Supply chain issues shackle consumers
BLAKE FONTENAY | THE DAILY MEMPHIAN
MAY 10, 2021
During the early days of the COVID-19 pandemic, people flocked to grocery stores to stock up on toilet paper, hand sanitizer and other household items they suspected might soon be in scarce supply.
The Great Charmin Famine of 2020 never fully materialized. However, for months the pandemic and other factors have disrupted the supply chains businesses use to get their products into market.
This problem is affecting consumers in a number of different ways: People buying refrigerators or other large household appliances might have to wait months instead of weeks for delivery orders. Those shopping for new cars might have not be able to find their preferred models on showroom floors. Buyers of new homes might experience sticker shock over the high cost of lumber and other building materials.
“It is the most out-of-balance situation I’ve seen in 30 years of being in this business,” said Satish Jindel, president of SJ Consulting Group Inc., a Pennsylvania-based company that provides information services for the shipping industry.
Simply put, what is out of balance is the relationship between supply and demand, one of the most basic concepts taught in introductory economics classes.
Demand for products is high, particularly as the economy recovers from the effects of the pandemic. And supply, for a variety of reasons, is struggling to keep pace.
Doug Session, general manager at Mercedes-Benz of Memphis, said his dealership is selling cars on pre-order because of a lack of available inventory to show customers.
“Everybody is having the same issues,” Session said. “Our inventory is very low right now.”
For car dealers, one of the factors disrupting the supply chain was a fire in March at a Japanese manufacturing plant that produces about 30% of the microcontroller units used in vehicles worldwide. That fire is expected to disrupt production for much of the summer, if not longer.
Other industries are experiencing problems for different reasons.
When the pandemic forced communities into lockdowns, the market for new home construction dried up. When lockdown restrictions ended, there was pent-up demand for new housing, which fueled a building boom.
That, in turn, has made it more difficult to get lumber, a problem felt by everyone from professional contractors to do-it-yourselfers who want to repair their decks or build summer treehouses for their kids.
Jim Whittington, owner of Jimmy Whittington Lumber Co., said his business has been able to manage its inventory through long-term contracts for lumber and plywood. The company also has its own tractor trailer, which it can use to pick up wood from sawmills in the region.
“The biggest issue our industry has been having is with trucking,” Whittington said. “It’s a backlog of not just lumber, but all building materials.”
A new normal
Woodson Dunavant, senior vice president of enterprise business development and marketing for Dunavant Logistics, said many truck drivers have chosen to take better-paying jobs. That means there are fewer trucks available to offload goods arriving at ports like those in Los Angeles and Long Beach, California.
Those delays create a domino effect throughout supply chains.
“It’s created a real bottleneck,” Dunavant said. “Companies are having a lot of trouble moving products around.”
There are other issues contributing to the slowdowns, such as lack of availability of large shipping containers in Asia and shortages of wheeled chassis used to transport those containers over land once they reach America.
“It feels like this is a new normal we’re in,” Dunavant said. “We haven’t seen a reduction in freight rates in six months.”
Inventory management has also been tougher for manufacturers and retailers due to uncertainty created by the pandemic. Consumers still want to buy products, but in some cases, their buying habits have shifted from visiting bricks-and-mortar stores to ordering online.
Greg Costa, president of Delta Materials Handling Inc., said some manufacturers shut down or severely scaled back their operations when the pandemic hit. Now those manufacturers are trying to ramp production back up to meet demand, but that’s a process that takes some time.
“Nobody knew what was going to happen” when the pandemic hit, Costa said. “We rebounded more quickly than many people anticipated.”
Costa said the worker shortage isn’t limited to truck drivers. His company rents forklifts and other warehouse equipment, but some companies are having trouble finding employees willing and able to operate that type of equipment.
“The demand for employees is extremely strong,” Costa said.
Jindel, the shipping industry consultant, said action taken by Congress to ease the effects of the pandemic have contributed to the supply chain problems in two ways.
For one, by issuing stimulus checks, Jindel said Congress encouraged more consumer spending. At the same time, however, Congress agreed to continue enhanced unemployment benefits through September, which Jindel said has created a disincentive for people to return to work.
That applies not only to truck or forklift drivers, but package handlers and other workers needed to keep supply chains strong.
“If people can make $15 an hour sitting at home, why would they want to go to work for $12, $13 or $14 an hour?” Jindel said.
Until that imbalance between supply and demand is corrected, Jindel said consumers can expect higher shipping costs and delivery delays for the foreseeable future.
“There is no relief from it, in my view, until next year or 2023,” Jindel said.