A record number of container ships wait to unload due to the blocked ports of Los Angeles and Long Beach near Long Beach, California, United States, September 22, 2021.
Mike Blake | Reuters
These days, everything from seemingly random shortages of items in the grocery store to fine print warnings that your online purchases could experience shipping delays, can all be attributed to a terribly broken supply chain.
The everyday items and services we all take for granted – buying half and half, repainting the kitchen, buying a new sofa – have been disrupted by the Covid-19 pandemic, and more specifically, the unpredictable delta variant. As we have all been forced to recognize over the past 18 months, when one point in the supply chain is disrupted or delayed, the repercussions are felt right down the line. More than 70 container ships unable to unload cargo at Los Angeles and Long Beach ports are not just a nighttime report. This is the reason why the patio furniture you ordered in June has still not arrived.
Fixing supply chain problems won’t be easy or quick, experts say. At its core, the problem that plagues almost all disruptions along this globally interconnected network is the lack of manpower. Container ships off the coast of California do not have the longshoreman to unload them. A shortage of truck drivers – a problem that existed before the pandemic, but has only worsened since then – means goods cannot get from ports to warehouses and then find their way to retailers and consumers.
Tony Costa, chief information officer at Bumble Bee Seafood, says the pandemic has been a bit of a “double-edged sword” for his business. In 2020, demand for Bumble Bee’s products skyrocketed, with 6 million new customers trying the company’s shelf life offerings as the pandemic unfolded.
However, a spike in the delta variant in some of the countries it sources from is now forcing Bumble Bee to seek out different suppliers. “We have all this renewed interest in our products, but we have all these disruptions in the supply chain,” he says. “It’s so integrated globally that any problem impacts everything downstream.”
As companies like Bumble Bee experience an increase in demand, they also face rising transportation costs and longer delivery times due to labor shortages. Costa says he’s seen shipping costs four and five times higher. “Our typical truck shipment was between $ 4,000 and $ 5,000 before the pandemic,” he says. “Now we are seeing over $ 19,000.” He also says that the transit of goods takes three to four times longer than usual.
Labor shortages at every step of the supply chain impact businesses of all stripes. It also affects economic growth. A survey by the United States Chamber of Commerce of leaders of local chambers of commerce found that 90% of those leaders say labor shortages limit economic growth in local areas.
Customer demand exacerbates supply chain problems
Dick’s Sporting Goods, like Bumble Bee, has been riding a wave of increased demand throughout the pandemic. As gyms closed last year, people ordered more outdoor gear and fitness equipment, driving sales up faster than ever in the company’s history.
The company reports that demand has remained strong this year, but supply chain disruptions, especially those now plaguing factories in Vietnam, make it harder for the retailer to stock everything it needs. Because of this, he warned analysts that shipping issues in Asia could impact costs and sales growth during the all-important holiday season.
Sneaker giant Nike, a major supplier to Dick’s, has supply chain issues itself. Last week, the company lowered its outlook for fiscal 2022 due to longer transit times, labor shortages and prolonged production shutdowns in Vietnam. On a recent conference call, Nike CFO Matt Friend said the company expects its entire business to experience short-term inventory shortages in the coming quarters.
Meanwhile, the member-only warehouse chain Costco recently announced that shipping delays and labor shortages have prompted the company to lower purchase limits on essentials like paper. toiletries, bottled water and cleaning products. Unlike in the early days of the pandemic, when demand exceeded supply, the reason now has more to do with delays in getting these products to store shelves in a timely manner.
And FedEx last week slashed its financial outlook because labor shortages led to increased spending in the last quarter, while supply chain issues reduced shipping demand. FedEx said it spent an additional $ 450 million in the quarter ended Aug. 31 to cover costs associated with increased overtime, higher wages to attract more workers, and increased transportation costs.
Supply chain start-up solutions
While a relaxation of the delta variant and its oversized impact on every part of the supply chain will help to smooth the flow of goods, so will technological solutions. Better deployment of automation in ports, factories and warehouses must be part of the answer, says Brian Laung Aoaeh, partner of Newark Venture Partners, a company that invests in supply chain start-ups.
“The pandemic has made operations that were already ineffective even more inefficient,” he says. “Supply chain technology start-ups that have created solutions to help companies manage their supply chains more effectively are going to do well in the years to come. “
In the meantime, companies accept that the pandemic will have lasting implications for the functioning of supply chains. Technology platforms that use advanced technologies like artificial intelligence and machine learning will help businesses identify potential issues before they disrupt the flow of goods.
“Every company tries to find the best ways to get its products to consumers in the most efficient and economical manner,” says CIO Costa of Bumble Bee. “Real-time visibility into the supply chain and the location of hot spots is absolutely essential. “