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Supply Chain in the Spotlight

Most of us have toiled away most of our careers in a profession few outside of it have had any idea what it is.

That has changed in a big way in the last few years, I will argue in three phases.

The first, roughly 2016 to 2020: This is when advances in efulfillment, from Amazon to drones to mobile robots delivering meals via city sidewalks and more, started coming fast and furious. Even for a casual observer, things were happening in probably what was considered logistics rather than supply chain, but almost every understood something transformative was afoot.

Phase II was 2020, the year of the virus pandemic, when supply chains morphed to keep delivering the goods to store shelves under vary tough conditions, serving as what I called the "thin supply chain line" that separated mostly well stocked and fed consumers from chaos and panic. That includes several companies that built supply chains to create, make and deliver virus vaccines in incredibly short time frames. Supply chain was certainly part of the pandemic discourse.

Now, phase III, in 2021 - a variety of factors have led to what many have termed "shortages of everything" and sharply rising prices for many goods. Supply chain issues are now commonly cited on mainstream news programs as causing those shortages, with occasional references to "supply chain inflation."

As just one of many examples, the headline in an Op-Ed piece this week in the New York Times was this: "Why Does Everyone Suddenly Care About Supply Chains?"

In fact, many are now concerned that supply chain bottlenecks, including labor shortages and huge delays, congestion and soaring costs in ocean shipping, could torpedo the economic recovery.

"Global supply chain bottlenecks are feeding on one another, with shortages of components and surging prices of critical raw materials squeezing manufacturers around the world," an article in the Wall Street Journal last week," adding that "The supply shocks are already showing signs of choking off the recovery in some regions."

US and European companies that rely on Asia for finished goods, components or materials are being especially hard hit, as some countries there are still in the throes of lockdowns and other coronavirus-related restrictions, severely constricting their ability to meet demand.

Then there is the crazy scenario with global shipping, with huge delays in both loading in China and unloading in US ports, and seeing costs rise to almost unfathomable levels, with rated soaring from $2000 to ship a container from China to the US to $20,000 or more in some cases.

I heard last week one company executive say inbound logistics costs had risen for his company from 3-4% of revenue last year to 17% currently. Wow.

With demand exceeding supply almost everywhere, prices are rising rapidly. The US consumer price index rose 5.4% in September versus 2020, the highest year-over-year gain in prices in any month since 1991.

With the big jump in inflation, the Social Security Administration announced this week that the cost of living increase in payments for 2022 will be a huge 5.9% - good news for the 70 million US retirees, but it will add significantly to the ever growing US budget deficit next year.

The concern about the economic impact of the supply chain woes - and I would guess equal concern over Christmas shoppers unable to find the gifts they want to buy, especially toys, led President Biden to meet virtually this week in a 17-person "virtual roundtable" with port directors from Los Angeles and Long Beach, top officials from the Teamsters and AFL-CIO labor unions, the US Chamber of Commerce, and other business groups.

The result? A commitments from top importers such as Walmart, FedEx and UPS to use the new extended hours at the Port of Los Angeles to move shipping containers that have slowed freight operations. Will that alone have much impact? I suspect not.

The headline from Reuters: "US supply chain too snarled for Biden Christmas fix, experts say."

We are seeing a preview of what may soon to be Christmas shopping chaos with reports of empty shelves in terms of costumes, decorations and candy for Halloween.

How long all this will last is unclear. Some are saying well into 2022, and some even early 2023.

"Global supply chains could remain clogged for two years because the world is so reliant on China for manufacturing, said the chair of DP World, one of the biggest container port operators," the UK's Financial Times reported this week.

Personally, I believe we'll see major relief by end of Q1 next year.

But these are unprecedented supply chain times - we'll just wait and see if there is a supply chain phase IV.

What's your take on the current supply chain in the spotlight? Let us know your thoughts at the Feedback button or section below.