January 31, 2023 • 22 mins
Most of what we buy and use every day comes to us on cargo ships, which represent essential links in worldwide distribution systems. A global public health crisis reminded us of how important they really are.
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Episode Transcript
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Bernie Fette (host) (00:14):
Hello again.
This is Thinking Transportation-- conversations about how we
get ourselves and the things weneed from one place to another.
I'm Bernie Fette with the TexasA&M Transportation Institute.
During the Covid 19 outbreak,stories in the New York Times
mentioned supply chains morethan 45,000 times.
(00:39):
Prior to the pandemic, you hadto look pretty hard to find any
mention of supply chains inmainstream news sources, and
that doesn't even count socialmedia, where mentions increased
by more than 10 times.
During the lockdown, we couldn'tseem to get the things we needed
when we needed them, and it waseasy to blame the supply chains
(01:01):
for our inconvenience.
Our guest for this episode willhelp us understand why it's not
quite that simple.
Jim Kruse is a senior researchscientist at TTI and an expert
in the freight that moves oncargo ships-- the way that we
get so much of the things thatwe use every day.
He's the director of the Centerfor Ports and Waterways at TTI.
(01:26):
Jim, welcome.
Thank you for joining us today.
Jim Kruse (guest) (01:30):
Thank you.
I always appreciate theopportunity to chat with you.
Bernie Fette (01:34):
When the pandemic started, people had a very
difficult time getting thethings they needed, and the
reason that we were given forthat is that the supply chain
was broken.
So if we can, I'd like to startwith a really broad question and
then maybe try to narrow theconversation from there.
My question is, is the supplychain still broken?
Jim Kruse (01:57):
Well, I'm glad you asked it that way because the
way I look at it, it was neverbroken.
It was overwhelmed.
And to me, that's a distinction,and I'll give you an example of
how that would work in reallife.
If you take a five gallon jar ofwater, like you have a water
cooler and you just dump it inyour sink all at once, your sink
will back up and you'll havewater maybe coming out of the
sink depending on how fast itdrains.
(02:19):
Does that mean your piping isbroken?
No.
Does it mean you've got aproblem with the plumbing?
No.
You just try to do too much toofast.
Yeah, and I think that's whereour supply chain wound up.
It wasn't broken.
It was never designed to handlethe volumes we're forcing it to
handle.
Bernie Fette (02:34):
Okay.
Really important distinctionthere.
So if we take that distinction astep further and ask the
question again, is the supplychain still overwhelmed, how
might we get a different answer,depending on whether we are
talking to shippers or if we'retalking to consumers?
Jim Kruse (02:54):
I think right now things have smoothed out quite a
bit.
Initially the problem was thatthere was such a surge in
consumer buying that the volumesrolled like 23 percent in one
year, which is justoverwhelming.
Right.
Since then, things have leveledout a little bit.
You saw these news reports abouthow many vessels were staying
off the coast of Californiawaiting to get to the port and
that kind of thing.
That's gone away.
(03:15):
Pretty much.
Things are functioning prettymuch like they should in an
ordinary situation.
So today that's fine.
But that being said, everybodyexpects another surge to hit at
some point.
And so what people are doing nowis they're buying equipment.
Suppliers are spreading outtheir sources of materials and
so forth that they're notdependent upon one particular
(03:36):
part of the world and things arehappening.
People are responding to this bysetting themselves up for the
next surge that it won't be asbad as this last one was.
Bernie Fette (03:44):
So adjustments are happening.
Some of'em on their own and someof'em by design.
Of course, seaports represent areally prominent link in that
supply chain that we're talkingabout that's been overwhelmed.
And that's your specialty area,I know.
So can you give us a sense ofhow much of the stuff that we
buy comes to us on cargo shipsand how much of the stuff that
(04:07):
we send away from America goesout on cargo ships?
Jim Kruse (04:10):
Well, as far as coming in goes, people would
find it interesting.
The largest importer of consumergoods in a containerized
shipment is Walmart.
Then you have Home Depot, youhave Toyota, you have Lowe's,
you have all these brand nameconsumer places that we go to
that are the big, big, bigimporters.
(04:31):
So those are the ones who aremaking it happen.
Exporting typically winds upbeing agricultural goods or in
some cases even waste paper,waste products that are being
processed elsewhere in theworld.
So that's kind of how it comesand goes.
I challenge people sometimes togo around their living room and
look at where everything wasmade, and I think you'll find
(04:52):
that almost nothing was made inAmerica.
Okay.
So if it wasn't made in America,it had to get here somehow.
And you're not gonna fly a couchon an airplane, you're not gonna
fly a table on an airplane.
So those came on a boat fromsomeplace.
Your clothes came on a boat fromsomeplace.
I've often used theillustration, if you took out
everything in your house thatcame on a boat and didn't have
any of it, you might be sittingthere with no clothes on in the
(05:14):
middle of an empty house.
Bernie Fette (05:15):
Right.
And no bed to sleep on, etcetera.
Jim Kruse (05:18):
That's right.
Bernie Fette (05:19):
Let's talk a little about, cuz I think part
of what you're getting at isjust the simple laws of supply
and demand.
Mm-hmm.
.
Let's talk about that just alittle if we can.
I'm wondering how the supply anddemand trends may have changed,
if at all, in recent years.
And please answer that questionif you could however you'd like.
(05:39):
I mean, if you'd like to talkabout post pandemic or were they
already changing before thepandemic, please?
However you'd like to addressthat.
Jim Kruse (05:46):
Well, trade was actually increasing before the
pandemic, but what happenedduring the pandemic, two things
happened.
One is people said, well, Ican't travel.
I can't go anywhere, so I'lljust buy stuff for my house.
I'll buy computers, gamingequipment, exercise equipment,
patio stuff.
So they just started buying intremendous quantities.
In fact, there was a 23 percentrise in consumer buying from one
(06:09):
year to the next, which isdifficult for any kind of
business to absorb.
It was just a tremendous volume.
The real problem was on theother side, when Covid first
hit, people said, well, nobody'sgonna buy anything.
We'll just start closing ourfactories down.
And all of a sudden people didstart buying stuff and they
weren't ready to produce whatpeople wanted to buy.
So you had kind of a little bitof a shortage because the
(06:29):
producers were caught unaware ofthis latent demand that hit
them.
The buyers were going crazy,buying everything they could get
their hands on because theycouldn't do anything else with
their money.
And so these two things cametogether to overwhelm the
system.
And then we got these backups.
Bernie Fette (06:42):
So all of those producers you're talking about
weren't considering thepossibility that people were
gonna take their vacation moneyand spend it on stuff.
Right?
Yeah.
Which I think was a lot of whatthe news was, the news trends at
the time where people wereforegoing vacations because they
couldn't go anywhere.
So they decided they had to havesome outlet for their desire to
spend their money.
Jim Kruse (07:01):
And the economic data we're seeing now too, show
that people have kind of slackedoff on that consumer of buying
and started spending it ontravel and services again.
And so we're seeing more of apre-Covid type of distribution
of spending, which will helpquite a bit in smoothing things
out in the system.
Bernie Fette (07:17):
I think one of the points that you made earlier,
the distinction of how thesupply chains are being
overwhelmed as opposed to supplychains being broken.
Mm-hmm.
.
Please correct me if I'm drawingtoo much of a parallel here, but
can we not draw at least somecomparison with surface
transportation and the fact thatyou can't build highways and
(07:37):
bridges to handle surges all ofthe time, just because that's
not a very practical way toapproach.
Is there a legitimate parallelin what we're talking about
there?
Jim Kruse (07:45):
I think so.
As you say, you can't build forthe potential peak situation
because then you would have alot of assets sitting idle most
of the time and nobody canafford that.
Yeah.
On the other hand, if yoursystem is set up to be agile and
flexible, maybe you can reroutethings, you can move things
around.
You can use alternate methods ofgetting things from A to B that
(08:06):
would alleviate or mitigate someof this delay that we saw during
the pandemic.
Bernie Fette (08:10):
Okay.
So supply chains, again, notbroken so much as just being
overwhelmed.
And you talked about how some ofthe consumer trends are helping
to make adjustments to thatsituation of being overwhelmed.
Mm-hmm.
.
What else is happening on the, Iguess the manufacturer, the
(08:31):
shipper side of things toaddress that condition of being
overwhelmed?
Jim Kruse (08:36):
Well, there are two major things I see happening.
One is 40 percent of our goodsor more come from China and they
land on a West Coast port.
A lot of those shippers now arererouting their stuff through
the Panama Canal over to theGulf Coast and the East Coast to
kind of spread out theirnetwork.
Okay.
So that if Los Angeles/ LongBeach gets whammed all of a
sudden they've still got anoutlet to go somewhere.
(08:58):
They've got an establishedsystem someplace else that they
can use.
It takes more time and it costsmore money.
So it's gonna drive up the costof goods a little bit, but at
least the demand gets met.
That's the big thing.
The other thing is that duringthe pandemic, one of the things
we saw was that equipment wasgetting stuck everywhere you
looked.
Equipment was sitting idle.
For instance, a vessel tries tocome into the port of Los
(09:20):
Angeles.
They say, we've got all thesecontainers to unload.
The terminal says, well, I'msorry, but we're full.
We can't do anything with those.
So they call the warehouse, theysay, we've got some containers
we need to send your way.
And they go, well I'm sorry butwe're full.
We can't take any morecontainers and if you send any,
we're just gonna leave'em in theparking lot cuz we can't do
anything with them.
Then you say, well, okay, let'sput on a rail line, let's get it
out here on rail instead of by atruck.
(09:41):
Well, the rail line tells you,well, all of our rail yards are
full.
We've got no place to put thatstuff.
But what happens is, ifeverything is sitting there
waiting for an opening, you'rereducing the amount of equipment
that's actually working.
And at one point we estimatedthere was 20 to 30 percent of
our equipment that was doingnothing because it was sitting
waiting because of a congestedsituation.
(10:01):
So what people are doing now isthey're buying equipment like
crazy.
I mean, we're seeing more cranesbought and these containers move
on what's called a chassis.
It's a specialized trailer thatthey sit on so they could be
moved.
People are buying a lot of thosethat they don't have to worry
about getting one to move acontainer.
Warehouse space has just gonethrough the roof.
It's essentially 100 percentused in Southern California and
(10:24):
in here in the Houston area.
It's also a huge demand for thiswarehouse space and it's just
going up like crazy.
So what people are doing rightnow is they're trying to set
themselves up to have moreequipment so that if another
situation to happen where you'vegot 15 or 20 percent getting
tied up someplace, at leastyou've got equipment to work
with.
You're not stuck waiting onsomebody to free it up.
Bernie Fette (10:43):
Okay.
You've given us a good pictureof how the industry and how some
consumer habits are helping tolevel things a bit.
Mm-hmm.
Helping toequalize and, and maybe calm
things down a little bit withsuch a huge increase in consumer
purchasing.
What are the supply chain fixes,if we can call'em that, that
(11:05):
still need to be addressed?
The improvements that you thinkneed to be made, but we're not
there yet.
Jim Kruse (11:10):
One of the big things that people are checking
right now is the ability to handinformation out between all the
various parties involved.
And I should back up a step.
When we say supply chain, whatwe're talking about is all the
businesses, all the services,all the equipment that's needed
to get something from the pointwhere it goes to a factory and
that factory produces it, andthen it comes over to the final
consumer here in the U.
(11:31):
S.
All that's part of the supplychain.
One of the problems is thatthere is no single source of
data that says, okay, I boughtthis.
It's coming out of Shanghai.
Where is it?
What ship is it on?
When is that ship gonna gethere?
Where is it in the terminal?
Once it gets off the ship, howdo I know where to go get it?
All these kinds of things.
When is the ship expected toarrive, for instance?
These things are not gettinghanded off between all the, the
(11:53):
various players is there's a bigpush right now.
The federal government'sinvolved, several private
parties are involved, butsetting up a system where you
can trade this information,where you can access information
that tells you where things are,when big events are expected to
happen, and allow you then tomarshal your resources
effectively.
Bernie Fette (12:10):
In maybe much the same way that you can go online
and find out if that packagethat was mailed to you by a
family member in another state,you can go to the right website
and figure out exactly wherethat package is.
Jim Kruse (12:25):
Right.
And the idea again is to providesome real-time insight into
what's going on with yourdelivery, but also to provide a
little bit of a forecast methodso that if I know that I've got
a thousand containers are gonnahit me next month, I need to
have the trucks in place, thewarehousing space available, I
need to have the chassisavailable, the people available,
and I can plan for that.
(12:46):
If I'm just sitting here and athousand boxes show up, uh-oh,
what am I gonna do now?
.
So that's kind of the ideabehind all that.
Bernie Fette (12:53):
Yeah.
Try to minimize the surprises.
Mm-hmm.
.
We as consumers, were really nottalking about supply chains
until Covid 19.
Mm-hmm.
.
If another global crisis,whether it's a public health
crisis or whatever it might be,were to hit without warning next
month, how much more ready arewe than we were in 2019?
Jim Kruse (13:20):
That's a tough question to answer, mainly
because I don't have insight towhat all the individual players
in this game are, are doing, butokay.
I would say that it takes timeto develop a response to any of
these kind of situations.
So I'm sure we're not there yet.
Uh- huh, peoplethink, well, I can just move my
shipping stuff from Oakland toHouston and it'll just be
(13:40):
overnight real easy.
Which is not the case.
It typically takes years to setup the receiving facility, the
distribution facility, thepeople involved, the the agents
that are required to make thingshappen and so forth.
So people are doing that.
They're reconfiguring supplychains, they're ordering a lot
of equipment, a lot ofequipment's being ordered to
help make sure that we don't getstuck with things just sitting
(14:02):
in parking lots and warehouses.
But again, it takes time to dothese things.
And so I would say we'reprobably another year away from
saying, okay, now we're in abetter position than we were
last time.
That's just my personal guess.
It's not based on cold hardfacts, but if you just read what
people are doing and read whatpeople are reporting, that's
what it looks like.
Bernie Fette (14:21):
Okay.
And again, before Covid 19, theonly people who were really
talking about supply chains werepeople like you-- people who
work in some field of shippingor distribution or logistics or
in your case in research relatedto all of those different
things.
Mm-hmm.
.
And now it seems that greatnumbers of people feel
(14:41):
comfortable mentioning supplychains anytime that we don't get
our stuff delivered to us asfast as we want to get it.
Is that in any way perhaps agood thing, the fact that people
are just talking about supplychains at all?
Jim Kruse (14:55):
Oh, I think that helps.
Public awareness is always agood thing because then you
appreciate some of the measuresthat are being taken and some of
the difficulties public agencieshave in providing infrastructure
and some of the things thatprivate players have to do to
make their businesses operate.
You begin to appreciate that.
I get the biggest kick outtapeople blaming everything on the
supply chain, though.
Not everything that's lategetting here is because the
(15:17):
supply chain was an issue.
Bernie Fette (15:18):
, but Okay.
Jim Kruse (15:19):
But, but it has been more frequent than in the past.
I'll grant that.
Bernie Fette (15:22):
Yeah.
Okay.
Well while you're on that topic,tell us about some of the other
things that people can blame ifthey're not gonna blame the
supply chain.
Jim Kruse (15:28):
.
Well, again, maybe your orderwas mishandled by the, uh,
person you placed the orderwith.
Okay.
Sometimes, I guess it is part ofthe supply chain, but one of the
things we saw during thepandemic, and it's happening
again, is that producers inChina and some of the Asian
countries had a Covid outbreak.
And so they just shut everythingdown.
We're not doing anything.
Nobody's gonna come to work.
(15:49):
We're just stopping.
Well, when that happens, youcan't fulfill the order that
somebody in the U.
S.
ordered.
So that is a reason why thingsslow down.
If China's having a a hiccup,we're gonna feel it over here at
some point.
Mm-hmm.
it, it does affectus.
So it, it is not always thesupply chain itself, although I
guess you would say theproducers, the beginning of the
(16:09):
supply chain.
I think a lot of what we'reseeing too is that as people
begin to reconfigure their wayof sourcing their products and
as buying habits continue tochange, we're going more toward
this online shopping than weever had before.
Mm-hmm.
, I think there'rejust gonna have to be some time
for people to get past themistakes they make in trying to
do these things and and learnhow to do it better.
(16:31):
And I think we're seeing a lotof improvements just almost
every month here is somethingnew being tried that hasn't been
tried before.
So what do you blame it on?
Um, I dunno what you blame iton, but again, I don't think the
supply chain was broken, butyou're gonna have to allow more
time if you don't wanna pay morefor it.
And so that's just the waythings are.
Bernie Fette (16:50):
Yeah.
Yeah.
What sort of takeaways would youlike to leave with anybody
listening to this?
Jim Kruse (16:58):
One of the things that I'd like to point out is
that ports across the countryare breaking volume records
constantly.
21 was a volume record, 22 isanother volume record, 23 may be
another one.
So it's not that ports areslacking or that the system is
not working.
They're handling record volumes.
But when a record volume means Igrew 10 percent and people
(17:19):
wanted 20 percent, you still gota problem.
Right.
So yeah, that's kind of wherethat was.
I always say ports are notslackers.
They are getting the work doneat record paces and record
volumes.
It's just there has to be abalance between what they can
handle and what they arehandling.
That's the problem.
I think the other thing I wouldpoint out is that here in Texas
especially, ports are really thelifeblood of the economy.
(17:41):
The tonnage handled in Texasports is 25 percent of the
nation's total, the nation'stotal.
That includes California, NewYork, East Coast, West Coast,
all that stuff.
Bernie Fette (17:52):
Wow.
Jim Kruse (17:52):
So it is the lifeblood.
And with our oil industry andpetrochemical industry here, the
amount of cargo that's justmoving in and out is just mind
boggling.
Houston is the nation's busiestport that handles more vessels
per year than anybody else.
We hear all these things aboutCalifornia and New York and
Seattle, but Houston is thenation's busiest port.
(18:13):
It handles it over 8,000 ships ayear call this port, divided by
365.
And you can see it's a lot ofactivity.
Bernie Fette (18:20):
.
Wow.
Yeah.
That is,
Jim Kruse (18:21):
That's, and some of our ports are military outlets.
Beaumont is the nation's busiestmilitary port for moving
supplies overseas.
And Corpus Christi does it, PortArthur does it.
So we're a military strategicpoint.
Just things like that.
It's, you know, Freeport is oneof the nation's largest
exporters of liquified naturalgas-- LNG.
Ports are the livelihood of theeconomy.
(18:42):
If they're not working, we'regonna notice it one way or
another.
Maybe not immediately, maybe Iwon't see it in a missed order,
but I will see it in theavailability of overall goods
and the cost of living.
Bernie Fette (18:53):
And what you're saying sounds similar to what
other folks on this podcast havesaid before about other modes of
transportation.
It takes something going wrongbefore we sometimes realize how
often things go right.
Jim Kruse (19:07):
?
Yes, that is true.
You know, we always hear whenthe airplane goes down and
people die, that's justhorrible.
But when you consider thethousands of flights per day,
yeah, it's a pretty safeindustry overall.
And the same thing happens onthe water.
We only hear about it whensomething really bad happens.
And I tell people, it's probablya good thing.
You never think about it becausethat means nothing bad's
(19:27):
happening.
Plus, I've never been stopped bya barge on my way to work.
I've never had a ship run intome on the highway.
So you know, they're kind ofover there, out of outta sight,
out of mind, leaving me alone,but getting the work done.
And that's always a good thing.
Bernie Fette (19:40):
Good point.
Last question.
What is it that motivates you toshow up to work every day?
Jim Kruse (19:47):
I just think the maritime industry is a
fascinating industry.
It involves people from all overthe world, literally all over
the world.
It's a true internationalenterprise, and there are no two
places where everything is donethe same.
It's just everywhere you go,it's a variation on the theme.
New things have to be handled,new situations have to be
addressed.
It's just a really fascinatingindustry in terms of the variety
(20:10):
of things you can look at andthe variety of people involved.
Bernie Fette (20:13):
And it looks like you've got no shortage of things
to study in the future on thistopic.
Jim Kruse (20:18):
Oh, things are evolving rapidly.
That's true.
.
Bernie Fette (20:21):
Yeah.
Jim Kruse, an expert inwaterborne freight movement and
it's many connections, doingresearch to help refine how
people here and abroad get thestuff they need.
Thank you for your time, Jim.
This has been really enjoyable.
Thanks for sharing yourinsights.
Jim Kruse (20:39):
My pleasure.
Thank you.
Bernie Fette (20:42):
When people couldn't go on vacations during
the Covid 19 pandemic, manyfound other ways to use their
money, and consumer spendingjumped by 23 percent.
So it's no surprise that everylink in the supply chains from
manufacturing to shipping wasstretched beyond routine limits.
(21:03):
Shippers and logistics expertshave learned much from the
biggest public health crisis ina century, and they're putting
those lessons to good use infinding ways to minimize
disruption if and when a similardisaster strikes.
Again, thank you for listening.
Please take just a minute togive us a review and subscribe
(21:23):
and share this episode, and wehope you'll join us again next
time for a conversation with TomScullion, a pavement engineer
and road doctor, taking aforensic approach to find the
reasons why some roadways failto last as long as they should.
Thinking Transportation is aproduction of the Texas A&M
Transportation Institute, amember of the Texas A&M
(21:46):
University System.
The show is edited and producedby Chris Pourteau.
I'm your writer and host, BernieFette.
Thanks again for listening.
We'll see you next time.
Hello again.
This is Thinking Transportation-- conversations about how we
get ourselves and the things weneed from one place to another.
I'm Bernie Fette with the TexasA&M Transportation Institute.
During the Covid 19 outbreak,stories in the New York Times
mentioned supply chains morethan 45,000 times.
(00:39):
Prior to the pandemic, you hadto look pretty hard to find any
mention of supply chains inmainstream news sources, and
that doesn't even count socialmedia, where mentions increased
by more than 10 times.
During the lockdown, we couldn'tseem to get the things we needed
when we needed them, and it waseasy to blame the supply chains
(01:01):
for our inconvenience.
Our guest for this episode willhelp us understand why it's not
quite that simple.
Jim Kruse is a senior researchscientist at TTI and an expert
in the freight that moves oncargo ships-- the way that we
get so much of the things thatwe use every day.
He's the director of the Centerfor Ports and Waterways at TTI.
(01:26):
Jim, welcome.
Thank you for joining us today.
Jim Kruse (guest) (01:30):
Thank you.
I always appreciate theopportunity to chat with you.
Bernie Fette (01:34):
When the pandemic started, people had a very
difficult time getting thethings they needed, and the
reason that we were given forthat is that the supply chain
was broken.
So if we can, I'd like to startwith a really broad question and
then maybe try to narrow theconversation from there.
My question is, is the supplychain still broken?
Jim Kruse (01:57):
Well, I'm glad you asked it that way because the
way I look at it, it was neverbroken.
It was overwhelmed.
And to me, that's a distinction,and I'll give you an example of
how that would work in reallife.
If you take a five gallon jar ofwater, like you have a water
cooler and you just dump it inyour sink all at once, your sink
will back up and you'll havewater maybe coming out of the
sink depending on how fast itdrains.
(02:19):
Does that mean your piping isbroken?
No.
Does it mean you've got aproblem with the plumbing?
No.
You just try to do too much toofast.
Yeah, and I think that's whereour supply chain wound up.
It wasn't broken.
It was never designed to handlethe volumes we're forcing it to
handle.
Bernie Fette (02:34):
Okay.
Really important distinctionthere.
So if we take that distinction astep further and ask the
question again, is the supplychain still overwhelmed, how
might we get a different answer,depending on whether we are
talking to shippers or if we'retalking to consumers?
Jim Kruse (02:54):
I think right now things have smoothed out quite a
bit.
Initially the problem was thatthere was such a surge in
consumer buying that the volumesrolled like 23 percent in one
year, which is justoverwhelming.
Right.
Since then, things have leveledout a little bit.
You saw these news reports abouthow many vessels were staying
off the coast of Californiawaiting to get to the port and
that kind of thing.
That's gone away.
(03:15):
Pretty much.
Things are functioning prettymuch like they should in an
ordinary situation.
So today that's fine.
But that being said, everybodyexpects another surge to hit at
some point.
And so what people are doing nowis they're buying equipment.
Suppliers are spreading outtheir sources of materials and
so forth that they're notdependent upon one particular
(03:36):
part of the world and things arehappening.
People are responding to this bysetting themselves up for the
next surge that it won't be asbad as this last one was.
Bernie Fette (03:44):
So adjustments are happening.
Some of'em on their own and someof'em by design.
Of course, seaports represent areally prominent link in that
supply chain that we're talkingabout that's been overwhelmed.
And that's your specialty area,I know.
So can you give us a sense ofhow much of the stuff that we
buy comes to us on cargo shipsand how much of the stuff that
(04:07):
we send away from America goesout on cargo ships?
Jim Kruse (04:10):
Well, as far as coming in goes, people would
find it interesting.
The largest importer of consumergoods in a containerized
shipment is Walmart.
Then you have Home Depot, youhave Toyota, you have Lowe's,
you have all these brand nameconsumer places that we go to
that are the big, big, bigimporters.
(04:31):
So those are the ones who aremaking it happen.
Exporting typically winds upbeing agricultural goods or in
some cases even waste paper,waste products that are being
processed elsewhere in theworld.
So that's kind of how it comesand goes.
I challenge people sometimes togo around their living room and
look at where everything wasmade, and I think you'll find
(04:52):
that almost nothing was made inAmerica
Okay.
So if it wasn't made in America,it had to get here somehow.
And you're not gonna fly a couchon an airplane, you're not gonna
fly a table on an airplane.
So those came on a boat fromsomeplace.
Your clothes came on a boat fromsomeplace.
I've often used theillustration, if you took out
everything in your house thatcame on a boat and didn't have
any of it, you might be sittingthere with no clothes on in the
(05:14):
middle of an empty house.
Bernie Fette (05:15):
Right.
And no bed to sleep on, etcetera.
Jim Kruse (05:18):
That's right.
Bernie Fette (05:19):
Let's talk a little about, cuz I think part
of what you're getting at isjust the simple laws of supply
and demand.
Mm-hmm.
Let's talk about that just alittle if we can.
I'm wondering how the supply anddemand trends may have changed,
if at all, in recent years.
And please answer that questionif you could however you'd like.
(05:39):
I mean, if you'd like to talkabout post pandemic or were they
already changing before thepandemic, please?
However you'd like to addressthat.
Jim Kruse (05:46):
Well, trade was actually increasing before the
pandemic, but what happenedduring the pandemic, two things
happened.
One is people said, well, Ican't travel.
I can't go anywhere, so I'lljust buy stuff for my house.
I'll buy computers, gamingequipment, exercise equipment,
patio stuff.
So they just started buying intremendous quantities.
In fact, there was a 23 percentrise in consumer buying from one
(06:09):
year to the next, which isdifficult for any kind of
business to absorb.
It was just a tremendous volume.
The real problem was on theother side, when Covid first
hit, people said, well, nobody'sgonna buy anything.
We'll just start closing ourfactories down.
And all of a sudden people didstart buying stuff and they
weren't ready to produce whatpeople wanted to buy.
So you had kind of a little bitof a shortage because the
(06:29):
producers were caught unaware ofthis latent demand that hit
them.
The buyers were going crazy,buying everything they could get
their hands on because theycouldn't do anything else with
their money.
And so these two things cametogether to overwhelm the
system.
And then we got these backups.
Bernie Fette (06:42):
So all of those producers you're talking about
weren't considering thepossibility that people were
gonna take their vacation moneyand spend it on stuff.
Right?
Yeah.
Which I think was a lot of whatthe news was, the news trends at
the time where people wereforegoing vacations because they
couldn't go anywhere.
So they decided they had to havesome outlet for their desire to
spend their money.
Jim Kruse (07:01):
And the economic data we're seeing now too, show
that people have kind of slackedoff on that consumer of buying
and started spending it ontravel and services again.
And so we're seeing more of apre-Covid type of distribution
of spending, which will helpquite a bit in smoothing things
out in the system.
Bernie Fette (07:17):
I think one of the points that you made earlier,
the distinction of how thesupply chains are being
overwhelmed as opposed to supplychains being broken.
Mm-hmm.
Please correct me if I'm drawingtoo much of a parallel here, but
can we not draw at least somecomparison with surface
transportation and the fact thatyou can't build highways and
(07:37):
bridges to handle surges all ofthe time, just because that's
not a very practical way toapproach.
Is there a legitimate parallelin what we're talking about
there?
Jim Kruse (07:45):
I think so.
As you say, you can't build forthe potential peak situation
because then you would have alot of assets sitting idle most
of the time and nobody canafford that.
Yeah.
On the other hand, if yoursystem is set up to be agile and
flexible, maybe you can reroutethings, you can move things
around.
You can use alternate methods ofgetting things from A to B that
(08:06):
would alleviate or mitigate someof this delay that we saw during
the pandemic.
Bernie Fette (08:10):
Okay.
So supply chains, again, notbroken so much as just being
overwhelmed.
And you talked about how some ofthe consumer trends are helping
to make adjustments to thatsituation of being overwhelmed.
Mm-hmm.
What else is happening on the, Iguess the manufacturer, the
(08:31):
shipper side of things toaddress that condition of being
overwhelmed?
Jim Kruse (08:36):
Well, there are two major things I see happening.
One is 40 percent of our goodsor more come from China and they
land on a West Coast port.
A lot of those shippers now arererouting their stuff through
the Panama Canal over to theGulf Coast and the East Coast to
kind of spread out theirnetwork.
Okay.
So that if Los Angeles/ LongBeach gets whammed all of a
sudden they've still got anoutlet to go somewhere.
(08:58):
They've got an establishedsystem someplace else that they
can use.
It takes more time and it costsmore money.
So it's gonna drive up the costof goods a little bit, but at
least the demand gets met.
That's the big thing.
The other thing is that duringthe pandemic, one of the things
we saw was that equipment wasgetting stuck everywhere you
looked.
Equipment was sitting idle.
For instance, a vessel tries tocome into the port of Los
(09:20):
Angeles.
They say, we've got all thesecontainers to unload.
The terminal says, well, I'msorry, but we're full.
We can't do anything with those.
So they call the warehouse, theysay, we've got some containers
we need to send your way.
And they go, well I'm sorry butwe're full.
We can't take any morecontainers and if you send any,
we're just gonna leave'em in theparking lot cuz we can't do
anything with them.
Then you say, well, okay, let'sput on a rail line, let's get it
out here on rail instead of by atruck.
(09:41):
Well, the rail line tells you,well, all of our rail yards are
full.
We've got no place to put thatstuff.
But what happens is, ifeverything is sitting there
waiting for an opening, you'rereducing the amount of equipment
that's actually working.
And at one point we estimatedthere was 20 to 30 percent of
our equipment that was doingnothing because it was sitting
waiting because of a congestedsituation.
(10:01):
So what people are doing now isthey're buying equipment like
crazy.
I mean, we're seeing more cranesbought and these containers move
on what's called a chassis.
It's a specialized trailer thatthey sit on so they could be
moved.
People are buying a lot of thosethat they don't have to worry
about getting one to move acontainer.
Warehouse space has just gonethrough the roof.
It's essentially 100 percentused in Southern California and
(10:24):
in here in the Houston area.
It's also a huge demand for thiswarehouse space and it's just
going up like crazy.
So what people are doing rightnow is they're trying to set
themselves up to have moreequipment so that if another
situation to happen where you'vegot 15 or 20 percent getting
tied up someplace, at leastyou've got equipment to work
with.
You're not stuck waiting onsomebody to free it up.
Bernie Fette (10:43):
Okay.
You've given us a good pictureof how the industry and how some
consumer habits are helping tolevel things a bit.
Mm-hmm.
things down a little bit withsuch a huge increase in consumer
purchasing.
What are the supply chain fixes,if we can call'em that, that
(11:05):
still need to be addressed?
The improvements that you thinkneed to be made, but we're not
there yet.
Jim Kruse (11:10):
One of the big things that people are checking
right now is the ability to handinformation out between all the
various parties involved.
And I should back up a step.
When we say supply chain, whatwe're talking about is all the
businesses, all the services,all the equipment that's needed
to get something from the pointwhere it goes to a factory and
that factory produces it, andthen it comes over to the final
consumer here in the U.
(11:31):
S.
All that's part of the supplychain.
One of the problems is thatthere is no single source of
data that says, okay, I boughtthis.
It's coming out of Shanghai.
Where is it?
What ship is it on?
When is that ship gonna gethere?
Where is it in the terminal?
Once it gets off the ship, howdo I know where to go get it?
All these kinds of things.
When is the ship expected toarrive, for instance?
These things are not gettinghanded off between all the, the
(11:53):
various players is there's a bigpush right now.
The federal government'sinvolved, several private
parties are involved, butsetting up a system where you
can trade this information,where you can access information
that tells you where things are,when big events are expected to
happen, and allow you then tomarshal your resources
effectively.
Bernie Fette (12:10):
In maybe much the same way that you can go online
and find out if that packagethat was mailed to you by a
family member in another state,you can go to the right website
and figure out exactly wherethat package is.
Jim Kruse (12:25):
Right.
And the idea again is to providesome real-time insight into
what's going on with yourdelivery, but also to provide a
little bit of a forecast methodso that if I know that I've got
a thousand containers are gonnahit me next month, I need to
have the trucks in place, thewarehousing space available, I
need to have the chassisavailable, the people available,
and I can plan for that.
(12:46):
If I'm just sitting here and athousand boxes show up, uh-oh,
what am I gonna do now?
So that's kind of the ideabehind all that.
Bernie Fette (12:53):
Yeah.
Try to minimize the surprises.
Mm-hmm.
We as consumers, were really nottalking about supply chains
until Covid 19.
Mm-hmm.
If another global crisis,whether it's a public health
crisis or whatever it might be,were to hit without warning next
month, how much more ready arewe than we were in 2019?
Jim Kruse (13:20):
That's a tough question to answer, mainly
because I don't have insight towhat all the individual players
in this game are, are doing, butokay.
I would say that it takes timeto develop a response to any of
these kind of situations.
So I'm sure we're not there yet.
Uh- huh,
shipping stuff from Oakland toHouston and it'll just be
(13:40):
overnight real easy.
Which is not the case.
It typically takes years to setup the receiving facility, the
distribution facility, thepeople involved, the the agents
that are required to make thingshappen and so forth.
So people are doing that.
They're reconfiguring supplychains, they're ordering a lot
of equipment, a lot ofequipment's being ordered to
help make sure that we don't getstuck with things just sitting
(14:02):
in parking lots and warehouses.
But again, it takes time to dothese things.
And so I would say we'reprobably another year away from
saying, okay, now we're in abetter position than we were
last time.
That's just my personal guess.
It's not based on cold hardfacts, but if you just read what
people are doing and read whatpeople are reporting, that's
what it looks like.
Bernie Fette (14:21):
Okay.
And again, before Covid 19, theonly people who were really
talking about supply chains werepeople like you-- people who
work in some field of shippingor distribution or logistics or
in your case in research relatedto all of those different
things.
Mm-hmm.
And now it seems that greatnumbers of people feel
(14:41):
comfortable mentioning supplychains anytime that we don't get
our stuff delivered to us asfast as we want to get it.
Is that in any way perhaps agood thing, the fact that people
are just talking about supplychains at all?
Jim Kruse (14:55):
Oh, I think that helps.
Public awareness is always agood thing because then you
appreciate some of the measuresthat are being taken and some of
the difficulties public agencieshave in providing infrastructure
and some of the things thatprivate players have to do to
make their businesses operate.
You begin to appreciate that.
I get the biggest kick outtapeople blaming everything on the
supply chain, though.
Not everything that's lategetting here is because the
(15:17):
supply chain was an issue.
Bernie Fette (15:18):
Jim Kruse (15:19):
But, but it has been more frequent than in the past.
I'll grant that.
Bernie Fette (15:22):
Yeah.
Okay.
Well while you're on that topic,tell us about some of the other
things that people can blame ifthey're not gonna blame the
supply chain.
Jim Kruse (15:28):
Well, again, maybe your orderwas mishandled by the, uh,
person you placed the orderwith.
Okay.
Sometimes, I guess it is part ofthe supply chain, but one of the
things we saw during thepandemic, and it's happening
again, is that producers inChina and some of the Asian
countries had a Covid outbreak.
And so they just shut everythingdown.
We're not doing anything.
Nobody's gonna come to work.
(15:49):
We're just stopping.
Well, when that happens, youcan't fulfill the order that
somebody in the U.
S.
ordered.
So that is a reason why thingsslow down.
If China's having a a hiccup,we're gonna feel it over here at
some point.
Mm-hmm.
So it, it is not always thesupply chain itself, although I
guess you would say theproducers, the beginning of the
(16:09):
supply chain.
I think a lot of what we'reseeing too is that as people
begin to reconfigure their wayof sourcing their products and
as buying habits continue tochange, we're going more toward
this online shopping than weever had before.
Mm-hmm.
for people to get past themistakes they make in trying to
do these things and and learnhow to do it better.
(16:31):
And I think we're seeing a lotof improvements just almost
every month here is somethingnew being tried that hasn't been
tried before.
So what do you blame it on?
Um, I dunno what you blame iton, but again, I don't think the
supply chain was broken, butyou're gonna have to allow more
time if you don't wanna pay morefor it.
And so that's just the waythings are.
Bernie Fette (16:50):
Yeah.
Yeah.
What sort of takeaways would youlike to leave with anybody
listening to this?
Jim Kruse (16:58):
One of the things that I'd like to point out is
that ports across the countryare breaking volume records
constantly.
21 was a volume record, 22 isanother volume record, 23 may be
another one.
So it's not that ports areslacking or that the system is
not working.
They're handling record volumes.
But when a record volume means Igrew 10 percent and people
(17:19):
wanted 20 percent, you still gota problem.
Right.
So yeah, that's kind of wherethat was.
I always say ports are notslackers.
They are getting the work doneat record paces and record
volumes.
It's just there has to be abalance between what they can
handle and what they arehandling.
That's the problem.
I think the other thing I wouldpoint out is that here in Texas
especially, ports are really thelifeblood of the economy.
(17:41):
The tonnage handled in Texasports is 25 percent of the
nation's total, the nation'stotal.
That includes California, NewYork, East Coast, West Coast,
all that stuff.
Bernie Fette (17:52):
Wow.
Jim Kruse (17:52):
So it is the lifeblood.
And with our oil industry andpetrochemical industry here, the
amount of cargo that's justmoving in and out is just mind
boggling.
Houston is the nation's busiestport that handles more vessels
per year than anybody else.
We hear all these things aboutCalifornia and New York and
Seattle, but Houston is thenation's busiest port.
(18:13):
It handles it over 8,000 ships ayear call this port, divided by
365.
And you can see it's a lot ofactivity.
Bernie Fette (18:20):
Wow.
Yeah.
That is,
Jim Kruse (18:21):
That's, and some of our ports are military outlets.
Beaumont is the nation's busiestmilitary port for moving
supplies overseas.
And Corpus Christi does it, PortArthur does it.
So we're a military strategicpoint.
Just things like that.
It's, you know, Freeport is oneof the nation's largest
exporters of liquified naturalgas-- LNG.
Ports are the livelihood of theeconomy.
(18:42):
If they're not working, we'regonna notice it one way or
another.
Maybe not immediately, maybe Iwon't see it in a missed order,
but I will see it in theavailability of overall goods
and the cost of living.
Bernie Fette (18:53):
And what you're saying sounds similar to what
other folks on this podcast havesaid before about other modes of
transportation.
It takes something going wrongbefore we sometimes realize how
often things go right.
Jim Kruse (19:07):
Yes, that is true.
You know, we always hear whenthe airplane goes down and
people die, that's justhorrible.
But when you consider thethousands of flights per day,
yeah, it's a pretty safeindustry overall.
And the same thing happens onthe water.
We only hear about it whensomething really bad happens.
And I tell people, it's probablya good thing.
You never think about it becausethat means nothing bad's
(19:27):
happening.
Plus, I've never been stopped bya barge on my way to work.
I've never had a ship run intome on the highway.
So you know, they're kind ofover there, out of outta sight,
out of mind, leaving me alone,but getting the work done.
And that's always a good thing.
Bernie Fette (19:40):
Good point.
Last question.
What is it that motivates you toshow up to work every day?
Jim Kruse (19:47):
I just think the maritime industry is a
fascinating industry.
It involves people from all overthe world, literally all over
the world.
It's a true internationalenterprise, and there are no two
places where everything is donethe same.
It's just everywhere you go,it's a variation on the theme.
New things have to be handled,new situations have to be
addressed.
It's just a really fascinatingindustry in terms of the variety
(20:10):
of things you can look at andthe variety of people involved.
Bernie Fette (20:13):
And it looks like you've got no shortage of things
to study in the future on thistopic.
Jim Kruse (20:18):
Oh, things are evolving rapidly.
That's true.
Bernie Fette (20:21):
Yeah.
Jim Kruse, an expert inwaterborne freight movement and
it's many connections, doingresearch to help refine how
people here and abroad get thestuff they need.
Thank you for your time, Jim.
This has been really enjoyable.
Thanks for sharing yourinsights.
Jim Kruse (20:39):
My pleasure.
Thank you.
Bernie Fette (20:42):
When people couldn't go on vacations during
the Covid 19 pandemic, manyfound other ways to use their
money, and consumer spendingjumped by 23 percent.
So it's no surprise that everylink in the supply chains from
manufacturing to shipping wasstretched beyond routine limits.
(21:03):
Shippers and logistics expertshave learned much from the
biggest public health crisis ina century, and they're putting
those lessons to good use infinding ways to minimize
disruption if and when a similardisaster strikes.
Again, thank you for listening.
Please take just a minute togive us a review and subscribe
(21:23):
and share this episode, and wehope you'll join us again next
time for a conversation with TomScullion, a pavement engineer
and road doctor, taking aforensic approach to find the
reasons why some roadways failto last as long as they should.
Thinking Transportation is aproduction of the Texas A&M
Transportation Institute, amember of the Texas A&M
(21:46):
University System.
The show is edited and producedby Chris Pourteau.
I'm your writer and host, BernieFette.
Thanks again for listening.
We'll see you next time.
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