The COVID-19 pandemic has laid bare a host of supply chain challenges, particularly in the US intermodal system. In 2022, the industry’s highest priority is to clear the current backlog as quickly as possible and restore more normal system velocity and fluidity.
This begs the question: Are pre-2020 supply chain designs are still suitable for 2022, or is an end-to-end reworking in order?
Consider chassis availability. Oliver Wyman research suggests the average time chassis spend on the street has as much as doubled since 2019, while intermodal shipping volumes are back to 2019 levels or higher. In more normal times, outsourcing chassis control to leasing companies and creating pools for common use has benefited the overall system.
But now that normalcy has been upended, none of the individual stakeholders — from railroads and container lines to third-party logistics, drayage, and chassis providers — has both the commercial incentive and the leverage needed to fix what’s broken.
Because the root cause of the current supply chain disaster in the US is a combination of labor shortages exacerbated by COVID-19 and terminal congestion, it cannot be solved simply by doubling the number of chassis. To clear the backlog, the industry must over-produce, or be permanently saddled with the pandemic’s legacy of high street inventory and slow turn times. This will add inordinate costs to the supply chain, costs that are then passed on to consumers, contributing to inflationary pressures.
Containers and especially chassis must turn more quickly to regain the system velocity we have previously achieved and improve from there. Skyrocketing demurrage and detention charges by themselves are failing to persuade shippers to move and release equipment.
The industry must come together and work as one to find solutions. That may involve identifying how the federal government could help, such as by temporarily suspending hours-of-service regulations, injecting emergency funds, or staffing critical bottlenecks. The alternative is to be left reacting to top-down government intervention, which rarely leads to an optimal outcome.