It is interesting to hear about changes in regional supply chains. The Ukraine war provides a chance to see what disruption occurred and how it is impacting routes to move cargo in the area of the Black Sea. This article covers the effects of the blockade of Ukranian ports.
Naturally costs have changed, and so have equipment imbalances.
Finally, the markets for freight into and out of the area have changed a lot. Many shippers and carriers have been actively looking for alternatives, and have needed to create some new ones.
And sanctions imposed by the EU and US have forced other changes.
By Daniil Melnychenko data analyst at Informall BG 26/07/2022
Right now there’s a big railroad strike looming. There’s also a potential strike coming up among West Coast dock workers. And there is labor unrest elsewhere in the supply chain area, including warehouse workers and independent contractor drivers.
It’s obvious that when things are difficult for employers, that’s the time to stage a strike if you’re a union. The circumstances offer the opportunity to generate maximum impact on the firms.
But the railroads have many other problems that coalesce into a serious decline in service. Rails were all excited about PSR, or precision scheduled railroading, an effort to apply some lean principles to the management of rail traffic. The trouble with lean, however, is always in the interpretation. It’s easy for managers to get carried away and cut too deeply, whether it be equipment, labor, or other resources. It makes the bottom line look good instantly, but reduced flexibility to deal with change. And it may even reduce customer service, if that isn’t measured in a sound fashion, that takes the customer interest into account. I’m afraid some of the rails did not perform their lean transformation that well.
The Covid epidemic didn’t help, either. It created a temporary decline in demand, and it was easy to ride that trend downward and reduce inputs too much. That’s what happened here. The rails simply cut staff too deep. And now that demand for rail has increased, it’s really hard to catch up.
The Great Resignation or Relocation is also amplifying the problem. People don’t want to keep jobs that make them work hours they don’t want, or force them into a difficult lifestyle. So even if union contracts are signed, there’s no guarantee that workers will become available for the rails. They may decide to choose other jobs and lifestyles. Make the job too hard, and no one will want it.
I feel that rails took their eye off the ball— customer service. Customers depend on rail for reliable on-time delivery, within the requirements for their use of the products. That means the trains have to run on time. There can’t be shortages of equipment or labor. When those are cut too deeply, it’s hard to bring them back quickly.
And the financial implications, to stock prices, and now high inflation, also work against the executives making difficult decisions to not cut so deep. Inflation makes capital items harder to replace. And the labor shortage means that higher wages will hurt the bottom line, since the raises ought to be offered to everyone, not just new workers— that’s the basic law of monopsony.
So the chaos in dispatching and routing for rails today is not entirely due to labor in my opinion. It’s also due to the big rails not continuing to invest in infrastructure improvements, in switching yards and equipment that would support their goals of reducing future congestion and costs. And they will need to cooperate as well. Allowing customers to cross-connect would help. Improving switching yards, or humps, to make switching cars and trains faster, would help. In a few places, double-track and double-stack would help. And better port-to-rail connectivity would help.
Rails also can’t ignore the agriculture supply chains which rely on them for both exports and domestic deliveries. Those chains aren’t as profitable as some others but have to be served. We allowed the rails to abandon passenger transportation years ago. But we can’t allow them to abandon other business sectors that depend on them.
This podcast moderated by David Wessel of Brookings is very informative. It’s an assessment of the success and failure of several programs of aid to businesses the US government put forth when COVID-19 started to dampen US business activity.
The level of financial support offered to businesses during the pandemic was unprecedented, and clearly kept the decline in consumption less serious than it was feared.
There has been a lot of criticism of these programs, some positive and some negative. It’s important to understand how the programs did work and how they did not. In the future we may be faced with other economic crises and we should know which features worked as intended and which did not, and why not.
It’s a good listen, and there is also a link to a transcript.
How effective was aid to business during COVID-19?