Maryland Smith Expert: A Better Fix for the Supply Chain Crisis

Martin Dresner, professor of the logistics, business and public policy at the University of Maryland’s Robert H. Smith  School of Business, is available to reporters and can expand on his comments below describing factors and solutions to the supply chain crisis and how White House intervention is best via long-range infrastructure planning and spending.

Factors:

Dresner says the pandemic “created increased demand for products shipped from Asia that arrive via container at major U.S. ports, putting pressure on shipping, port, truck and rail capacity.”

In the meantime, work rules designed to curtail the spread of the coronavirus and some port shutdowns reduced the throughput of the shipping industry — especially in Asia. This was coupled with a decline in the workforce as people retired or quit lower-paying jobs, including transportation and warehousing positions. And, finally, government policies pumped considerable cash into the economy, increasing consumer spending, thereby further increasing demand for consumer goods.”

Solutions:

“The president is proposing making better use of our current infrastructure by increasing working hours and spreading business more evenly throughout the day. …  Although this may help at the margin, there is only limited warehouse, rail and trucking capacity. It is difficult to expand this capacity in the short run. Although the backlogs will eventually work their way out of the system, this may take some time.”

The White House has said that if needed, it would take an active role in solving the crisis and would call on the private sector to step up. But federal support is best channeled through infrastructure spending. “In the long run, better infrastructure should improve the functionality of supply chains.”

In the short run, it’s best left to businesses to work out the backlogs. Prices are already adjusting and these prices will cause adjustments in consumer demand, and higher interest rates, should they be forthcoming, will also curtail consumer demand.”