Sep 22, 2021 10:17:24 AM | 7 Min Read

The Fed, Tequila, Ships and PT Boats

Posted By Bay Cities
The Fed, Tequila, Ships and PT Boats

Reuters reported on September 8th that the US economy “downshifted slightly” in August according to the Beige Book. “The deceleration in economic activity was largely attributable to a pullback in dining out, travel and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant in a few cases and international travel restrictions.” Fed officials reported, “rising employment overall.” Fed officials are grappling with when to reduce their 120-billion-dollar monthly bond purchases as a first step in stopping our post-pandemic monetary policy. Now would be a great time to stop the trillions of dollars of money supply into our system that ultimately drives inflation. Hell, no one wants these low-interest bonds anyway as they don’t pay anything. The Fed has almost doubled its balance sheet in less than two years. We know we will be paying more for everything over the next who knows how many years. Oil will be $80 a barrel by the end of the year. Our GM from our sheet feeder ENCORR tells me we went from $2.78 a BTU of natural gas to $7.30 per BTU and he sees it going to $10 before year’s end. Our politicians now hate fossil fuel and without this energy driver we have no chance of driving an economy towards renewables as this advancement in green energy has to be done in stages not just shut the valve off. The costs of labor, freight (which we will talk about shortly) commodities, and just about the price of everything are marching higher and higher. The price of a box will soon have gone up 30% on average in just a year. Transitory inflation as a word for cover your backside things will be just fine, as inflation is a tax and our friends in Washington don’t quite get that formula.


So, let’s get to the tequila, shall we? I went to our neighbor’s home for a Labor Day barbeque. He loves tequila and has taught me to admire the cactus-inspired elixir. We got to try many different flavors and styles over the years and this time he was debuting some special sauces from a few unknown villages in Mexico that were brought in by his brother-in-law. It is amazing just how smooth some of these different types of tequila are. My neighbor is an administrative clerk at the Port of Los Angeles. He is in the trenches every day. He asked me a very odd question, “what record do you think the port set last month?” I thought maybe the largest tonnage of the product was being unloaded in a month. Nope, it was the largest number of ships (44) not being able to be docked in a month. Today there are 33 ships not being able to be docked. This really caught me off guard (not because of the wonderful effect of the agave liquid) but because of the sheer number of ships sitting in our harbor with no way of getting unloaded. We knew this would be the most challenging fall with regard to containers not arriving into our packout barns, but I didn’t think it would be that bad. We were building extra time into having suppliers bring their goods in two weeks earlier to avoid late shipments to the retailers we work with and it looks like most of them are going to miss deliveries by weeks. Here we go!

We heard from one of the largest freight operators in North America last week and she shared with us that the railyards in Chicago are completely shuttered. At the main terminal, a truck takes 4-6 hours to grab a container due to this congestion. Because the terminal is located right smack in the middle of traffic hell, trucks take hours just to get out of the terminal and get on the road. After that, they can’t continue due to the restrictions of driver’s hours of work. Thus, drivers don’t want to run pick-ups out of that congested rail terminal. At ports across the US docks are so full there isn’t even any room to bring back chassis and empty containers. My neighbor told me just today that the Port of LA is offering $2,000 for a chassis. Add Covid issues into the mix and we are in for many months of strangled supply chains. We all need to start learning about tequila right about now!

When we got news of the extremes of these broken supply chains, and the effects they were having on our retailers and our suppliers to the retailers, we began to concentrate on our freight brokerage, to help all of them out with these dilemmas, so we could move their products for them outside of their large carrier contracts. Late last week we were brought into an opportunity to help a sizable company land, house, manipulate goods, build their item creation, and manage their data and distribution. People are diverting from the Port of LA and many other congested ports around the country. We have utilized our long-enduring relationships throughout this industry and country to help in situations like these. Our PT boat team, manned with the best in the business, curated our partners in different ports to divert this Client from Direct Import to Prepaid freight contracts and helped them get distribution going. Without this remixing, they would never have been able to make it to market.

While this PT boat crew was in the midst of helping this Client come to America, we had another Client transition their business from our LA facilities to our Royal Bay facility in Chicagoland. This work is mostly data manipulation: pick and pack extremely valuable product that involves a tremendous amount of scanning and validation of data. Inside of 30 days, we reconfigured software, purchased hardware, and built processes and procedures to bring to Royal Bay and train our partners on the many intricacies of this build. We rotated two teams from LA in and out of the TAPA secured facility to execute the pilot order. The Client’s Supply Chain team came out to observe the processes and without fail we succeeded in bringing them to market, once again in a highly fractured supply chain situation and in a very quick amount of time. This was a highly successful manipulation put together by our PT boat specialists. Their spirit and determination brought forth their ability to beat extremes, eliminate waste, drive efficiency, and utilize technical skills of programming, data manipulation, and hardware development, to bring a new Client to market with a new and very innovative product. Our PT boat crew also taught our Royal Bay team how to be wildly successful with these types of manipulations and how to succeed in the future with many more of these types of builds. This is what Bay Cities is all about. Bringing resources, processes, technology, and grit together like a PT boat requisitioned to sink that battleship and win!


Greg Tucker 

Chairman CEO


Topics: Corrugated, Packout, Logistics

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