A monthly summary of important trends affecting supply chain, pricing and the PPE industry.
Ongoing Port Congestion
Importers seeking relief from bottlenecks at the West Coast ports are triggering new backlogs at the East Coast and Gulf Coast ports.
Volume on the West Coast has decreased by a third since January, however, the congestion has now shifted east. Backups of dozens of ships have formed off the ports in New York and New Jersey, Houston and Savannah, GA as companies are diverting shipments from the West Coast in an attempt to subvert the ongoing congestion there. The largest port on the East Coast, New York and New Jersey, is experiencing a backlog of over 20 vessels. The Savannah port, the second largest East Coast port, has a backlog of about 40 container vessels. This is about six times the number the port can accommodate. Houston Port, a growing destination for ships from Asia travelling through the Panama Canal, counted a backlog of 25 container ships last week. Import cargo is also sitting an average six to seven days there, double the usual time.
The surge in inbound cargo has also swamped landside operations, straining storage capacity and the availability of container handling equipment. In addition, it has posed new challenges for dockworkers and trucking companies to handle the shipments. Some container terminals are so crowded with cargo that truckers can’t access shipments. Ocean carriers are charging shippers late fees for failing to pick up loaded containers and return empty containers quickly enough.
Relief may be in sight though. Shipping officials anticipate a slowdown in cargo volume on the horizon. While late summer is typically a peak shipping season as retailers import goods for the fall and winter holidays, many companies ordered supplies from overseas early in 2022, fearing a repeat of last year’s port delays. Big retailers are now cutting back on orders after a slowdown in consumer spending left them overstocked.
Chinese New Year
Chinese New Year falls on January 22nd, 2023. Factories will be shut down for approximately 2 weeks throughout the country so employees can spend time with their families. Due to the long lead times and extreme port congestion, it is prudent to place your orders now so that purchase orders can be placed before the holiday.
Unprecedented flooding in Pakistan has killed more than 1,300 people and affected 33 million people since June. Flooding covers as much as one-third of the country in a disaster blamed on climate change. Record monsoon rains and glacier melt in Pakistan’s northern mountains created the disastrous conditions. Government relief efforts are overwhelmed, although international aid supplies are starting to enter the country.
The United States, the European Union and Britain have pledged millions of dollars in humanitarian assistance in the past week. The United Nations launched an emergency plan to deliver aid, but as the waters continue to sweep across the country, the areas in the greatest need are increasingly inaccessible.
Last week, the retaining wall on Pakistan’s largest lake burst after months of heavy rains. Hundreds of villages downstream from Lake Manchar are inundated, threatening to force over 100,000 residents from their homes. The Pakistani government engineered two intentional breaches of Lake Manchar’s retaining wall over the weekend in an attempt to ease pressure on the structure. However, the wall has reportedly started to crack as water levels continue to rise.
Vanguard Safety’s string knit gloves, produced in Pakistan, have not been affected by the recent floods.
Uyghur Forced Labor Prevention Act
The Uyghur Forced Labor Prevention Act (UFLPA) recently went into effect. In December of 2021, Congress overwhelmingly passed the UFLPA with bipartisan support. The UFLPA prevents goods produced in the Xinjiang Uyghur Autonomous Region (XUAR) of China from entering the United States. The XUAR region is known for widespread and state-sponsored forced labor. It is important to note that none of Vanguard Safety's products are affected by these labor issues.
According to the new guidelines, “any goods, wares, articles and merchandise mined, produced or manufactured wholly or in part” in the XUAR should be assumed to be the product of forced labor unless proven otherwise by “clear and convincing evidence.” This means that all goods are effectively barred from entering the United States under Section 307 of the Tariff Act of 1930.
The U.S. Forced Labor Enforcement Task Force, established by the United States-Mexico-Canada Free Trade Agreement (USMCA), has developed a strategy to prevent the import of goods from the XUAR, as well as issued guidance for importers. The guidance provides detailed instructions to businesses on how to conduct human rights due diligence and supply chain tracing sufficient enough to prove that their goods were not sourced or produced in the XUAR.
While only about 0.01% of all goods imported to the United States come directly from the XUAR, raw materials and components from the region are integrated into dozens of product categories produced in other regions of China. About one-fifth of the world’s cotton is produced in the XUAR.
Rail Service Improvements
Union Pacific reported improved service after months of congestion created by a mix of labor constraints and high demand.
In an August 26 filing, Union Pacific announced that train velocity improved by 8% since mid-April. The number of trains held for crew shortages declined from an average of 51 per day in mid-April to 16 per day in mid-August.
Union Pacific added 3,000 of its own cars back into service to support demand. It’s also making concerted efforts to maximize train lengths and improve crew utilization. They also took aggressive measures limiting the number of privately-owned cars on its tracks, a move that some shippers contended only worsened delays in some industry sectors.
Union Jack also reported that it has made headway on addressing labor constraints. The railroad is on track to hire and train 1,400 employees by the end of the year.
How Is Vanguard Safety Working Through these Challenges?
We constantly monitor the ever-changing supply industry to mitigate the impact to our customers by:
- Increasing Safety Stock – We have adjusted our forecasting and planning to carry more safety stock, ensuring we can continue to be a reliable partner for our customers.
- New Distribution Centers – We opened our newest Vanguard Safety warehouse in California! Located at 10395 Nobel Ct. in Jurupa Valley, CA, this new DC will increase our stock levels and service our customers faster. We are also working on adding two more DCs this year, stay tuned for more information.
- Forecasting – We are planning ahead and working off of forecasts provided by our customers to ensure that we are able to consistently supply high quality PPE. We are 100% committed to providing support to our partners.
- Continued Growth – Vanguard Safety is growing fast! We continue to invest in our growing team to support you. We continue to hire integrally important people to our roster to better serve our customers.