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Supply Chain Weekly Wrap-Up 06/10/2022-06/16/2022

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Biden pushes for shipping reform amid rising costs

During his visit to the Port of Los Angeles, President Joe Biden called for the Ocean Shipping Reform Act of 2022 to be passed to tackle high shipping costs. In his speech, he said “the rip-off is over”, sending a warning to the nine top ocean carriers that are raising their prices and making billions of dollars in profit amid supply chain issues.

The Reform Act is an aspect of the administration’s plan to address the severe consumer price inflation which has reached the highest level for 40 years. It would give the Federal Maritime Commission the power to investigate ocean carriers’ business practices as well as helping shippers seek financial aid if needed. Hal Lawton, president and CEO of Tractor Supply Company explained: “We were paying $3,500 a container in 2020. Then by September, October of last year, we were paying upwards of $20,000 to $25,000.”

The Biden Administration have taken a number of steps to alleviate supply chain pressures in recent times, including boosting the number of truck drivers and introducing new apprenticeship programs to help combat labor shortages. He noted that “we had record-setting employment in trucking earlier this year,” he said. Biden blamed the Russian invasion of Ukraine as a main driver of inflation which has caused price hikes and troubles for supply chains.

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Sriracha sauce maker warns of looming summer shortages

Hot-sauce lovers will be disappointed to learn that a sriracha shortage is on the cards for the summer months. The Californian maker of the spicy condiment made from sun-ripened chilies, Huy Fong Foods Inc., has warned of a shortage of its products. Unlike some of the recent supply chain shortages, including baby formula and semiconductors, this shortage is weather-related.

For consumers, the theme of product shortages is common since the pandemic began, due to a lack of components and surging prices of raw materials amongst other factors. Restaurants in the United States have warned their consumers about the oncoming shortage since it is essential for many dishes. The sriracha shortage is due to droughts in the U.S. which have caused officials to order water cuts for agriculture, consumers and businesses. The spring weather is also to blame.

Stephanie Walker, a chili specialist at the Chile Pepper Institute at New Mexico State University, said less water and more heat can cause problems for crops, especially chilies at the seedling stage, where they can die. “Drought is absolutely a concern” she said, and “climate is completely intertwined with vegetable production.”

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South Korean strikes that caused supply chain disruption have come to an end

After a week-long strike in South Korea, the government has struck a deal with truckers to extend a minimum wage plan called the Safe Rates System, providing some hope for the recovery of supply chains. The strike lasted for eight days in total, and during this time, cargo shipments and deliveries were delayed. The approximate cost of the strike action to industries including steel, automobiles and petrochemicals amounted to around $1.2 billion.

In the deal that has been reached, the transport ministry will extend the minimum wage plan that was due to expire at the end of 2022. The truckers were also striking because of rising diesel prices, which have increased by around 50% over the past year. Lee Ho-sin, a truck driver in the city of Incheon, has been in the industry for 40 years. He said that rising fuel prices and inflation have significantly raised the costs of operating and maintaining vehicles and reduced incomes.

The transport ministry said that it will be working quickly to repair the country’s logistics system, after around 450,000 tons of steel deliveries and the production of 5,400 vehicles were disrupted. The country’s business groups welcomed truckers’ decisions to return to work but also expressed concern about the continuation of the Safe Rates System as some believe that it threatens the nation’s international competitiveness.

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