Lack of workers is further fueling supply chain woes
- More than 70 container ships at ports in Los Angeles and Long Beach are unable to unload goods because of a shortage of workers.
- A survey of local chamber of commerce leaders by the U.S. Chamber reveals that 90% of these leaders say that labor shortages are limiting economic growth in local areas.
- An easing of the delta variant will help the supply chain smooth out the flow of goods, but better deployment of automation at ports, in factories and within warehouses needs to be part of the long-term answer.
These days, everything from the seemingly random shortages of items in the grocery store to the small-print warnings that your online purchases could experience shipping delays can all be traced back to a woefully out-of-whack supply chain.
The everyday items and services we've all come to take for granted — buying half-and-half, getting the kitchen repainted, buying a new couch — have been disrupted by the Covid-19 pandemic, and more specifically, the unpredictable delta variant. As we've all been forced to acknowledge over the past 18 months, when one point in the supply chain gets disrupted or delayed, the reverberations are felt down the line. More than 70 container ships unable to unload goods at ports in Los Angeles and Long Beach isn't just a nightly news story. It's the reason why the patio furniture you ordered in June still hasn't arrived.
Fixing what ails the supply chain won't be easy or quick, experts say. At its core, the problems plaguing nearly every disruption along this globally interconnected network is a lack of labor. The container ships off the coast of California don't have the longshoreman to unload them. A shortage of truck drivers — a problem that existed pre-pandemic, but one that has only worsened since — means goods can't get from the ports to warehouses to 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 company. In 2020, demand for Bumble Bee's products soared, with 6 million new customers trying the company's shelf-stable offerings as the pandemic unfolded.
However, a spike in the delta variant in some of the countries where it sources goods is now forcing Bumble Bee to look for different suppliers. "We have all this renewed interest in our products, but we have all this disruption in the supply chain," he says. "It's so integrated globally that any one issue has an impact on everything downstream."
As companies like Bumble Bee experience increases in demand, they're also having to contend with rising transportation costs and longer delivery times because of labor shortages. Costa says he's seen four- and five-fold increases in shipping costs. "Our typical truck shipment was between $4,000 and $5,000 before the pandemic," he says. "Now we're seeing upwards of $19,000." He also says the transit of goods is taking three- to four-times longer than usual.
Labor shortages at every part of the supply chain are having an impact on companies of all stripes. It's also affecting economic growth. A survey of local chamber of commerce leaders by the U.S. Chamber reveals that 90% of these leaders say that labor shortages are limiting economic growth in local areas.
Customer demand adding to supply chain woes
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 equipment and fitness gear, driving sales to rise faster than ever in the company's history.
The company reports demand has stayed strong this year, but supply chain disruptions, especially those now hitting factories in Vietnam, are making it harder for the retailer to stock all it needs. Because of this, it has warned analysts that shipping issues in Asia could impact costs and sales growth during the all-important holiday season.
Sneaker giant Nike, a big supplier to Dick's, is having supply chain headaches of its own. Last week, the company lowered its fiscal 2022 outlook due to longer transit times, labor shortages and prolonged production shutdowns in Vietnam. In a recent conference call, Nike chief financial officer Matt Friend said the company anticipates its entire business will see short-term inventory shortages over the next few quarters.
Meanwhile, membership-only warehouse chain Costco recently announced that shipping delays and labor shortages have prompted the company to bring back purchase limits on essentials like toilet paper, bottled water, and cleaning supplies. Unlike in the earliest days of the pandemic when demand outstripped supply, the reason now has more to do with delays in getting these goods onto store shelves in a timely way.
And FedEx last week cut its financial outlook because labor shortages caused expenses to increase in the latest quarter, while supply chain problems put a dent in shipping demand. FedEx reported that 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.
Solutions from supply chain start-ups
While an easing of the delta variant and its oversize impact on every part of the supply chain will help smooth out the flow of goods, so too will technology solutions. Better deployment of automation at ports, in factories and within warehouses needs to be part of the answer, says Brian Laung Aoaeh, a partner with Newark Venture Partners, a firm that invests in supply chain start-ups.
"The pandemic has caused operations that were already inefficient to become 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 ahead."
In the meantime, companies are coming to terms with fact that the pandemic will have long-lasting implications for how supply chains function. Technology-led platforms that utilize advanced technologies such as artificial intelligence and machine learning will help companies identify potential problems before they disrupt the flow of goods.
"Every company is trying to figure out the best ways to get their products to consumers in the most efficient, economical way," says Bumble Bee's CIO Costa. "Real time visibility into the supply chain and where the hot spots are, are absolutely essential."
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