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Supply Chain Issues that No One is Talking About in America

Everyone sees the fuel costs and the grocery store costs jumping to levels never seen in this country before, especially when taken together and not due to a natural disaster. We have all experienced shortages due to localized supply chain interruptions from hurricanes, cyberattacks or flooding. This is different.

This is not short term; it definitely is not localized. So, what is it that no one is talking about?

Well, we know as of the writing of this article that China and more precisely the Chinese leader Xi has a Zero covid policy. The zero covid policy has 400 million people in 46 major metropolitan areas in some form of a lockdown. Some of these lockdowns are extreme enough to have people literally starving in their homes as chain link fences have been erected and armed soldiers patrol the streets.

Think about this, 400 million people in China are on lockdown, that is more than the entire population of these United States by 25%. Remember our lockdowns? Most states allowed you to move about for necessary items, yes this was unconstitutional and an absolute overreach by all levels of government but nonetheless we maintained the ability to go to the grocery stores, the pharmacy and other stores. In China this is not allowed.

So what does this mean for us? Let us just look at the trucking industry vertical in this example.

In October 2019 these United States had 3.5 million truck drivers. In 2021 we were short 80,500 truck drivers and in 2022 that is at 90,000 and 97,000 by 2023 as estimated by the government. In 2017 the American Truckers Association stated that by 2030 the industry needed to hire
900,000 drivers to keep up with attrition and demand.

The government is estimating 180,000 truckers needed by 2030 and the industry is stating 900,000. So can we just call it 500,000 and split the difference? The issue continues to get worse as the years pass per the trucking industry. Now, this does not take into account increased demands for goods, increases in population or any other factors. Of course, the greatest loss of truckers and thus the greatest need for truckers, is in the long haul or OTR (over the road) class of drivers.

Long haul trucks put an average of 100,000 miles per year on their trucks. The maintenance, just preventive maintenance, is crucial to keeping the truck viable and on the road. Preventive maintenance literally prevents a catastrophic failure of the vehicle and maintains the safety of the truck as it navigates our highways, roads and interstates.

Let’s combine a few factors here to pull this together. China has shut down a full 48% of its manufacturing capacity in the last 22 days due to Xi’s Zero covid policy. These United States import a full 42% of all goods imported from China, which has cut manufacturing by 48%. That means these United States will go from 42% of goods imported to 24% of goods imported.

Follow this… The Chinese lockdowns are 22 days old. It takes, using statistical averages, 17 days for a manufactured Chinese product to get from the point of manufacture to a Chinese port. It takes 27 days to cross the Pacific Ocean on a ship. It takes 14 days from a US port to a store shelf. So, for the sake of simplicity let’s call it 60 days.

We are 22 days in. That leaves us 28 days before we begin to see the effects on our shelves here in these United States. This begs the question, what if China just stops the lockdowns?

Well, restarting a factory, performing maintenance on the physical facilities, the machinery, getting the truckers back, the trucks moved to locations to  begin accepting freight… none of this occurs overnight. Most estimates are that from a cold start it is 2 to 4 months to become fully operational again. This means if China were to end the lockdowns today we would have an estimated 5 to 6 months to begin receiving that missing 48% of products again.

Here is another part of the equation. We are already short truckers, but where do we get parts for our trucks? Hoses, belts, filters, chips, water pumps, fuel pumps? The vast majority comes from China. When a truck has a mechanical issue, what if it cannot get parts in a timely manner? That will deadline more trucks and more trucks as the supply chain for parts continues to become increasingly stressed.

The growing stresses applied to the drivers and their vehicles due to the existing supply chain issues, the increase in fuel and now a supply chain that is going to get worse only means a long road ahead. This industry that is the true backbone of these United States supply chain is about to get another heavy load placed upon its shoulders, and we all had better hope they can carry that load.

 

 

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