Committed to Consumption: Can Improvements to Supply Chain Flaws Meet 21st Century Needs?
Janet Pucino, Technology Advisor
Recently, Tony Crisafulli, a colleague of mine, posted his analysis of the container shipping cycle index and noted that U.S. government policy response to the pandemic was a likely cause for a historically unprecedented demand for goods from U.S. consumers. Now that the fiscal policies are coming to an end, his prediction, rationally so at the macro level, is that demand will decrease, which in turn will alleviate congestion at the ports.
As of early January 2022, over 100 ships were still awaiting a berth at a Southern California port, even though import volume fell around 14% as reported by Paul Berger of the Wall Street Journal. Primarily, the logistics of moving goods to their final destination, as well as moving the empty containers back to their origin, remains a persistent issue stifling global economies.
Consumers are still consuming goods at unprecedented rates. The more goods humans consume, the faster those containers need to be returned to suppliers to refill them with goods in a perpetual fulfillment cycle. The process seems straightforward, except for a few major flaws. The underlying supply chain ecosystem that has supported the world’s demand for goods and associated import and export economies for the last two centuries, no longer aligns with 21st century human behavior. Consumers have been persuaded that digital experiences, namely online shopping, can satisfy their needs and demands for immediacy, particularly in the U.S., and that ongoing consumption will contribute to their happiness, or allay their fears. While, at the same time, trade, agriculture, and manufacturing policies pushed so much development out of our country that control of source materials needed to make goods and feed the nation was passed on to others’ hands, without any thought to the detriments of “single-sourcing.”
Ocean transport
Carriers and shippers continue to look toward capacity expansion as a way to solve the shipping demand side and speed up the shipping cycle. The pandemic and ensuing break down of the supply chain proved to be a profit boon for most of them, and many are using those profits to expand their services. According to a report from Alcott Global, the top five largest global container shipping companies which included Maersk, MSC, CMA, Cosco Shipping, and Hapag-Lloyd, announced they have already ordered 2.8 million TEUs (twenty foot equivalent units) to supplement their current fleets. The top ten global container companies plan to supplement their current fleets with an aggregate increase of 4.3 million TEUs.(1)
However, increasing capacity to manage larger volumes requires additional labor at the ports, on the roads, and in the warehouses to deliver goods to their final destination. The unintended consequence of a rapid capacity expansion is that labor shortages are exasperated at every step in the global supply chain, particularly during the pandemic when hiring, retention and churn have been extreme pain points for all employers. Tweaking one segment of the supply chain during this time has significant effects on every industry that supports the process, as well as the physical transportation infrastructure that is needed to bring goods to their final destination. Atlanta, Georgia residents already see negative consequences from increased truck traffic driving through their neighborhoods. Those areas do not have roadways and traffic management in place to cope with more last mile deliveries from shipments coming from the port of Savannah, which is in the process of expediting multi-million dollar upgrades to its births, storage acreage and rail lines.
What about rail?
Rail can be a practical alternative for intermodal shipments that are currently transported by trucks. However, rail expansion projects face challenges on a number of fronts, but time-to-build the infrastructure remains one of the primary concerns. There are others. The port of Savannah for example, recently completed nine new rail tracks and expects to increase container capacity on those lines by 30%.(2) It is too soon to see whether highways, roads and communities around Atlanta will be ready to accommodate even more last mile deliveries as a result of the rail expansion, but no doubt city and state transportation departments will need to coordinate infrastructure upgrades across their state to produce desired results. In California, the port of Long Beach completed its rail yard expansion at the end of 2021 which boosted on dock capacity by 35%.(3) A large portion of those containers are routed through downtown Los Angeles. Per a Los Angeles Times report in January, up to 90 cargo containers carried by Union Pacific are looted each day as they idle in the rail yards awaiting truckers to carry goods to warehouses or their final destination.(4) The remnants of the packaging are randomly scattered on the tracks leaving an ocean of debris. This is certainly not an expected outcome, but one that requires another solution to expedite shipments to consumers via rail. All of this adds exorbitant costs to retail and manufacturing companies, which in turn is passed onto consumers.
Human Behavior
The carriers, shippers, port authorities, rail lines, truckers, and everyone else in the chain, have brilliantly battled the supply chain and logistics flaws. Each sector brought its best minds and resources to the table to build solutions. But I can’t help but think about how much human behavior factors into the supply chain crises. Expanding infrastructure and capacity across the chain to meet increasing demand will not be solved in the short term and may not even be scalable to consumption rates we haven’t imagined yet.
Why do humans consume so much in the first place? Lizabeth Cohen, a Harvard Professor of American history, estimates that 70% of U.S. GDP is dependent on people making purchases, which in turn “fuels the economy”. Historically, we adopted mass consumption as a means to stimulate the U.S. economy after World War II.(5) Now it seems, we have crossed the threshold into an era of insatiable consumption. Even with inflation at its highest point since the 1980’s, people continue to consume what they can, wherever they can.
What are humans doing with all those goods? We accumulate most of what we buy as evidenced by the U.S. storage industry. In 2021, the storage sector valuation neared $40 billion(6) and that number is expected to reach $115 billion by 2025.(7) What U.S. consumers do with their clothing purchases are even more astonishing. Calpirg (California Public Interest Research Group) estimates the average American throws away about 81 pounds of clothes every year. (8) Reports on this trend illustrate that on an average, each item of clothing is worn only seven times before it’s discarded. (9)
If we’re driven to consume beyond what is necessary to meet our needs, there must be an underlying motivation to do so. I randomly surveyed friends and family and asked what motivates them to buy things. Their responses included feeling better about themselves when they buy clothing or shoes, pleasure, instant gratification, being in competition with others to have the latest tech gadgets, maintaining a public image, rewarding oneself and others, and fear. It’s not just the FOMO (fear of missing out) of a purchase, but fear for their safety in the case of self-protection from aggression and crime, and also fear of not having basic necessities if goods become unavailable. In addition to being flush with cash from government stimulus, the fear factor has been hyped as the fundamental reason people increased the purchase of goods during the pandemic. One friend saw similarities between people’s purchasing behavior during the pandemic with how his aunts and uncles stockpiled goods in their basement after the Great Depression – which they did for the remainder of their life. Their psyches were changed forever by their personal experiences. There were no social media influencers back then.
Many of the current reasons for consuming that were kindly offered by friends and family, however, were tied to the tsunami of daily marketing campaigns, ads, and messages we all experience on every social media platform, email service, entertainment, or news outlet. These messages are constantly competing for our attention, and they ultimately drive our behavior. The pandemic no doubt, has fueled a deeper need to hunker down with our purchases, but there is much to be done to re-program human brains to develop skills, talents, experiences, and relationships rather than fueling insatiable consumption.
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1 “Top 10 world’s largest container shipping companies in January 2022 vs April 2021”
2 Nancy Guan, Savannah Morning News, November 15, 2021
3 Bill Mongelluzzo, Senior Editor, JOC.com, November 21, 2021
4 “Thieves target cargo trains in L.A.” LA Times, January 16, 2022
5 “Why Americans buy so much stuff: A short history”, Mary Louise Kelly, Elena Burnett, Courtney Dorning, December 2021
6 Getonedesk.com/storage-statistics 2021
7 “Self-Storage Market Has Flourished in the Last Decade,” Globest.com, Kelsi Maree Borland, October 6, 2020
8 “The Fashion Industry Waste Is Drastically Contributing To Climate Change,” Calpirg.Org, March 9, 2021
9 “Fast fashion in the U.S. is fueling an environmental disaster in Ghana”, CBSnews.com, September 18, 2021
Photos from iStock.com
Janet Pucino is an experienced Information Technology (IT) advisor, leadership specialist and author. She has held numerous senior level positions throughout her 30-year technology career and developed a keen focus for optimizing IT investments and leading organizations through change. She holds an MBA from the University of Chicago Booth School of Business and an undergraduate degree from Northern Illinois University. Janet is passionate about leadership development within organizations, particularly for women, and served multiple terms as a member of the Leadership committees for the University of Chicago Booth Advisory Council and Northern Illinois University Foundation Board of Directors. Janet’s leadership and industry experience includes:
CIO, Vanguard Logistics – Global Ocean Logistics company specializing in LCL shipments
CIO, Prolacta Bioscience – Bioscience company specializing in nutritional products for neonatal ICUs
CEO, Deep Canyon Media – Consulting firm specializing in leadership development and CIO services
IT Governance Officer, VP Office of the CIO, VP Worldwide Application Development and Director of Enterprise Architecture and Planning, Warner Bros. Entertainment Inc. – A leading global film, television, and animation entertainment company
CTO, Art Center College of Design – Renowned transdisciplinary design college specializing in transportation, product, graphic, and digital design