Shipper To Congress: Inflation 'Rampant' Through Supply Chain

Congress received an on-the-ground report from an industrial shipper on how rapid price increases for goods and services can be traced directly to bottlenecks in the supply chain.

Testifying before the Senate Commerce Committee on Thursday, William Taylor, CEO of Taylor Group, a heavy equipment manufacturer, told lawmakers that delays in inbound deliveries from freight carriers and rapidly increasing transportation rates have forced the company to boost prices he charges to customers.

"The supply chain is a disaster," said Taylor, whose family-owned, Louisville, Mississippi-based business, which generates $500 million annually in revenue, relies on road, rail, water and air transportation.

"This situation is causing inflation to run rampant throughout the supply chain. So far, we have kept our lines running but are facing 30% to 75% price increases from our vendors and transportation companies. The worst part is that we have orders, but we don't have confidence in our supply chains to meet the demand. The same story is playing out in thousands of manufacturers across America."

350% Container Rate Surge

Taylor said that average transportation rates for an ocean container has jumped from $4,000 to $18,000 due to low supply and high demand. To ensure that his manufacturing lines are supplied, his purchasing managers are seeking out alternatives like hot-shot delivery services and air transport instead of ocean — all of which cost more.

The shortages extend into the labor sector, he said. "Two large national trucking companies that support us have told us that they're trying to fill over 2,000 driver positions today," a situation that is due in part, according to his carriers, to unemployment subsidies that are keeping drivers from coming back to work.

The supply chain bottlenecks recounted by Taylor are most evident at the ports and are expected to get worse. "Cargo continues to move at a record pace. There's no lull in the action, no half-time intermissions," Port of Los Angeles Executive Director Gene Seroka told reporters this week, as the country's largest port heads into the next phase of the surge amid ongoing hurdles to cargo flows.

"On-dock rail time is running at about 12 days, not far from its peak in the spring. And with warehouses filled to the rafters, street dwell times ran as high as eight days in June. The bottom line is that the continued surge has strained all nodes of the U.S. supply chain and we must change these trends."

Taylor told the committee that despite the challenges, "my request is not to overreact with solutions that may cause unintended consequences. Rather, I encourage you to support a free-market system and allow it to do what it does best, and find solutions that are practical and driven by the private sector."

Government Proposals In The Works

The Biden administration and Democrats in Congress, however, are leaning toward regulatory and legislative action to deal with the problem. Last week the White House issued an executive order that directly targeted what it considers to be limited competition in the ocean and rail sectors.

The order calls on the Justice Department to help investigate and potentially fine ocean carriers that charge shippers unreasonable rates and fees. It also urges the Surface Transportation Board to take a closer look at rail mergers and resurrect rulemakings aimed at the invigorating rail-to-rail competition.

At the same time, lawmakers in the U.S. House of Representatives are crafting a bipartisan bill that would require ocean carriers to accept all U.S. export container bookings in an attempt to address container lines that rush empty containers back to Asia for refilling in the more lucrative U.S. import market.

Sen. Roger Wicker, R-Miss., who recruited Taylor to testify at the hearing, acknowledged that as global competition has increased, "control over our supply chains has fallen into the hands of fewer and fewer countries, most notably China," he said. "Such geographic concentration of supply chains has left many U.S. companies vulnerable to disruption — something we're now acutely experiencing."

Wicker and other Republicans are backing the United States Innovation and Competition Act, which passed the Senate with bipartisan support. The bill establishes a supply chain resiliency program and includes emergency funds for semiconductor manufacturers to help alleviate microchip shortages.

Related articles:

• Los Angeles port braces for Yantian catch-up, peak season combo
• FMC onboard for Biden's ocean carrier ‘crackdown'
• Congress drafting law barring ocean carriers from refusing US exports

Click for more FreightWaves articles by John Gallagher.

Image by 1778011 from Pixabay