Will Supply Chain Issues be the Grinch that Stole 2021 Christmas?
Posted by: Dean & Draper Insurance Agency | November 9, 2021
Global supply chain issues have disrupted everything from construction supplies to what’s available at your local grocery store.
Shoppers have noticed a shortage at the market on items such as toilet paper, ice cream flavors, carbonated drinks, chicken, coffee, diapers, fish sticks, spices, and more.
Yuletide Cheer Could be in Short Supply
Unfortunately, economic forecasters do not see supply chain hiccups clearing up until sometime in 2022 so that means consumers may be left searching high and low this year for traditional holiday staples.
“Demand is driving optimism this year but kinks in the supply chain, including bottlenecks along various points in the transportation system, could cut into supply. We’re hearing talk about potential shortages of toys, trees, and yes, maybe even holiday sweaters,” wrote USA Today on Oct. 21, 2021. “Clogs clearly exist in the supply chain system as a backlog of cargo ships creates a traffic jam in the Pacific Ocean. And logistics experts warn that the trucking system is short on drivers.”
AARP pointed out in an article on Oct. 19, 2021 that some Halloween products were having trouble making it to market on time, and that the same thing could happen at Thanksgiving with turkey and then at Christmas with items normally found under the Christmas tree such as consumer electronics and clothing apparel.
“No one really knows, but there are good reasons to suspect that this will be with us well into 2022 and maybe longer,” the New York Times wrote on Oct. 22, 2021. “Shortages and delays are likely to affect this year’s Christmas and holiday shopping season by making it much harder to find key goods. A lot of companies ordered earlier, which is exacerbating the shortages, sending more surges of goods toward ports and warehouses.”
Supply Chain Issues May Get Worse Before Getting Better
The New York Times says that when it comes to what is in short supply the answer is “just about anything produced or manufactured – from chemicals to electronics to running shoes. Shortages beget more shortages.”
Experts like Tim Uy of Moody’s Analytics, according to CNBC, think that the supply chain problems will get worse before they get better.
“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Uy said in a report.
Uy said that the supply chain will play catch up for some time, especially with bottlenecks located in:
Even those products able to make it to the U.S. from overseas are getting stuck dockside with warehouse space near ports and hubs booked solid.
“Space in our markets is effectively sold out,” Thomas Olinger, chief financial officer from Prologis, Inc., said in an Oct. 15 earning call, according to the Wall Street Journal. “In the last 90 days, supply-chain dislocations have become even more pronounced, with customers acting with a sense of urgency to secure the space they need.
The Perfect Storm Created Supply Chain Issues
The global supply chain, which had transitioned towards a “Just in Time” model, was already under pressure prior to the COVID-19 pandemic, but the last 18 months has truly exposed weaknesses in the system.
Ayman Omar, an associate professor of supply chain management at American University's Kogod School of Business, described to the current situation to ABC News as a “perfect storm.”
“There is no one single point in time where the delays or disruptions started, it just exacerbated significantly because the volume of disruption is much higher,” commented Omar.
Omar says the supply chain disruptions are happening on multiple fronts including:
- Shortage of truck drivers
- Consumers and businesses stocking up on products
- Delays in the shipping industry
The White House is working on ways to fix the supply chain issues, including expanding work hours around the clock at Los Angeles and Long Beach ports and agreeing with large private companies to expand their hours.
Commitments announced Oct. 13, 2021, include:
- Walmart is committing to increase its use of night-time hours significantly and projects they could increase throughput by as much as 50 percent over the next several weeks.
- UPS is committing to an increased use of 24/7 operations and enhanced data sharing with the ports, which could allow it to move up to 20 percent more containers from the ports.
- FedEx is committing to work to combine an increase in nighttime hours with changes to trucking and rail use to increase the volume of containers it will move from the ports. Once these changes are in place, they could double the volume of cargo they can move out of the ports at night.
- Samsung is committing to move nearly 60 percent more containers out of these ports by operating 24/7 through the next 90 days.
- The Home Depot is committing to move up to 10 percent additional containers per week during the newly available off-peak port hours at the Ports of L.A. and Long Beach.
- Target, which is currently moving about 50 percent of its containers at night, has committed to increasing that amount by 10 percent during the next 90 days to help ease congestion at the ports.
“Just in Time” is Running Late
While the COVID-19 pandemic gets a lot of the press for supply chain issues, the global economies embrace of “Just in Time” manufacturing gets the blame in some quarters.
“Just in Time” manufacturing, which started in the auto industry, is based on not stockpiling parts but having them delivered right when they are needed.
“From fashion to food processing to pharmaceuticals, companies have embraced “Just in Time” to stay nimble, allowing them to adapt to changing market demands, while cutting costs,” the New York Times wrote. “But the tumultuous events of the past year have challenged the merits of paring inventories, while reinvigorating concerns that some industries have gone too far, leaving them vulnerable to disruption. As the pandemic has hampered factory operations and sown chaos in global shipping, many economies around the world have been bedeviled by shortages of a vast range of goods — from electronics to lumber to clothing.”
Moody's said the "weakest link" may be the shortage of truck drivers and warned of “dark clouds ahead” but others are more optimistic we can turn the corner sooner than later.
"This will not be an issue next year at all," JPMorgan Chase CEO Jamie Dimon said during a conference held by the Institute of International Finance, CNBC reported. "This is the worst part of it. I think great market systems will adjust for it like companies have."
Contact Dean & Draper
Dean & Draper is a Trusted Choice, Houston-Based, Insurance Broker representing over 200 insurance companies. For over 40 years we have offered a trusted freedom of choice to our clients.
Contact us for your Nationwide business and personal insurance needs, or visit our blog for more information, tips, news and current events.
The recommendation(s), advice and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking or responsibility to you. The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.
©2021 Dean & Draper Insurance Agency All Rights Reserved.