Monday, July 12, 2021

Congestion in transit in supply chains: pipeline inventory

 The recovery from the pandemic is revealing as many supply issues as the pandemic itself did. Here's an article in Forbes about congestion in transportation

How Traffic Congestion In Chicago Is Backing Things Up In Los Angeles: Pipeline Inventory Is Now A Big Logistics Problem  by Willy Shih 

"As retailers try to bring a surge of imports into their distribution centers, they are exceeding the capacity of logistics providers to move them through choked hubs like the Union Pacific Global 4 intermodal terminal in Joliet, Illinois outside of Chicago. A shortage of truck chassis means its difficult to get containers out of the terminal to warehouses, that in turn leads to congestion that makes it is difficult to unload trains. According to a recent discussion hosted by the Journal of Commerce on top importers, that means the traffic has backed up to the marine terminals in Los Angeles and Long Beach, and to a lesser extent Seattle/Tacoma. That’s why now would be a good time to understand what we mean by pipeline inventory.


"All those containers stuck at UP Global 4 are pipeline inventory for somebody, and rail congestion out of West Coast ports means pipeline inventory is building up there (and remember it’s on trucks and trains as well). The Port of Los Angeles Signal report for last week projects import volumes up 54.9% this week and 71.6% next week, with big jumps in on-dock and off-dock rail containers. So that furniture or freezer you are waiting for might be sitting in a container stack in a yard somewhere.


"The key question is will those goods stuck in pipeline inventory make it to the consumer while the demand is still there? The recent precipitous collapse in lumber prices suggests that as Americans shift towards a more normal consumption pattern, we might end up with a lot more of some goods than retailers planned. Neglect of pipeline inventory, or increased ordering to make up for the pipeline lag, is one of the major causes of the bullwhip effect in supply chains. Sophisticated retailers like Walmart or Target are probably always on top of how much inventory they have in the pipeline, but the challenge is will the demand still be there when those goods finally arrive? For fashion retailers, this could be “Hello, TJX” as they end up looking for help to liquidate excess inventory."

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