M. Holland’s Mid-Year Logistics Update

If you thought the end of 2020 would lead to a smoother road for the logistics market in 2021, think again. In addition to the continued effects of COVID-19, we’ve seen several significant disruptions since January. The first was Winter Storm Uri that impacted most of the southern U.S. for many weeks, followed by the Suez Canal blockage, which delayed more than 369 steamships. Then there was the cyberattack on Colonial Pipeline, which resulted in numerous delays in the East. And currently, there are heat waves and wildfires further impacting supply chains.

Considering these events along with the rising cost of materials and worker shortages, what can we expect from the rest of 2021? Is there time for the market to course-correct? Below, we delve into some of the most pressing logistical challenges for the plastics industry and outline how M. Holland is continuing to address those obstacles.

Bulk Trucks Traveling Farther, Exasperating Capacity Issues

Bulk truck capacity is extremely limited because demand significantly exceeds supply. While Texas has long thawed after experiencing a once-in-a-decade winter storm, the impact on raw material supply remains. Because of ongoing resin availability issues, full railcar availability has been reduced, and bulk trucks are required to travel greater distances as manufacturers seek to restock their inventories.

In some cases, manufacturers who would typically purchase an entire railcar are forced by supply constraints to purchase smaller quantities, which must be delivered by bulk truck. Further, when bulk truck drivers are forced to travel beyond their local market for days at a time, it consumes a significant amount of local delivery capacity. For example, one long-haul delivery might push back six local deliveries. To protect local customers, more and more bulk trucking firms are turning away long-haul, out-of-network loads.

Despite these bulk trucking challenges, action can be taken to improve service. Consistent schedules and efficient unloading processes can help prioritize and streamline bulk load deliveries. For optimal success, companies should ensure orders are ready to route by at least three days before bulk truck ship dates. Keep in mind some regions have longer lead times for load booking than others. At M. Holland, we’ve observed that the Southeast has been particularly challenging, so we’ve had carriers reposition assets there as well as tapping into our national carrier network.

LTL Freight Feeling the Pressure

Similarly, dry van capacity — including full, partial and less than truckload (LTL) — is very limited due to supply constraints and continuous high demand. Truckload constraints have cascaded to the LTL sector, with some mode-shift from full truckload to LTL despite LTL’s higher costs. Similarly, increased online shopping has forced many parcel shippers to leverage LTL to deliver large items.

Although the LTL network can often provide shippers with greater certainty and consistent pickup and delivery schedules, it’s becoming increasingly overloaded. To improve the likelihood of on-time deliveries, companies should ensure orders are ready to route at least two days before ship dates for full or partial truckloads (loads of 10,000 pounds or more) and at least one day for LTL (loads of less than 10,000 pounds).

Driver Shortages

Across the trucking industry, driver shortages are a growing challenge, with a projected need for 1.1 million new drivers over the next decade to replace retiring drivers and meet explosive demand. In recent weeks, several states have waived hours-of-service restrictions for drivers to ease the severe driver capacity constraint.

Congested Ports Continue to Delay Imported Containers

The spike in import volumes has caused terminals to remain extremely congested across U.S. ports, with bottlenecks expected to continue into the fall. Port congestion is a global issue impacting nearly every industry and causing longer lead times and higher costs. Why? Because demand is far exceeding the supply of containers, chassis, intermodal rail, dock workers and more. Container port congestion is causing significant issues with downstream intermodal rail as well as drayage delays in transporting containers to sites — the import bottleneck has moved from getting ships unloaded to making containers available for pickup. The shortage of chassis, for example, results in full containers left unhauled and companies facing expensive fines. Even in Chicago, port congestion is severe due to the lack of container storage capacity, available chassis, and the yard operators’ ability to cherry-pick containers to load specific customers. Recently, the congestion in Chicago was so bad that the intermodal railroads restricted inbound container traffic from West Coast ports for two weeks to improve container yard operations.

Unfortunately, most companies have no options in this scenario, and detention fees will likely be levied. For planning purposes, it’s best to assume imported containers will be delayed beyond the scheduled arrival date, with four-week delays common. So shippers should expect delays as well as possible demurrage fees. 

Packaging Production Challenges Persist

The supply and demand imbalance is creating havoc with packaging, pulverizing and grinding services. Several packaging sites have extended lead times due to the increased volume of work and staffing challenges. The demand for warehouse workers is also exceeding the labor supply — this is especially true for pulverizing and grinding, where demand has been greatly exceeding available capacity across the plastics industry. One issue that has waned is the industry-wide packaging material supply shortages. However, sporadic shortages can occur (e.g., corrugated octa-bins, pallets).

Objectives for the Months Ahead

At M. Holland, we remain focused on our primary logistics objectives, including meeting our service level agreements, particularly on-time delivery. We remain fully committed to improving sustainability by working with our Gold Standard Distribution Centers on Operation Clean Sweep® adoption and compliance.

The logistics industry has been dealt a steady stream of blows over the past 16 months. But with thoughtful planning, prioritizing proactive approaches and keeping a pulse on the latest market shifts, we can continue delivering on the logistical services our clients and the industry expects for the remainder of 2021 and beyond.

If you enjoyed this post, please check out some additional posts:

• Subscribe to our daily COVID-19 Bulletin
• M. Holland’s Mid-Year Economic Update: Industry Outlook
• What We Can Expect From 2021: An Economic Outlook with Economist Alan Beaulieu
• Plastics Reflections Web Series: Driving Sustainability Action in the Plastics Industry
• Plastics Reflections Web Series: 2021 Outlook for the North American Plastics Market
• Our Role in Creating a Circular Economy for Plastics
• Plastics Products for a Changing Climate
• Regulatory in the Time of COVID: Same as It Ever Was
• Our View on Logistics: How 2020 Will Impact 2021