Supply Chain Challenges…Why So Many?
Supply chain challenges worldwide are causing severe shortages to many industries. As the world’s economies are reopening, demand is spiking with a massive amount of orders being placed in Asia to restock retail and distributor shelves.
What challenges are we facing today that contribute to supply chain issues?
Import Challenges
- Container Shortages are causing delays to ship products. Many more containers have shipped to USA and Europe then shipping back to Asia. Further, labor shortages at USA and European ports are causing slowdowns in unloading containers.
- Cost increases in the form of surcharges to freight from China have skyrocketed lately due to fewer container spots on ships. Additionally, Amazon, Walmart and other giant retailers are buying up most available container space causing shortages for container space on ships for all others.
- India’s recent COVID spike is causing shutdowns in the country and resulting in manufacturing demand increases to China and more pressure on the freight issues.
- The Suez Canal two week back up caused a domino effect holding up hundreds of ships and resulting in major congestion at ports around the world and adding to the container deficit.
US Domestic Challenges
- States opening up have resulted in product demand skyrocketing.
- Truck driver shortages are resulting in longer lead times and higher wages to hire drivers.
- Labor shortages due to COVID concerns and/or stimulus packages.
- Corrugated box price increases and extended lead times are slowing product production.
- Domestic manufacturers cut back on inventory levels due to COVID related drops in business which caused tighter cash flow as they now trying to replenish.
- Domestic manufacturers not investing in plant and equipment due to low margins thus supplementing inventory with imports, further driving demand and US import dependency.
Additional Contributing Challenges
- Resin Price increases worldwide coupled with increasing demand are adding to pricing pressures.
- Raw material price increases in pulp and aluminum foil roll stock are adding to pricing pressures.
- Concerns of future deflation related to potential overstock of high-priced inventory by worldwide vendors further contributed to lower inventory levels (example of disposable masks price volatility in 2020).
There is no clear time line to normalcy, however most economists expect this situation to last thru the summer and some believe through the end of the year. RJ Schinner is working diligently to find solutions to alleviate the severity of these increases and supply shortages. If you should have any additional questions or concern, please contact your local RJ Schinner sales representative.
Visit the RJ Schinner DSR Support Blog home page to view more posts.
Content contributed by Tim Scott, Senior Vice President of Purchasing & Corporate Strategy
For more information on this topic check out the links below:
From boba pearl shortages to skyrocketing shipping costs, US small businesses are still grappling with supply chain disruptions
– Business Insider India
Container shortages, delays beset shipping industry as ‘ripple effect’ of Suez Canal blockage continues
– China Macro Economy
Sources: https://www.freightwaves.com/news/flexport-trans-pacific-deteriorating-brace-for-shipping-tsunami
