Unintended Consequences

Joe Doakes from Como Park emails:

This article claims the reason for container ship backlog is not a labor shortage, it’s a second-order effect of a California environmental regulation. Seems California will only allow certain low-emission vehicles in the dock area to cut back on air pollution, and there aren’t enough qualifying vehicles to meet the demand to unload the ships.

I have no idea if it’s true. But it sounds plausible, right in line with proposals to ban lawnmowers and cow farts, to derive the energy to charge electric vehicles from wind and sun without a single thought of what happens to civilization when that plan doesn’t work. SITD readers understand second-order effects; California officials, not so much.

I’m not worried, though. Mayor Pete will be back soon. Should be fixed in a jiffy.

Joe Doakes

Seems plausible – I’d be looking for some corroboration, but then so is Joe – but I suspect it’s a perfect storm of side effects from poorly conceived regulations.

Another one that I’ve heard blamed: California ports don’t allow trucks run by independent owner operators; they have to be unionized haulers. Who are a small minority of the nations trucking industry.

41 thoughts on “Unintended Consequences

  1. If true — isn’t this a a perfect example of a crisis where the federal government needs to step in?
    Gosh, I wish we had a transportation secretary who wasn’t on maternity leave, or at least an interim appointee in his office.
    Basic competence in traditional goverment operations is something we have learned that cannot expect from the Biden administration.
    And it ain’t going to get better.

  2. First of all, now that a whole bunch of amateurs are interested in logistics and shipping, one can expect a whole lot of misinformation. The fact of the matter is that international logistics is an incredibly complicated topic and people touting one size fits all explanations or solutions are not helping.

    “Success has many fathers, but failure is an orphan” In point of fact, this situation has many fathers. The one mentioned in the linked to post is quite reasonable apart from its implied whoop-de-presto magical solution perspective. The second, about unions and trucking, misunderstands that there are in-port draymen (truckers) who move containers around and off-the-port truckers who take them containers away. The former are required to be of the union, the latter are not.

    A third aspect regarding the trucking industry is that most drivers are older fellas who want to retire and younger people are not filling in those ranks. There are many reasons for this too.

    The granddaddy of all the problems, however, is the 40 year obsession to move all manufacturing to China. There’s a guy on Twitter (@man_integrated) who discusses almost nothing on his feed except logistics and he was hitting the alarm button already a couple of years ago. First of all, moving all manufacturing to China created a asymmetric flow of goods (in containers) because shippers don’t want to ship empty containers and what exactly do we manufacture that China wants?

  3. “and what exactly do we manufacture that China wants?

    coal, we could fill the containers with coal, the Chinese want lots of that

  4. Thanks, jdm, your explanation helps me understand the problem. The container remark rings true – I found a storage facility in Wisconsin that uses cast-off containers sitting in a field, much cheaper than building a fancy steel building.

    Sadly, I can’t see a quick-and-easy solution. Sounds as if bringing manufacturing home would help (hey, another Trump initiative) but that’s a long process. Maybe Mother Pete is right after all: there’s nothing he can do about it so why not take some personal time?

  5. Pig, c’mon, man, we’ve been hindering, preventing, or just stopping the mining of that evil stuff for export and profit or even use years ago. Wind turbines, solar cells, and unicorn farts are all anyone needs for energy production.

    BTW, King Banaian has something to say about shipping, Confronting the Supply Chain Crisis.

  6. This is one place where I part ways from a lot of conservatives. We spend hundreds of billions of dollars each year to keep the sea lanes open, but collect little in import duties and tariffs–about $40 billion annually. We are in effect subsidizing the competition for our manufacturers.

    The fix is easy; 10% revenue tariff with a massive cut in income taxes to make it “net zero”. Most likely, we’d get less goods coming in on the Maersk and other lines, and the ports/truckers/railroads would be more able to handle the load. There is a reason the Founders specifically prohibited direct taxes like the income tax, and limited taxes to indirect taxes like duties, imposts, and excises.

  7. Other issues leading to the current problem:

    1 – Consolidation of in-bound freight to LA/LB ports – Because modern container ships have continued to grow, they are now so large that only a handful of US ports have water deep enough, cranes tall enough and piers long enough to accommodate them. In a normal world, other ports would be dredging and building to provide an outlet, but the environmental crowd has an effective choke-hold on such projects so the other ports in the US see only the smaller carriers resulting in congestion at those facilities with sufficient size. I believe there are fewer than 12 ports in the US able to receive the current top-line container vessels.

    2 – Resistance to automation – the major ports in the US are incredibly labor intensive. Ports in other countries have embraced automation and driverless vehicles for moving containers from the pier to the drayage yard, resulting in hundreds fewer staff being necessary.

  8. Joe,
    We all know about the increases in the cost of beef, pork and poultry. There are four large processors, one of which is owned by the ChiComs. They have apparently colluded to not purchase animals from family ranchers and farmers. Of course, under the feckless ChiCom compromised Brandon administration, that’s fine. No one, on either side of the aisle, seems to care, either.
    Well, a bunch of those farmers and ranchers told these big firms to pound sand and they are building a 400 acre processing plant in Nebraska. A friend of mine that raises cattle and bison, told me that several co-ops are talking about doing the same thing here in MN. Of course, the environazis and SJWs, are already squawking about it.

  9. Bikebubba — I have been an advocate of the “tariff for revenue only” replacing the income tax since I first read about back in the 90s. I think Jerry Pournelle first proposed it.

    The world is a far wealthier place than it was before we adopted the global economy. It’s been a few years since I crunched the numbers, but I believe that in inflation adjusted dollars per capita, the US creates about 3x what it did in the 1970s.
    But I would argue this increase in economic efficiency was achieved in large part by sacrificing resiliency.
    If you think that there is a chip shortage now, wait until the Chicoms make their move on Taiwan.

  10. bike/MP.

    Before the Democrats implemented the “temporary income tax”, the U.S. paid for essential government services via tariffs. Once the sheep accepted the income tax, the Democrats always went for more, while implementing their numerous money laundering schemes and creating new government departments to manage them. Of course, I’m in no way giving the GOP a pass, because there are plenty of them that are Big Government advocates, i. e. Georgie W. We have him to hate for the TSA and to a lesser extent, the DHS. It’s long past time for a POTUS to bring in “The Bobs” and turn them loose in every government entity to ask each employee, “Just what is it that you do here?”

  11. Replacing the income tax with a tariff is a terrible idea. The only opportunities for graft would be the Customs inspectors. Think of all the tax lawyers who’d be forced to learn other trades.

    Although I suppose The Big Guy could still get his 10% so it’s not all bad.

  12. I don’t know jdm, sounds like a solution to the homeless problem, no? Always thinking ahead them libturds.

  13. Well played, Joe. :^)

    Ideas #2 and #3 to rein things in would be a tax on fossil fuels–say $20/ton or so–with an assessment for imported goods as well, again offset by a big drop in the income tax–and then harsh cuts to corporate welfare, again, offset in part by a drop in the income tax. And hopefully this would start putting a lot of people to work who were previously unemployable, and in doing so reduce the need for welfare.

    Side note; having lived around LA, including about 12 miles from the port of Long Beach, the thought of having shipping containers dumped in the neighborhood where I lived terrifies me. You have these 30′ wide lots–not a lot of room for a 40′ or 53′ container.

  14. Oh, and here’s an angle no one is mentioning. From ZeroHedge.

    On the west coast, it appears that part of the problem is simply sheer laziness…

    “In 15 years of doing this job, I’ve never seen them work slower,” said Antonio, who has spent hours waiting at Los Angeles County ports for cargo to be loaded. “The crane operators take their time, like three to four hours to get just one container. You can’t say anything to them, or they will just go [help] someone else.”

    The Washington Examiner spoke to six truck drivers near the Long Beach/Terminal Island entry route, and each described crane operators as lazy, prone to long lunches, and quick to retaliate against complaints. The allegations were backed up by a labor consultant who has worked on the waterfront for 40 years. None of the truckers interviewed for this story wanted to provide a last name because they fear reprisals at the ports.

  15. Yup! When the freaking unions decide to screw around, they always do a work slow down. The Post Office did the same thing in 2013. They slow walked/drove their routes. And people wonder why the USPS has been bleeding red ink for the last 50 years.

  16. Oops, I stepped away from this and didn’t refresh the page to see that jdm already posted from that article.

  17. Hold on! Sorry I didn’t see this before. This changes everything.

    There are now THREE separate op-eds at @washingtonpost asking people to lower their expectations in @JoeBiden’s America.

    Here it is telling people they’re wrong to expect stores to have their shelves stocked.

    In other words, stop being so whiny and stop buying so much. It’s all your fault.

  18. Logistics engineers have long known that congestion costs increase exponentially once near capacity. Nevertheless, global businesses grow in a haphazard way where such externalities are not priced, and the two ports in LA handle 54% of all containerized imports. The guiding principle is that concentrated economic activity puts more strain of resources (energy, water, human, …) than diffused economic activity, though there are cost advantages. But the strain on resources is not efficiently priced (carbon, water, worker’s well-being ..).

    The rule of four will not help if production is divided between four random nations in the same geography — say, Philippines,
    Indonesia, Vietnam, and Thailand. We need to think of trade in global terms, not bilateral – Latin America, Africa, the western part of Asia … Only then, we can have a resilient logistical framework, along with balanced global economic development..

  19. The most important thing that you can do to prevent logistics driven shortages is NOT appoint Pete Buttagieg to be Secretary of Transportation.
    You could literally appoint any random person to the job and it would be done better.

  20. Regarding Emery’s comment, I do work in supply chain, and the notion that supply chain engineers don’t try to price in externalities is pure, unadulterated BS. My company was working with the likely problems of COVID months before anybody was locking things down.

    It is far more difficult to do, however, when a single union controls the majority of unloading for product entry into the U.S., and when a single state can hamstring shipping by restricting available trucks to an impossibly high set of emissions standards.

  21. Regarding Emery’s comment, bike; he horked it from somewhere. He has no idea what it means. It just sounded really serious and shit. Ask him to explain the “rule of four” and how its effect is mitigated when we think globally.

  22. ^ Suspect you are mathematically inclined so a rudimentary roadway model … Each entering car imposes a congestion cost (c) on all (cost Nth car added = N*c). Each car added this cost when it entered. So, the aggregate cost is a summation of incremental cost added by each upon entry = SUM(i*c), for i=1..N). With constant c, it is the sum of first N integers (exponentially increasing). Of course, c has to increase in N (multi-car pileups, gridlock, etc), i.e. a faster rise that a squared-N function. I googled — the following two websites present graphics which corroborate the above intuition (Fig 1 and Fig 2.4, respectively). https://lost-contact.mit.edu/afs/eos.ncsu.edu/info/ce400_info/
    Now, assume the chain comprise 10 factories, each sourcing parts from 5 other places. We have a chaotic mess.
    Concentration of economic activity, i.e. many overlapping chains, will only worsen the scenario.

  23. Emery; suspect you are mathematically declined, so we’ll simplify that model for you. What happens to shippable containers when you subject the unloading of ships to random union work stoppages, and you reduce the number of trucks to haul containers by 50%?

    Or is my son’s 7th grade math, and the thought that 50% < 100%, too difficult for you?

    Add to that that a lot of people have been getting paid handsomely not to take jobs like factory work and warehouse worker, and you're going to get to the real roots of the problem very quickly.

  24. You don’t often see the emery employ the baffle-them-with-BS debate tactic. It’s unfortunate for him that in this case I know a little about the topic (there are very, very old brain cells waking up after a long nap). It’s Queuing Theory hand-waving without any of the math (btw, I don’t believe the sum of an integer sequence exhibits exponential growth; please help me understand how to find the exponent in this function E((N(N+1)) / 2)).

    I have trouble believing that using a roadway as a simplified model for getting shipping containers to/from the ocean from/to the loading dock of some business is appropriate. The service needs of vehicles on a road are very small – but oddly, in the example given, the service requirements on the roadway are significant and only get bigger. Why? Based on what? Significant servicing requirements is far more typical for (un)loading shipping containers which are always present and can get worse. I don’t understand.

    Also the first of those links points to a directory of 12-ish other directories and a couple, three files. Which directory? Which files? The second link is more roadway modelling.

  25. The supply chain crisis on the West Coast is a third order effect of lockdowns.

    First order – waitresses lose their jobs
    Second order – landlords take a hit as business works remotely
    Third order – West Coast ports are clogged as locked-down citizens shop Amazon

    It all goes back to Fortifying the Election to Steal it from the Bad Orange Man.

  26. And as far as I can tell, the Rule of Four has nothing to do with N-squares or congestion costs, it simply means you should try to have at least four suppliers for critical components so you don’t come up short if some of them fall through.

    Or as Grandma would have said: “Don’t put all your eggs in one basket.”

  27. So, JD, what you’re saying is that not only are you logical, but you’re also logistical!

  28. JDM, my thought was that I could approach the mathematical theory this way, but then the Pareto principle came in mind–when you’ve got a bunch of obvious faults in the system, developing a complex mathematical model really doesn’t help you much. In this case, guess why the ports weren’t open on weekends? If you thought “Union Contract”, go to the head of the class.

  29. Rule of four went out the window decades ago in push for lower costs and higher margins by the fresh MBA graduates who were hired on to solve all the issues based on textbook examples – and paid big bucks for having zero real world experience. And that they did! In spades. I was FORCED to put all eggs into one low cost basket, damn the consequences.

  30. I agree, bike. I think it’s game theory that postulates “rational decision-makers”, but what about decision-makers who are irrational?

  31. There’s a failure to acknowledge the role the surge in demand for consumer durables (and our expectation that those durables turn up at our doorstep the next day without paying for their delivery) has played in hobbling supply chains than a call to consume less. There seems to be a blame game that it’s the logistics industry that’s at fault if Christmas doesn’t happen. I don’t think that’s fair. And I think it fails to acknowledge the stress people in this sector have been under for the past year and a half.

    In addition, most US cargo goes cross country on intermodal rail. The rail yards are congested as well even after 10 years of track improvements. It’s 14 days across the Pacific and 3-5days cross country (with rail to road handoffs) ….. you can’t violate the laws of physics simply because it’s politically uncomfortable. BNSF, UP, The various truck lines, Walmart, Target, Amazon all know this. It’s just the consumer that is ignorant of how the stuff they order gets to their home or retail store

    Re: LA Ports—to actually get efficient ports you’d put the Rotterdam Port Authority in charge.

  32. One other point— the labor issues at this port complex are extraordinary and MBerg’s commentary is therefore incomplete without deeper analysis.
    This is a joke. “Emery” is troll account shared by several leftists whose goal is to pollute SITD with anti-Trump comments. The “Analysis” of Emery has predicted Brexit failure, a landslide election by Hilary in 2016, and, of course, a “Mueller Report” that would provide evidence that the Trump campaign had colluded with Putin to steal the 2016 election from Hillary.
    “Emery” is a troll account. There is no human being behind it. Treat it accordingly.

  33. JPA nails it. I used to work for a holding company that decided that longstanding supplier relationships could be replaced by having new suppliers bid for business (lowest bid won of course), and then the sole supplier was going to miraculously do JIT correctly with no training.

    Let’s just say that the basic errors made by a lot of these fly by night operators were pretty impressive.

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