Blog: America’s Port Problems Push Pause on D.C. Tech Startup
(Originally posted on the U.S. Chamber blog)
Kathleen Hale aims to keep her startup on the move. In fact, that’s kind of the point.
Started two years ago in Washington, D.C., Hale’s company, Rebel Desk, designs and sells treadmill desks, allowing professionals to squeeze some exercise into the hours they spend laboring away at the office. Her business concept is all about productivity and efficiency.
The same can’t be said of America’s seaside ports – and that’s causing a real problem for Rebel Desk.
Last fall, Hale’s firm hit promotional gold when its products were featured on “Good Morning America” and “The View” within a matter of weeks. Orders started flying in for the walk-while-you-work desks – so fast that Hale worried the company might run out of stock. If so, it would only be for few days, though, a week at most, as a 40-foot container filled with its desks and treadmills was already making its way across the Pacific from the firm’s manufacturer in Taiwan.
“We thought we’d be OK,” said Hale, who started Rebel Desk with her husband, Jeff, at the 1776 startup incubator in Washington. “It wouldn’t be a big deal.”
She was wrong.
Rebel Desk’s order was scheduled to arrive in Long Beach, California, in early October, around the same time massive delays started to snarl import and exports flowing through West Coast ports. Experts say the slowdowns were the result of a decades-old port system that has fallen further and further behind technological advances in the maritime shipping industry.
Hale says the ship carrying her products arrived on time and the container was offloaded promptly in early October, but it then sat in the shipyard for weeks as a backlog of goods mounted at the port. Her freight services supplier sent trucks on several occasions to try to pick up the container – sometimes in the middle of the night, and always on Hale’s dime – to no avail. There were simply too many trucks arriving to pick up goods and not enough resources available to handle them.
“We knew exactly where it was, but we just couldn’t get to it,” Hale said.
It wasn’t until November 9 that the company was able to retrieve the container, deliver it to a warehouse and start sending out products. And unfortunately, Hale’s problems were just beginning. Directly behind that first container, aboard another vessel, was a second shipment – this one even more important, as it held Rebel Desk’s much-needed holiday inventory.
This time, the ship couldn’t even get in to the port to unload.
“So we’re getting closer and closer to the holidays, and the ship is just sitting out there in the ocean,” Hale explained. “Nothing was leaving the shipyard, so containers couldn’t get off the boats, so those boats couldn’t leave, which means the ones waiting couldn’t come in.” It was a situation that the president of a local trucking company would later describe as “a meltdown on the harbor.”
That second container eventually arrived at the warehouse five weeks late. In the meantime, Rebel Desk started taking pre-sale orders on some of its products, which are sold online. For other products, during the busiest shopping season of the year, the company was forced to simply list them as “out of stock.”
“We were out of stock for about a month, and for us, that’s quite a while,” Hale said. It left her to wonder just how many holiday sales her small company (she and her husband, Jeff, recently hired their first employee) lost from customers while they were in limbo. “It’s hard to estimate how much that happened, but the holidays are a huge time for us, so it certainly impacted our sales,” she said.
Contrary to the West Coast port delays that made headlines early this year – which were largely due to a bitter labor dispute – the backlog that affected Rebel Desk last fall stemmed from a multitude of infrastructure-related problems that ports on both coasts have been grappling with more in recent years. Namely, experts say, ports like the ones in Long Beach suffer from a dearth of chassis to load and unload goods, persistent labor shortages, rail delays, communication problems, and most importantly, harbors, docks and equipment that weren’t built to accommodate today’s increasingly large shipping vessels.
Kevin Ricciotti, chairman of the trade group Harbor Transportation Club, cited those problems in an interview with The Washington Post, saying: “The dirty little secret here with the ports of L.A. and Long Beach is that while everyone’s trying to put the emphasis on labor, there are some underlying issues that we have currently right now that are only going to manifest themselves later down the road.”
Those underlying issues are already causing plenty of problems. The American Association of Port Authorities reported earlier this year that at least seven of the country’s ten busiest ports are currently grappling with persistent congestion. That spells trouble for American businesses and the U.S. economy, as $900 billion worth of goods are moved in and out of the country on ships every year.
As Congress debates ways to replenish the nearly empty Highway Trust Fund – which provides money for critical road, highway and bridge work around the country – the mounting port problems and Hale’s story paint a picture of a nation in need not merely of pothole repairs and wider freeways, but also of a comprehensive, long-term solution to revive our nation’s marine transportation and shipping systems.
For Hale, the delays continued until the spring, when a container that was initially slated to arrive on February 9 finally showed up on March 4. Unlike a large retailer with warehouses and products spread across the country, she noted “we can’t just find a way to get more inventory.”
“It’s important for people to understand the impact that these delays have on small businesses,” she said. “When we place an order, we put down money, and we don’t make it back until we sell it. When that time frame gets longer and less predictable, that’s more strain on a small business like ours.”
In the three months since that March shipment, Rebel Desk’s containers have started arriving more or less on time again – but that doesn’t mean Hale is resting easy.
“We hope the issues have been resolved, but it sounds like there were some Band-Aids used that might allow the problems to pop up again,” she said. “It’s now another thing we have to worry about.”