Strong as its weakest link: Scrambled supply chains portend disrupted summer | Coronavirus
Do you remember building n ° 19?
And building # 19 ½, and building # 19 ¾ and all the other original stores, described in their equally original leaflets as “our semi-charming stores?”
They were invented by the late local entrepreneur Jerry Ellis, who built a mini retail empire in New England by buying what he delicately called “overstocks” from vendors – whose identities he protected in its advertising – which was wrong about the company’s basic supply and demand.
He promoted these errors of judgment as “good cheap stuff” and furnished countless dormitories and early college apartments with furniture, rugs, and even art at discounted prices. (Not to mention the clothes, shoes, and other items that had piled up in warehouses and warehouses until they were a bit dated, but still usable.)
The last of the # 19 buildings closed in 2013. They had faced competition from other discount retailers who were looking to copy Ellis’ business model and from the internet of course, but also been affected by the disappearance of the company’s main source of supply. More efficient supply chains made overstocking less common.
And that’s of course a good thing, isn’t it?
Companies got a lot smarter – using things like computerized inventory controls – to predict what was going on in their markets and with their supplies, notes Mitchell Glavin, a professor at Stonehill College in Easton, who is particularly interested. to supply chains.
These tools – like barcodes on everything from a bag of mulch to an individual peach – allowed businesses to know with some precision what was going on in their homes and what needed to meet consumer demand.
Costs were controlled, waste minimized, and profits increased – the holy trinity of modern business.
Manufacturers and retailers were no longer burdened with pallets of things they had to pay for to stack them in warehouses. Items moved smoothly through the supply chain in response to customer wishes. Companies like Dell have components out of the box “but they don’t put them together until someone orders a computer,” says Glavin. Apple doesn’t keep a large inventory of iPhones because, well, who wants an old iPhone?
It was a system that seemed designed to anticipate the ups and downs of supply and demand. But there were things he couldn’t foresee.
“When you’ve reduced your inventory as low as possible, you don’t have as much wiggle room,” says Galvin, when the unexpected happens.
Something as unexpected as a global pandemic.
When governments and industries criticized disruptions to the global economy, the delicate balance of the supply chain was upset and the impact of any subsequent disruption was magnified.
And it could combine to make a summer more expensive for many people anxious to escape the restrictions of the coronavirus pandemic.
For example, one of the few factories in the country that make chlorine disinfectants for swimming pools suffered a fire, which destroyed part of the manufacturing capacity. That, combined with an increase in swimming pool purchases as people planned to entertain themselves near their homes, created a shortage and soaring prices. Chlorine tablets are hardly available, said the suppliers who preferred not to speak officially, although other chemicals are in stock.
Or take the simple bike. A year ago, Bob Sirois Jr., of the family-owned Sirois Bicycle Shop in North Attleboro, was selling up to 15 bikes a day to people looking for something to break the monotony of lockdowns.
Many distributors had sold low-end consumer bikes, he told the Sun Chronicle at the time. And the country faced a severe shortage of bicycles as global supply chains in China and elsewhere in Asia, disrupted by the pandemic, scrambled to meet surging demand.
“Bicycles are the new toilet paper shortage,” Sirois said at the time, adding that he had an adequate supply.
This spring, Sirois said he was anticipating demand and out-of-stock products from China and Taiwan.
The result, he says, is that now: “There is a shortage, but my store is full of new bikes. I have people from Rhode Island and New Hampshire who can’t find the bikes they want closer to home. “There is a problem in the supply chain.”
But it’s not just in bikes.
The cost of lumber adds about $ 36,000 to the price of an average new single-family home, according to the National Home Builders Association.
Although prices for building materials are still fluctuating, volatility has increased over the past year as the pandemic has resulted in plant closures, a shortage of truckers and other logistical issues that have made the chain unpredictable supply, the Associated Press reported.
At the start of the pandemic in March 2020, sawmills actually cut lumber production, predicting new home sales to slow, according to economists at TD Bank. Instead, Americans – and families in other countries – looked for more room during quarantine and bought new homes or looked to renovate. This increased the demand for lumber, even as the supply was reduced, pushing up lumber prices, the AP said.
The National Home Builders Association pointed to insufficient domestic production dating back to Trump for the increases.
“When prices started their historic rise in August 2020, the NAHB reached out widely to the Trump administration, members of Congress and sawmills to call for swift action to address supply shortages that are hurting small businesses, builders of homes and, ultimately, the economy in general “and continues to do so under the Biden administration, according to the group’s website.
Escalating boat sales, fueled by the coronavirus pandemic, have created a nationwide shortage of ships in the United States, as people clamor to find social distancing activities to undertake outside of their homes, economic news service pymnts.com recently reported.
Boat sales, along with demand for marine products and services, reached $ 47 billion, a 9% increase from 2019, according to the National Marine Manufacturers Association (NMMA) fourth quarter report.
And if you want to drive somewhere to get away from it all because you can’t swim in your pool, find a bike to ride a bike, a boat to sail, or build an addition on your house, that won’t be cheap either.
According to AAA, the average price of a gallon of gasoline exceeded $ 3 last week for the first time since October 2014. The price of oil is $ 66.40 a barrel, the highest since 2018; more people drive as the economy recovers from the worst of the pandemic; and parts of the country are seeing prices increase due to the closure of a major pipeline.
A year ago, a gallon averaged just $ 1.85 as people curled up in their homes at the very start of the pandemic.
Gasoline vehicles are also becoming more expensive. Prices for used cars and trucks jumped a record 10% in April. A global shortage of computer chips is reducing production and leading to higher sticker prices.
It’s a global phenomenon, Glavin points out, Stonehill professor points out, and as nimble as it is supposed to be, the economy may not respond quickly. Where supply has met demand in the past, albeit slowly, unlike 20 or 30 years ago, Glavin notes: “It may be that only a few key suppliers” manufacture key components or cut wood or synthesize these. chemical products.
“The demand is obvious,” he says, “but getting the money to build a factory to meet that demand would be a major undertaking.”
There are only two companies that make all these cotton swabs needed for coronavirus tests, he points out. But you can’t just start pulling swabs out of your garage to meet demand. They need sophisticated machines to spin this material.
Ultimately, Glavin says, companies will have to take into account that the unexpected – war, natural disaster, or a ship stuck in the Suez Canal – can upset the delicate balance of the modern supply chain. “What’s the sentence? A chain is as strong as its weakest link. “
Whether a greater diversity of suppliers will be codified by regulation or “it will be up to companies to decide how best to achieve the best results,” says Galvin, will shape the future of the supply chain.
(Material from the Associated Press was used in this story.)