There's a reason consumers are being advised to start their holiday shopping in October and retailers are scrambling to put out promotions now. Shipping delays are putting a lot of retailers at risk for the upcoming holiday season -- namely, that they won't have enough inventory to meet consumer demand and will therefore lose out on much-needed revenue.
That would be very bad news, not just for retailers but for investors in shopping centers and mall REITs, or real estate investment trusts. Retailers can't afford a sluggish holiday season coming off the pandemic-related losses they suffered last year, and if shipping issues continue to cause massive delays, stores could end up closing.
Thankfully, a major deal was reached this week that could help ease the current supply chain bottleneck. On Oct. 13, the White House helped broker an agreement for the Port of Los Angeles to become a 24/7 operation. And that could have a huge impact on retail inventory.
Combating excessive delays
Ports in Los Angeles and Long Beach account for 40% of all shipping containers entering the U.S. As of earlier this week, there were 62 ships berthing at the two ports and another 81 waiting to dock and unload.
These delays have been going on for months, but as the holiday shopping season approaches, it's become even more important to move the inventory that's been sitting in limbo. And turning the Port of Los Angeles into a 24/7 operation could help in that regard.
The port will nearly double the number of hours during which cargo is moved from offshore container ships to delivery trucks. Crews will need to work through the night to make this happen, and members of the International Longshore and Warehouse Union will fill those extra shifts.
All told, the Port of Los Angeles will be open for more than 60 extra hours a week. That will almost double the number of hours the port is open for business from earlier this year.
Will more ports follow suit?
The Port of Long Beach has been operating 24/7 for the past three weeks, and now that the Port of Los Angeles is following suit, it could really start to relieve pressure on supply chains -- especially given the number of shipping containers that enter the U.S. through this part of California.
But whether the 24/7 model is feasible for other ports will hinge on a number of factors. First, will workers be available to take those shifts? Also, will the impact be substantial enough to warrant the cost involved in 24/7 operations?
Furthermore, not every U.S. port is experiencing the same level of delays as those on the West Coast. The Port of Houston, for example, is actually on track to set a record this year as far as shipping container traffic is concerned, and it's largely avoided the major holdups we've seen out of California.
Also, while increasing capacity at ports might help address the current bottleneck, it won't solve the issue of shipping delays entirely. That's because the U.S. is also deep in the throes of a truck driver shortage. And so while expediting operations at ports is a step in the right direction, it will only have a limited impact if goods are then stalled once they've able to move inland.
The Millionacres bottom line
All told, the fact the Port of Los Angeles will be open and operational for more hours is a bit of positive news as we head into a holiday season retailers are heavily banking on. But whether it manages to actually save Christmas and the other winter holidays is yet to be determined.