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A Penn State supply chain professor on what's contributing to the 'Gordian knot' we're facing

A head and shoulders shot of Brent Moritz in a navy jacket and red tie.
Penn State Smeal
Brent Moritz is an associate professor of supply chain management in Penn State’s Smeal College of Business.

Computer chip shortages, rising prices for some groceries, and a run on bicycles — reports of supply chain disruptions caused by the COVID-19 pandemic fill the news. To try to understand what this means for central Pennsylvania, WPSU’s Anne Danahy talked with Brent Moritz, an associate professor of supply chain management in Penn State’s Smeal College of Business.

Anne Danahy 

Brent Moritz, thank you for talking with us.

Brent Moritz 

Great to be with you. Glad to be here.

Anne Danahy 

We've been reading and hearing about thousands of giant shipping containers stuck in limbo at ports on both coasts. How big of an issue is this?

Brent Moritz 

This is a substantial issue. This is really unprecedented on a global scale. We've never seen this many shipping containers backed up in Los Angeles, that many ships at anchor outside of the Twin Ports in Los Angeles. But it's also a global problem. This is happening at ports all over the world, the biggest shipping port in the U.K. is substantially backed up. There's backups in China. So it's not just a U.S. problem.

Anne Danahy 

The cargo adrift at the ports isn't the only thing that's behind the supply chain disruptions right now. There's a lot of factors, is that right?

Brent Moritz 

There's many factors, and some of it is COVID-19 related. Some of it is supply chain related, sort of indirectly. And perhaps I could just start out by saying, you know, we've got three big factors, we can talk about demand changes, we can talk about supply shortages. And we can talk about the global nature of what's going on here, which is really quite unusual.

Anne Danahy 

Yeah, tell us about that. Those three factors and how they're playing into this.

Brent Moritz 

Sure. So if we start with demand, if we think at the start of the pandemic, we saw shortages of things like masks, ventilators, everyone was talking about a shortage of gloves and other PPE. That's really because we had an unusual spike in demand. Now, if we think about other stuff that made the news — toilet paper, for example. The underlying demand for toilet paper did not change during the pandemic. However, if you think about where people used and consumed toilet paper was very different. Think about how much toilet paper was used and consumed in restaurants, hotels, travel, workplaces, suddenly, all of that is being now consumed or bought for home use. And we didn't have supply chains that were designed to get that toilet paper into consumers hands at the retail level, when so much of it came from, let's just say the wholesale or institutional level.

Anne Danahy 

And then you were talking about the three factors, and was the third factor that this is global in nature?

Yeah, for sure. Usually, when we have a disruption, it tends to be local or regionalized. You can think of things like a hurricane hitting the U.S. Gulf Coast, for example. Or an earthquake, hitting somewhere, tremendous disruption and dislocation, but it tends to be regionalized. Even now, like if you see a hurricane hitting a region, the rest of the U.S. will send in trucks to fix the electrical grid, for example. The unique nature of COVID-19 is that it is hitting the entire world. And there's no backups, there's no real ways to reroute the entire world supply chain, at least in the short term.

Anne Danahy 

So we are seeing the pictures of the ports. And we're reading about what's happening lots of different places. What does all this mean for a typical person in central Pennsylvania?

Brent Moritz 

Well, that's a big question. Broadly speaking, because of the disruptions that we're seeing, we're seeing price increases happening in a lot of ways. Just to give some perspective, several years ago, the cost to ship one of those 40 foot containers that we see in pictures in the ports of Los Angeles was running about $1,500 to go from Asia to the U.S. West Coast. Right now that's about $15,000, or even more in some cases. So that's a 10-fold increase in the shipping cost, as opposed to normal. All of those costs have to get born somewhere. And so the shipping costs are going to cause price increases to the consumer. And there's not really a good way around that.

Cargo containers sit stacked on ships at the Port of Los Angeles, Wednesday, Oct. 20, 2021 in San Pedro, Calif.
Ringo H.W. Chiu/AP
/
FR170512 AP
Cargo containers sit stacked on ships at the Port of Los Angeles, Wednesday, Oct. 20, 2021 in San Pedro, Calif.

Anne Danahy 

So when the coffee costs $2 more a bag or there's reports that the price of turkey is going up and people need to prepare for that for Thanksgiving. That's one of the factors in that. It seems like there's a lot of dispute or discussion about whether this is going to be long range or whether this is going to be a short term we could we're going to see higher prices, or do we need to kind of get ready for long term inflation.

Brent Moritz 

Well, again, it's going to be a little bit different depending on what product you're talking about. And food and turkeys is not really a global commodity. It's much more of a U.S. commodity. For example, things like electronics, though that is coming from across across the globe. And we have a substantial chip shortage right now that it is hitting all manner of consumer electronics, we see it dramatically impacting the automotive business right now that there's a huge shortage of chips right now, those are things that are hard to fix in the short term just because we do not have capacity in our global semiconductor business to make all the chips that we that we need. When you're talking about foodstuffs, we suggest turkeys or you know, the Thanksgiving basket. Some of those are down to local labor kinds of things where we don't have enough workers in our processing plants. We don't have enough workers in our transportation hubs, to ship products from, from producer to the supply chain. So those are all issues that are working together in a bit of a Gordian knot, if you will, and we have lots of things happening at the same time.

Anne Danahy 

Has all of this changed how you're teaching your students this semester and what you're going to be teaching them about supply chain coming up?

Brent Moritz 

Well, it certainly provides a lot of great examples. When you have a ship stuck in the Suez Canal, you can talk about what's going on with shipping. And when you can talk about other disruptions it's made very timely. Now when you say you're a professor of supply chain management, or even my students say they're studying supply chain management, everyone has a story to tell about their supply chain experience. It's been great for our students, because the demand for supply chain jobs is up. All companies are realizing we need more supply chain talent. And frankly, the companies that have made those investments over the last decade or two are faring through the pandemic far better than the ones who've, let's just say, underinvested over time, both in human resources and some of the information technology and systems to track their supply chains.

Anne Danahy 

Well, Brent, thank you so much for talking with us.

Brent Moritz 

Anne, it was a pleasure. Glad to be with you.

Anne Danahy has been a reporter at WPSU since fall 2017. Before crossing over to radio, she was a reporter at the Centre Daily Times in State College, Pennsylvania, and she worked in communications at Penn State. She is married with cats.
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