The Disruption Report #10: Slow going as pallets become scarce and containers keep falling overboard

Pallet Shortage

Who thinks about pallets? They’re just ugly, utilitarian pieces of nailed-together wood. Well, it looks like we have to start thinking about them now.

Consider this headline from Bloomberg Business Week: “The Forgotten Shipping Pallet Stages a Pandemic-Era Rally.” Here is how the article’s author, Brendan Murray, puts it:

Demand for the platforms used to haul nearly every consumer good or industrial ingredient is soaring amid a surge in e-commerce, forcing retailers and manufacturers to expand warehouses or pile inventories higher. At the same time, two keys to production — cheap lumber and labor — are scarce, and even nail costs are rising. The result: Pallet prices have hit record highs

Long Lines at Register Checkouts Lead to Consumers Abandoning Shopping Carts

As a friend of mine once said as we waited in a long line to check out: “Why are they making me wait to give them my money?” That’s a good question and one that is particularly apropos at this moment in time.

Consider this headline from CSA: Survey: Long wait lines in stores amid pandemic may cost retailers $100 billion.” As the article puts it:

The survey found that millennial and Gen Z consumers, and those from higher household income groups, were at least twice as likely to avoid entering stores and to walk out of stores without service before the pandemic, and slightly more likely during the pandemic.

This is, of course, bad news for the beleaguered bricks-and-mortar retail industry. Just when they want people to enjoy returning to the store, they create an environment that is less than conducive to turning off the Internet and returning to in-person shopping.

What is causing the long lines? From what I am seeing and hearing, the frustration results from reduced staff coupled with increased demand. While waiting in a long line to pick up a prescription at my local chain drug store, I noticed only one clerk handling transactions. I asked the pharmacist if she could call up more staff, and she told me that the company had mandated staff cuts. As she put it: “Just at the worst time and it’s going to get worse.”

More Containers Are Toppling Overboard

In Disruption Report #8, I wrote about the surprising number of containers that were falling overboard. It seems that the new super-sized container ships have two problems: Containers are stacked 200 feet high, and the ships do not handle turbulence as well as the older vessels.

Things are not getting any better. That’s according to a Bloomberg article, “Shipping Containers Fall Overboard at Fastest Rate in Seven Years.”

How bad is the problem? Author Ann Koh writes:

The shipping industry is seeing the biggest spike in lost containers in seven years. More than 3,000 boxes dropped into the sea last year, and more than 1,000 have fallen overboard so far in 2021. The accidents are disrupting supply chains for hundreds of U.S. retailers and manufacturers such as Amazon and Tesla.

Shipping lines are under enormous pressure to get badly needed products to market. As Koh puts it:

The need for speed is creating precarious conditions that can quickly bring disaster, according to shipping experts. The dangers range from stevedores incorrectly locking boxes on top of one another to captains not deviating from a storm to save on fuel and time as they face pressure from charterers, they said. One wrong move can put cargoes and crew at risk.

Container Shipping Companies Are Having a Great Year

Who is benefitting from the logistics mayhem? It’s the container shipping companies. According to Christian Weinberg in his article, “Maersk Raises Guidance Citing Exceptionally Strong Demand:”

A.P. Moller-Maersk A/S, the world’s largest shipping line, almost doubled its profit forecast for this year, citing an “exceptional” environment characterized by “surging” demand for its services.

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