Tuesday, April 19, 2005

Another Lesson in Trickle Down Economics

Increase in imports causes backlog at ports
Longer delivery time - Premiums for shipping

Not long after the trading rules with China were relaxed, the bottlenecks at American ports started.

Since January, when the remaining U.S. quotas on textiles were lifted for some developing countries, China exporters have sent tons of goods to the United States faster than they can be unloaded.

So far this year, U.S. imports of textile and apparel products from China has increased more than 63 percent from last year, according to preliminary data released by the U.S. Commerce Department last week.

The increase in imports is good for shipping companies and ports, including those in Wilmington and Morehead City which have welcomed ships rerouted from other East Coast ports.

But the backlog has created problems for some companies.

From florists to manufacturers to frozen foods exporters, business owners say they are seeing longer delivery times for some products.

That, combined with higher fuel costs, is making business more challenging, and some companies are already passing the added costs on to customers.

For example, couples planning spring weddings should budget more for flowers.

Carlton Long, the owner of Carlton Flowers in Raleigh, said the cost to ship silk flowers from China and other eastern countries has gone up 15 percent to 20 percent over last year.

Some of that increase is because shippers are passing on higher fuel costs.

But companies also have had to pay a premium just to get products loaded onto a boat.

Long said that some of those increased costs are reflected in the price he charges.

"It has to trickle down to the consumer the same way as gas prices do," he said.

"Business can't afford to absorb all these extra high costs."

Electronic Systems Protection of Zebulon, which makes surge protectors for the copier industry, gets 90 percent of its components from China.

"Typically, something that used to take eight to 10 weeks lead time, now takes 12 to 14 weeks," said Ken Stanley, the company's procurement and inventory manager.

As a result, Electronics Systems Protection has had to deviate from its "just in time" inventory program under which suppliers delivered materials to the company as needed.

The congestion at the ports isn't as bad as in 2002 when a dock-workers strike caused shipment backlogs as long as 10 weeks.

And for now at least, it seems to be affecting smaller companies more than larger ones that have more clout with shipping companies, said Robert Handfield, professor of supply-chain management at N.C. State University.

But if imports continue to rise, other retailers could be affected, including the likes of Lowe's, Home Depot and Target, Handfield said.

And with such a wide variety of products -- including canned goods, furniture, linen, toys and automotive parts -- coming in through ports, consumers will start to notice the delays and feel the pinch of the higher shipping costs.

Handfield added that the larger volume of shipments isn't the only reason for the delays.

Goods also are taking a longer time to pass through customs because of national security guidelines, which require a more detailed search of cargo, he said.

Ernie Boragaurd, owner of Reefco Logistics of Raleigh, which ships frozen foods, said he is having a hard time even getting his cargo on ships.

Summarized by Copernic Summarizer


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