to places around the world that don’t export a lot of goods, so some of those shipping containers weren’t returned.

Then people bought stuff – a lot of stuff. Warehouses struggled to hire enough workers to keep up with demand and they started to pull back, leaving containers full of new goods at ports, where they started creating traffic jams, professor Chris Tang said. at UCLA’s Anderson School of Management which studies supply chain issues.

This week, California lawmakers discussed with experts and stakeholders what the state could do in the short term to resolve the backlog and, in the longer term, to prevent similar safeguards in the future.

“I mean, the simple answer to this crisis is for people to stop buying stuff, but that’s not going to happen,” said Assembly Member Patrick O’Donnell, a Democrat whose district includes in both the ports of Los Angeles and Long Beach. “So we have to react, and we have to react quickly. ”

Already federal, state and local policymakers have taken action. On October 13, President Joe Biden announced that the Port of LA would operate 24 hours a day, a move after the Port of Long Beach also decided to extend its hours. A week later, Democratic Governor Gavin Newsom signed an executive order directing state agencies to search for land that can be used as temporary storage, identify freight routes that should be exempt from vehicle weight limits, and identify training partnerships with private industry for port and logistics. workers. In late October, the Federal Department of Transportation announced it would offer billions of dollars in loans to shore up California’s port and supply chain infrastructure. Locally, authorities allowed containers to be stacked four heights, instead of the usual two, and said companies would be fined for leaving containers too long in ports.

But, experts say, the backlog may not be resolved until next year. Meanwhile, loitering ships are causing pollution and businesses across the country are facing shortages.

“It has become clear that this is a multi-faceted problem and will require multi-faceted action,” O’Donnell said at the hearing. “There isn’t a single switch you can flip.”

So what can the State of California actually do to help?

Find a site that can temporarily store containers

Dee Dee Myers, director of the governor’s office for business and economic development, said the solution she heard most often was for the state to identify plots of land, inside or outside port complexes, which can be used as additional temporary storage for containers.

Myers said the agency now has a list of several dozen potential sites, although there are complications for each. The government has a Dec. 15 deadline to complete its investigation, although they can be done earlier, Myers added.

Using other locations as temporary storage is something private marine terminal operators have been doing for some time, says Robert Leachman, professor in UC Berkeley’s industrial relations and operations research program. It makes sense, he said, as a short-term solution.

But leaving cargo strewn across Southern California could create new issues, such as how best to retrieve it later and negotiate with opposing communities when a ton of large rigs arrive and depart. , said the experts.

Increase Truck Driving Workforce

Helping to save is a truck driver shortage. Truck drivers are independent contractors and are paid on delivery rather than on time, Leachman said. When they have to wait hours in ports to pick up their container, that means they are working more hours for the same net pay. Fewer drivers are ready to accept this deal.

There is also a shortage of warehouse workers. “The jobs are desperately unattractive, so we can’t recruit enough people to fill them,” Leachman said. He thinks salaries will have to increase to fill these positions.

California Transportation Secretary David Kim said he had met with the White House, the Governor’s Office for Economic and Business Development, the California Agency for Work and Workforce Development and the Ministry of Food and Agriculture to discuss recruitment and retention of drivers. The Federal Department of Transportation will also work with state DMVs to speed up the licensing process for truck drivers.

“Jobs are desperately unattractive, so we can’t find enough people to fill them. “

– Robert Leachman, Professor in the Industrial Relations and Operations Research Program at UC Berkeley

The state can work with universities and community colleges to provide technical training and build a pool of people prepared for trucking and logistics jobs, said Nick Vyas, professor at the Marshall School of Business at the University of Southern California. But in the longer term, if it’s difficult to get enough workers interested in these kinds of jobs, automation may be part of the solution, he said.

Tang agrees. In the short term, there is a huge need for truck drivers, but, says Tang, “I think the long-term outlook for truck drivers (is) not good.

Suspend regulations and laws

A coalition of more than a dozen business groups sent Newsom a letter asking it to suspend several regulations and laws to help resolve supply chain issues. Among their proposals:

  • Suspend a variety of environmental regulations and pollution laws;
  • Suspend the state’s landmark worker status law passed in 2019 that reclassified many independent contractors as employees;
  • Suspend a new law passed this year that requires warehouses to disclose to workers any quota or working speed standard.

A quick response came from Assembly Member Lorena Gonzalez, the San Diego Democrat who introduced the two workers’ laws. She underline whereas the law on independent contractors does not currently apply to truck drivers; a battle over an exemption for drivers is currently making its way through the court system. Additionally, the warehouse law is not expected to come into effect until January 2022, which has led Gonzalez to call the proposals “misleading.” She also said the shortage of truck drivers had been going on for decades, due to industry deregulation and declining working conditions.

“Instead of offering good faith proposals that address the underlying issues contributing to labor shortages and congestion in our ports, the industry-backed proposal is a thinly veiled attempt to reduce the costs on the backs of essential workers and bypassing future enforcement efforts, ”she said. wrote.

When asked if the administration would reconsider laws regulating warehouses, Myers offered no conclusive answer. “I think we’re ready to take a big look; I think there are some things that we will not be willing to change, ”she said. She also said the administration could relax regulations such as certain weight limits for trucks.

“The industry-backed proposal is a thinly veiled attempt to cut costs on the backs of essential workers and bypass future enforcement efforts.”

– congresswoman Lorena Gonzalez, D-San Diego

An inland port?

Another suggested longer-term solution was the creation of an inland port – sometimes referred to as a dry port – to function as a distribution point for inbound goods. Inland ports are connected to seaports by road or rail.

An inland port in the Central Valley would do wonders in terms of relieving bottlenecks and facilitating the movement of goods from ports in San Pedro Bay to northern and central California by truck or rail. Secretary of Transportation Kim said at the hearing. He said a proposal is currently being developed by the Fresno Council of Governments, which has secured a $ 1 million grant from the US Department of Transportation to study the idea.

This would alleviate some of the pressure in the water ports, Vyas said.

But Leachman doubts the value of a new inland port. This would require building additional terminals for cranes to unload containers, he said, which is costly. He thinks these investments could be better made elsewhere. If a new inland port was built somewhere in the middle of the state, like Fresno, it could mean a lot of extra miles for truckers. Most of the distribution facilities are in the Inland Empire and near the ports of Southern California.

“If you end up needing to go to these warehouses anyway, it’s kind of wasted miles, isn’t it?” You’re going to Fresno, they’re going to have to come back to Ontario or Pomona, ”Leachman said.

So what can the state really do?

Anyway, not much, said Vyas. California ports are just one point in a very long supply chain, which stretches from manufacturers around the world to consumers in small towns in the Midwest and large towns on the East Coast. The State of California government has limited influence over the international players involved and the millions of consumers in the United States who order goods. There are no quick fixes to increasing the warehouse and truck driver workforce.

But the issues might be fixed before too long anyway: Tang expects things to calm down by February or March 2022.


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