With the holiday season approaching—and bundles upon bundles of presents—the United States’ continuing supply chain crisis portends empty shopping shelves and delayed gift-giving. American goods, waiting days on container ships to unload at the Los Angeles and Long Beach ports (where the majority of imports are received), are reaching the market at increasingly slower rates, unearthing decade-long flaws in the US supply chain. 

So, where did it all start? In simple terms: the Pandemic. In the pre-Covid world, firms focused on maximizing production and minimizing inventory—meaning, operating at a plant capacity with no excess products waiting in storage and no unused machinery. However, with the pandemic came a dramatic change in production and demand.

In China—a major source of labor and materials—factories closed to limit virus spread and the numbers of workers reduced due to quarantine. Compounded with rising demand in American households, firms were unable to supply the optimal market quantity demanded, leading to shortages, then increasing prices, then dreaded inflation. 

And, then there’s the ports. Large containers remain unloaded at shipping docks, hindering the efficient flow of goods from ports to warehouses to markets. Labor shortages are a root cause of this back-up. During the pandemic, laying off workers intrinsic to the supply chain—line operators, truck drivers, crane operators— decreased the productivity of manufacturing, transportation, and ports. Moreover, storage capacity issues at warehouses have incentivized firms to use ports as free storage, letting their inventory sit unloaded and take the spot of other shipping containers still waiting for land-fall. 

We’re left with this question: how do we solve this? Recently, companies have increased capacity, expanding rail yards, investment in factories, and shipping container fleets. Still, like most long-run production problems, it takes time. And, for the upcoming holidays, stockouts are looming on the horizon. Best get shopping done early.