There's no single measure we can look at to tell us whether supply chains are improving or not. There are some signs of easing (such as the number of containers sitting at the ports), but other signs are still getting worse (such as the number of ships waiting to dock). So what's really going on? And are the White House's efforts at easing the strain actually bearing fruit? On this episode, we speak with Gene Seroka, Executive Director of the Port of Los Angeles, who we last spoke to in the summer, about the actual situation on the ground. Transcripts have been lightly-edited.
Joe Weisenthal:
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway:
And I'm Tracy Alloway.
Joe:
Tracy it's seems like there are some tentative signs out there of easing global supply chains.
Tracy:
Yes and no. I keep seeing a mixed bag. And also, I mean, we kind of have to talk in terms of geographies as well. So I know Bloomberg Economics literally just hit the button on a piece of research saying that there seem to be some signs of improvement in the U.S. and Europe, but in places like the UK, things are just getting worse. But of course, even in the U.S., there's a lot of debate over what exactly it is we're seeing and what we should be looking at in terms of judging whether or not things are actually getting better.
Joe:
Right. There is not like one supply chain index or one measure of prices or one measure of shipping time that can give us the answer. There's clearly a lot of different moving parts to all this. And so at this point, I think maybe it's safe to say things aren't still getting worse, I think generally speaking, at least in the U.S. But whether things are like sustainably getting better, are packages and containers moving through our system faster, still feels kind of ambiguous.
Tracy:
Yeah, I think that's right.
Joe:
And of course, we recently spoke with the White House’s envoy to the port, John Porcari, and the White House itself has been putting out some blog posts and some stats saying, look at this improvement and then other pieces of data say that, eh, that improvement is a mirage. So yeah, I think we've sort of established just a lot of questions still out there.
Tracy:
I think that's right. And also when we spoke to Porcari, we said we were going to have to check in on the other side of all of this, which is with the actual Port of Los Angeles that the White House, the Biden administration, has been working with and see how things are actually going from their perspective.
Joe:
Well, that is what we're doing today. And so I'm very delighted, we spoke to him back over the summer. We are going be speaking again for an update on the situation at the Port of Los Angeles -- Gene Seroka, the executive director at the Port of Los Angeles. Thank you so much for coming on Odd Lots.
Gene:
Good to be here, Joe and Tracy. Thank you.
Joe:
Thank you so much. So why don't you just, give us the sort of very big picture, how things look today. We're recording this December 13th. The last time we had you on it was early August. Why don't you give us a little bit of a comparison between what's going on right now and then?
Gene:
If we talked back in the summertime, late summer, and folks told me that we would be nearing and surpassing the all time record for holiday sales, according to the National Retail Federation and had a chance to also simultaneously break the all-time record for retail sales in the country, I think there'd be a lot of skeptics led by me, but that appears to be where we're headed right now. Now behind that, there are a lot of, there are a lot of storylines. There are nuanced effects. There are so many variables in each equation. There's a lot to unwrap here on today's podcast, but happy to be with you both.
Tracy:
So what is it that you're watching now in terms of actually judging how much you are moving through the port? Because we had this conversation with Porcari a little while ago, we were talking for instance about the number of ships that are waiting off the coast. And he was emphasizing that we should all be looking at throughput and the number of actual containers that are moving through the port. So from that perspective, how are things going?
Gene:
Sure. I think we've gained some traction in a number of areas, but in all sincerity, it's like a game of whackamole. You do a couple of things pretty well as a supply chain -- and no one individual or no one entity is pulling every lever as you both well know, but as soon as something gets a little bit more traction or on better footing, something else jumps up and you have to approach it right away too. So looking at what we have been doing, I'll give you a couple of indicators. One, the number of idle containers sitting on the port’s marine terminals has decreased by 60% since October 24th. And that's when we first started discussing with the industry the potential of levying a penalty for the aging containers sitting on our docks. Second, the ongoing productivity at the ship level continues at record pace. We're welcoming more vessels that are worked every day at the Port of Los Angeles than ever before. And, on average, 50% better than when the surge began. And the other piece to this is that we're starting to see those signs on the macroeconomic level of the U.S. that are so encouraging, including the statements by the National Retail Federation, overall inventories at the warehouse level nationwide and the in-store or in-stock shelf where inventories at the retail level, that are just about a percentage point below where there were a year ago.
Joe:
Let's talk about the ships that are docked out because some have said, well, sure you can decrease the number of containers that are aging, waiting, simply by just having them be on the ships. And that ultimately it doesn't really change much. The number of ships, at least the latest stats that I've seen or at least up until recently have gone up. What is going on with that? And is there some sort of mirage here where those containers instead of aging on dry land are aging out on a boat?
Gene:
Yeah. One, I would say no mirage, but here again, Joe, this is really nuanced and I'll try to carry it through where we were, what we look like today and where we're going in the future. Much of the dialogue around the ports. And again, this is a global supply chain, but around the ports has been how many ships do you have sitting outside at what we call anchor? So we dutifully measured and reported on that daily, as you both well know. On our hero slide of our homepage at the port of Los Angeles are a litany of statistics that we look at every day, including major ones that have drawn the attention of observers and industry partners alike, especially those vessels at anchor. And then recently, as of the 16th of November, the private sector industry folks decided to put a new process in place when it comes to the liner shipping vessels that come our way every day.
So I'll explain this in two pieces where we were and where we are right now, we looked at and we show on our operations report every morning after our 0900 staff meeting here at the Port of Los Angeles, how many ships are in, how many ships are at anchor, what's on their way over the next three days. And that had been fairly traditional. So everybody could keep up with what's happening. On November 16th, the industry went to what they call a queuing system. And what they were trying to do was get after three areas that were problematic. Number one, pollution in and around our residential areas of the ports. With all these ships stacked up for an elongated period of time waiting to come into the ports, there was more pollution. That had to be dealt with. Second was the safety of our crews and the vessel assets because they were coming over here, sitting outside the breakwater, very close to each other. We've experienced some high wind events recently that got the ships moving in the ocean-going seas a little bit closer to each other than we would've liked. In fact, there was a lot of us that were really concerned about that.
And then thirdly, the reason they were rushing over and sitting at anchor was because that was the protocol for putting in the requests for the dock workers, making sure we had enough folks on the job to work each one of those individual vessels. So the industry decided to do this. You were allowed to put in your requests or orders for dock workers as you left Asia, therefore you didn't have to race across the Pacific simply just to get in line. You were allowed to stay a little bit further out as agreed upon for industry protocol and let's call it 150 miles offshore.
In that setting, you could sit farther apart from each other, if you had to. And de-risk that potential for collision in a high wind event. Thirdly, it moves all those emissions farther offshore and nowhere near the proximity of the residential areas here in Los Angeles and long beach. So that was the backstory to all this. Now because we're the folks that are looked to for transparency and the posting of all these numbers and information, we had to get to work to recalibrate along with industry how we would report out and create an apples-to-apples comparison of what we would've looked.
So today, as an example, outside of the waters of the Ports of Los Angeles and Long Beach under this new definition, we have 94 ships that are waiting to come into the port to do their work. If we used that same definition back on November 16th, we would've had 89 ships sitting, waiting to come into port. Most of us in the industry call that anchorage. At the Port of Los Angeles specifically we have 43 ships that fall into that category of waiting to come in to do their work. And if we use that same definition back on November 16th, it would've been 44. So again, the comparison of the definition was really important to get out to the public, to the media community and others. And we look pretty similar on those two specific dates based on what the private sector industry has brought forward as a new process.
Tracy:
So I wanted to go back to something you said or earlier about the number of containers that are, you know, sitting at the ports waiting to be loaded onto trucks or rail. I think you said that that number is down something like 60%, was that right?
Gene:
That's correct. And those are the containers that we defined as sitting at the port nine days and longer back on October 25th.
Tracy:
So one of the reasons, or the big reason those are down is because you have threatened to impose this charge, this $100 fee on containers that are either stuck there, I think for, for nine days or in some cases it's six days or more. And my question is why not just start imposing that fee? Why just have the threat of it? I mean, I get that you've achieved a pretty dramatic reduction with just the threat, but at some point, do you need to sort of follow through on what you’re saying?
Gene:
Potentially. And that's why the ability to charge this fee has been under my authority and will be so until the end of January, but we have kept the fee in suspension because we've seen progress in the industry. If you go back to our emergency harbor commission meeting back at the end of October, I told our board of harbor commissioners that I hope this is a miserable failure. That would mean quite simply that we're moving cargo and we would not collect any money. To date, we have not collected any money and we've seen a decrease in those aging containers because everybody pulled together. Now, obviously there was a financial interest in this. People did not want to get penalized. People did not want to see a problematic situation, get worse. At the same time, we were able to use this fee to also segment cargo. And there was admittedly cargo on our docks that was not needed right now at that snapshot in time, nor is it today. It may have been a little late as seasonal product that had already moved past its market. It may be a little early for next spring. And we were able to figure this out through the data mining in the port-optimizer, our port community system. We worked with the retailers, other large importers and said there's no shame here. Let's just move this cargo away for the time being, so we could really move the product to market that needed to get there. Think of holiday products and parts and components for our factories across the nation.
Joe:
Let's go in [and get] a little bit more clarity about why the containers built up so much in the first place, because I feel like I have two different ideas in my head. One is perhaps that the container owners viewed it as free storage and maybe the inland warehouses are like 98% capacity, so no rush taking it off the dock. The other thing that we've talked about before with, I think, you and some other guests, is just that there is a traffic jam at the port for the dray truckers to even get the containers off the port. And that there's only so many of them that can get in, you know, in the course of a day and when they're traffic jammed, they can't get 'em out. So what were, in your view, the underlying conditions that caused the buildup to get as bad as it did?
Gene:
Joe, it was both plus probably a dozen other issues. There were importers who admittedly brought in cargo just in case — not just in time as we had done in the past. Many folks knew that once we started to get wound up as we saw the American consumer demand really increase, that they were gonna have to get orders into factories in Asia as quick as they could and faster than their competitors. So maybe they ordered a few more lounge chairs or patio sets, maybe some flat screens well ahead of the time for the Super Bowl, which is the biggest sales time for TVs, and a variety of other important commodities. On the other side, we had and saw many examples on the ground of importers having a very difficult time getting their containers off port property. And that could have been a trucker stuck in a long line. That could have been an empty return policy of a terminal. It could have been a bad order chassis or not enough chassis at the right place.
So it was never a situation where we were just saying, okay, this is the only reason we're gonna go after it. Just like other areas of the supply chain. They’re so nuanced and there are so many reasons behind the inefficiencies that you just have to keep chipping away. So we did work with some of the large retailers and say, if you don't need your cargo right now, let's just move it to the side. And they were so gracious in working with us because they knew that they also had product that has to be speeded up to get to market. Then with the smaller and seasonal folks, we said, okay, if we can do this and get a little more maneuverability on our terminal tarmacs, we're gonna get to your product, but we're gonna do it through a program called Accelerate Cargo LA, where we turn this into a push system.
It's not simply wait for the hours of operation and sign up for your appointment. We know where your cargo is, how long it's been here, we're gonna come to you and say, this is how much cargo we have, and we can move out every day. You're gonna commit to us that you'll take that amount of cargo. You'll have the truck power we'll circle with the chassis people and the terminal operators. It was everybody working in that node to make sure we could deliver. The other piece to this was also working with those nodes. If we needed a more standardized process on export and empty returns, that's why John Porcari was having the meetings three times a week with industry stakeholders — and these were decision makers. So we went after it with as wide of a lens as possible and keeping our perspective that knowing we got one piece, right, we'd probably have three other pieces we had to get after next.
Tracy:
I wanted to ask you as well about the the expansion to operating 24/7. How is that actually going? And what obstacles have you had to, you know, sort of surmount in order to expand the working hours? Because I remember when you came on last, we were talking about, for instance, the difficulty of the tightness of the labor market and the difficulty of either convincing existing workers to work night shifts or getting new ones in, who would be able to work that schedule. And we were also talking a little bit with various guests about local noise ordinances and pollution restrictions and things like that. And basically just the difficulty of moving to this 24-hour schedule. And yet it's seems like you've made it happen. So what's changed on that front?
Gene:
All of that's true, Tracy and, and your recollection is absolutely spot on. I'll take you back to October 13th when I had the privilege of meeting with the president of the United States directly, we had other meetings with [Transport] Secretary Buttigieg, Brian Deese, the director of the NEC, and so many leaders on the cargo ownership side. We at the Port of Los Angeles traditionally work about 19 hours a day, day shift from eight to five, cleaning and sanitizing of equipment, then a nightside shift from 6:00 PM to 3:00 AM. We're trying to look at squeezing every hour of productivity from this port that we possibly could and working that three to eight shift or what we call the ‘hoot shift’ was another one of those opportunities. The president in his announcement was also trying to get this largely private sector supply chain on the same schedule as the port, meaning that the truckers who have 11 hours of service permitted to them by the federal government every day, and if they run consecutive days, must take time off, have to get on that schedule to be serviced better. Run at nighttime when there's less traffic on our roads and freeways
The warehousing complexes of which we boast more than 2 billion square foot of space from the shores of the Pacific out to the Southern California desert region, traditionally operate during the day. And both segments have a dearth of workers on the job right now. It's been stated by the American trucking association that we're short about 80,000 drivers nationwide. And I would tell you here in Southern California ports, we could use probably three or 4,000 more truckers. Nationwide, we have job openings for 400,000 warehouse workers and maybe eight to 10,000 here in Southern California alone. So when we can catch our breath one day here in the future, we need to look at how we turn these two segments into professions again.
We may have to look at compensation and benefits, but we have to find a way as a broader industry, both public, the federal state, local governments, as well as the private sector — transportation and customers of the port — to see what we can do to attract, recruit, and retain folks in this area. My grandfather was a teamsters trucker for the American Can Company in New York City for 40 years. He put children through school. He built a home on his own. Today we've got to find a way to look at the jobs in that same way. It's an uphill climb, I know that. That's a lot of work in front of us, but we've got to have enough folks in these segments to be able to operate on the same schedule. As an example, the ports can operate. So moving forward and opening up this dialogue has been good. We still also only use a certain percentage of our truck appointments every day, again for a variety of reasons, some operational, some that cargo is just not needed, and others that we have to improve upon.
Joe:
Can you talk to us a little bit more about the role that Porcari and the White House have played? So you mentioned three meetings a week. When he came on the podcast, he talked about his role as simply being like an honest broker, someone who was trusted by all the different parties. What happened, or what has happened, or what is happening in those discussions, and how does simply getting everyone on the same page allow greater throughput with the same physical resources as before?
Gene:
Well, without this, and without John, I would say right now, we'd be having a very different conversation, Joe. This all started back in February when President Biden wrote up the executive order on supply chain that also asked for a deeper look into certain commodities. Think these microchips that go into our phones, our automobiles and our computers, and then the President created the supply chain disruption task force, tri-chaired by the secretaries of labor, transportation and commerce. Next out of that shoot was the July 15th virtual round table, chaired by Secretary Buttigieg that had all private sector industry leaders join in addition to the ports and Southern California and some others. Shortly after that round table, John Porcari was named as Port Envoy. And we began going through all of the details, all of the personnel and all of the requirements of this industry. Had we not had that inertia beginning with President Biden's EO all the way through the personnel moves, he made, we'd be in a much different place.
John's accessibility has been first and foremost, one of the best things that's happened. He's been able to use that cache to bring together the necessary decision makers in the industry. And, while no one is declaring victory, and we have a tremendously long path in front of us, I think we're a lot better for having John around and helping us get to those decision points we needed. First and foremost was dating back to the summertime. Many folks thought that we were gonna have a real rough go of it when it comes to the retail market and especially the holiday season. But as I reported to John and many, many members of the media including you both, our savvy American import community began bringing holiday goods in as early as June, because they saw the longer lead times, the transit times being extended and so many complexities in the supply chain, even though that created a real storm of cargo. Think, keeping up with consumer demand, holiday goods and seasonal goods back to school, fall fashion, Halloween, all converging at one time this summer. It really helped get us in a position to have some semblance of progress leading up to the holiday buying season. Many folks also have said that they started shopping earlier this season at the recommendation of what they saw from the federal and state governments, what they heard from the ports and what they heard from shows like this. Get out there a little earlier and see if you could take that time to start your holiday shopping season with an eye on just that in mind.
Tracy:
So are there ever any areas of tension that might arise between, you know, an appointee from the federal government and a business — I mean, I know you're owned by the City of Los Angeles but you're still a business trying to generate revenue and some income for the city — and I can imagine, for instance, when, um, John Porcari says that, well, maybe we should be, rerouting a lot of containers to different ports that actually have the capacity to move them, I could imagine that that might be something undesirable for the Port of Los Angeles,
Gene:
You know, in normal times, Tracy, you're correct. But at this point in time and operating with a hundred year pandemic, with a consumer buying surge the likes of which we've never seen, supply chain disruption worldwide but maybe more acute here in the United States because of the size of our economy and the spotlight that's been on us. This was a time I felt you had to take off your local hat and do what was in the best interest of the country for economic recovery, pulling people together and everything in between. It also just happens to be the case that the cargo that traverses the Port of Los Angeles reaches each of our nation's 435 congressional districts, therefore automatically it is a conversation of national significance. And we have talked about bringing some of these new entrants to the trade, carrying smaller quantities of cargo on smaller vessels, bring those to other ports, whether it be Oakland, San Diego, Hueneme up in Ventura county. If the four corner strategy had to be deployed again by certain importers, meaning bringing more cargo to the East or Gulf Coast, if that's part of the equation, that's okay too. But still even with all of the details and all of the concerns in this U.S. supply chain today, bringing more and more cargo through the Southern California gateway is the best opportunity we have right now to make a difference for the U.S. economy. But again, it just comes down to situational awareness and doing what's best for the United States of America.
Joe:
What’s the opportunity with the infrastructure money that's been allocated to ports? What will that do for the port system or specifically your port?
Gene:
I think specifically for our port, it will allow us to accelerate projects that we classify as shovel ready. We have the financial wherewithal and capability, and that's how we were able to invest through cycle and keep 3,000 construction jobs going when it was difficult in other sectors, as we've talked about before. Those shovel-ready projects begin with a workforce training and development center, that will be the first of its kind in the United States. As we know technology, robotics, and the transition to this next level is going to be difficult on the workforce, but we cannot leave them behind. So this workforce training center is designed to reskill, upskill and promote opportunities for the next generation of worker. Think of a mechanic who goes to work with a toolbox today, they may be upgrading and fine tuning that equipment with a computer tomorrow. And those are the skills they they're gonna need.
Second is repurposing land. As we've seen more of this cargo flow and how it's changed, we're gonna have to repurpose land and develop what we call grade separations, flyovers. So we're not getting in the way of local commuters and school buses, but allowing for trucks and trains to move and remove bottlenecks. That's what's gonna happen here in Los Angeles. And over the last 10 years, the federal government and U.S. Congress have out-invested the west coast ports at a rate of 11-to-one. That means about $11 billion has gone to ports on the east and Gulf Coast compared to a little more than $1 billion here on the west coast. And with 40% of the nation's imports coming through Southern California, I think the best return on investment for the American citizen is right here in Los Angeles and Long Beach.
Tracy:
At the very beginning of our conversation, you described a lot of these supply chain strains as sort of being like whackamole, you know, you kind of get a handle on one of them and then a new issue pops up. What are the major issues now? What's your area of focus and what's taking up the most of your time, if you could be as specific as possible?
Gene:
Sure. I think it all starts with consumer demand and it remains elevated. And that's great because 70% of our GDP is driven, by us buying products. And I'm no different than anybody else right now. We've got to look at what fulfillment means compared to traditional bricks and mortar retail sales, and have a good focus on that. So that's breaking down a segment or two within that import retail system that maybe we need a finer look at. We've got to be able to scale better as an industry, both up when we see these surges and back down during what we call slack season or ebbing of the flow. The next piece are all these undercurrents that have happened since Covid- 19 began. Remember even dating back to the days of the trade policy in the previous administration, we went about eight months importing 20% less than we normally do.
And then we pivoted so quickly to all of us buying more product than ever before. So this surge predominantly has been the American importer, just trying to keep up with the consumer’s demands. We next will have to manage an early Lunar New Year. So the imports will remain elevated. And we're seeing that in the number of ships coming across the Pacific right now. Then in the second quarter, the retailers and home improvement stores are telling me they're gonna focus on inventory replenishment because our inventory sales ratio is still the lowest it's been in a decade while we have seen inventories move up, they need to get better according to the experts. Built within all of this because of the import strength, empty containers have piled up. And there's been a big conversation among John Porcari’s meetings about how we get those empties evacuated to keep the terminal tarmacs fluid and make sure we have the most maneuverability possible, because we saw what happened when imports piled up, everything got gummed up right there at the marine terminal. I don't want to have the same issue repeated with empty containers.
So we've asked and in some cases implored our shipping lines, bring in these sweeper vessels, bring in as much capacity as you can, even though there's not much in the marketplace right now, but use every available slot to get these empties out, focus on what you can do for the American exporter and turn those containers as quickly as possible so we can keep the sense of fluidity and it all pans out because we've seen our container dwell times — so the time the container sits, be cut in about half for trucking and down to pre-surge lows for our rail product right now. So again, all of these KPIs (key performance indicators) and measurables are looked at every day and each one has a knock on effect. Right now, empties. But again, Tracy, to your point, we're not just focused on empties and letting everything else run. Empties have risen to the awareness level that we need, but we're still looking at that stream of another dozen KPIs that we have to manage every day.
Joe:
So you mentioned the Lunar New Year. You mentioned the eventual Q2 restocking and that's gonna be a huge source of demand continued. At that point, I don't know if we're looking at middle of 2022, would you expect to see the number of ships at anchor and some of these other metrics start to meaningfully decline?
Gene:
Yeah, that's the goal Joe. I can't predict exactly when we hit this certain number or what the ship sitting at anchor will look like, but I'm starting to see a little more clearly what segments of upcoming demand will be. And it's based on the expert advice, what our data mining is showing us, but it'll give us a chance, if we do the, these next couple iterations the right way as an industry, as a collective, we get a chance to position ourselves next summertime, to pivot into a peak season where we have a real chance to improve that supply chain certainty that has been so elusive to date,
Tracy:
Any concerns about the omicron variant?
Gene:
Tracy, every day, there's something in the news that's impacting the supply chain and that's one of them. With omicron, we're looking at exactly what we can do, what our backup plans are going to be — across the ocean as well as right here at home. At this point, we don't see anything that's really debilitating in the industry. We've shown we can pivot to the second and third waves of Covid-19 that hit south and central China earlier this year. We've been extremely resilient on the docks here in Los Angeles, as well as our trucking firms and our warehouses. We just need to keep our eye on the prize every day and keep those contingency plans at the forefront should something happen that requires us to pivot very quickly.
Joe:
Well, Gene Seroka, executive director of the Port of Los Angeles. Thank you so much for coming on Odd Lots.
Gene:
Joe, Tracy, always good speaking with you. Thank you again.
Joe:
We'll talk to you next summer.
Tracy:
Thanks Gene.
Gene:
Look forward to it. Hey, available for you anytime. No problem at all. All right. Take care.
Joe:
So I think just in that conversation, it's pretty clear how it's sort of hopeless the idea of like, oh, we're gonna like get one measure that tells us whether the supply chain is getting better.
Tracy:
Yeah, I think that's right. Although I was thinking maybe we should start a supply chain index.
Joe:
We should. And honestly, if we could, we could probably make a lot of money. Like if we were like, oh, this is the one and it became the reference. We'd probably do really well.
Tracy:
Start doing options or derivatives tied to the Odd Lots Supply Chain Index.
Joe:
Yeah. Futures, supply chain futures.
Tracy:
We'd help the industry by allowing them to hedge.
Joe:
No, but your question, you know, he mentioned the whackamole and your question at the end, it's like, okay, what are you going after right now? Like what's popping up, sort of got at it. It really does seem like it's still, you know, there are some areas where they're getting better. It sounds like legitimately there are fewer containers on the ground on dry land there, but still the number of issues that continue seems pretty extraordinary.
Tracy:
Yeah. And I mean, the other thing that's coming through pretty clearly is this idea of the first quarter of 2022, after Lunar New Year, which I think this year is, I think it's the first week of February. Everyone, again, seems to be coalescing around that moment as the sort of inflection point where we should actually start to see some measurable improvement. I guess, incontrovertible improvement in supply chain issues. So again, like, I feel like that's going to be an interesting moment to watch.
Joe:
And then we're gonna have this booming demand because of the inventory restocking, which should keep GDP generally pretty strong in the U.S. because we're running pretty lean as he mentioned. So there is this big well of demand out there for retailers to catch their breath and actually get inventory levels that they're comfortable with.
Tracy:
Yeah, that's true although I feel like you could also argue at the other way, which is, you know, maybe people have been over-ordering already in response to very strong consumer demand. And you know, if the economy starts to slow, which it potentially could do in 2022, then suddenly they're not going to need as many goods as they thought they were. So I guess again, the big theme that kind of comes through all of this is just how difficult all these supply chain issues and ordering and inventory actually are to predict, like how hard it is and how often we seem to get it wrong and how that tends to lead to problems that become very, very difficult to solve.
Joe:
I've been thinking about this because, look it's December 2021. So we're basically two years solidly into it, I mean, you know, you could say March, 2020 when it really started, but we first heard about it in December, 2019. So we're like two years into this, and no one, or let's say not nobody, but not many people would've guessed in December, 2019 that we'd still be talking about this pandemic so much, two years later. It really seems like it makes it hard to plan anything. And so you think about investment, you think about, oh, you know, sort of permanent changes or what are appropriate levels of ordering or inventory levels. It's pretty hard to predict. And so, you know, you think about like supply chain persistence, inflation persistence and so forth. It seems like probably a lot of that is simply because the last two years have simply been so unpredictable.
Tracy:
Yeah. I think that's right. I mean, just think back to March, 2020, if you told someone then that we were gonna have a big boom in consumer spending within the next year, I think everyone would've thought you were crazy. And that's exactly what we had. And partly because we didn't expect it is the reason that we are now countering so much trouble because people cut back on their inventories and didn't make the appropriate amount of investment. And so we're suffering, you know, still almost a year and a half on
Joe:
And the pandemic is still going on. And we really, you know, in some sense, life is normalizing, but it's not normal. And we really do not know when we'll be at some sort of like, okay, this is stability. We really have no idea. And so, you know, anything here in terms of ordering or the good-services mix, it's still pretty much guesswork.
Tracy:
Yeah. Well, on that happy note, shall we leave it there?
Joe:
Let's leave it there.