Supply Chain Constraints

 

Nearly every link in the supply chain from China is experiencing unprecedented constraints. Manufacturers are dealing with raw material shortages, resulting in lower inventory levels than normal. They are also coping with limitations in ground transportation to get products to the ports. Once the shipments do get there, they have another long wait as the ports are trying to manage severe backlogs due to container shortages, adding lengthy lead time to already long international shipments. While these constraints are particularly bad in China, they are likewise being experienced around the globe.

On the other side of the water, the US ports are having their own challenges. Long lines of containers are waiting their turn to offload products to get into the hands of American distributors and sellers. Domestic ground transportation is likewise constrained between ports and distribution points, and to a lesser extent from distribution points to end consumers of these materials. The transportation labor force has decreased in size and positions are often filled at a higher wage to secure labor.

All of this is contributing to soaring costs, not just in transportation, but in material and labor. Today, container shipping rates are 10X what they were even 18 months ago.
 

What to Expect

Industry experts have posited that there is no sign of these restraints easing up any time before the second half of 2022. Lead times will continue to get longer, especially on imported materials, but even for domestic shipments as well. While companies are waiting for their material to arrive, their inventory levels will be low and they will be challenged to maintain customer service levels. Transportation costs will continue to be dramatically high, snowballing into higher product costs for customers.
 

What You Can Do

If you are purchasing imported goods and haven’t felt the impact yet, now is the time to take action. Graham Becker, Director of Customer and Supply Chain Operations at ChemPoint said, “The further in advance you can provide purchasing forecasts, or purchase orders to your vendors, the more time they have to plan, procure, and deliver the goods your business requires. If you are going to choose between the risk of higher inventory and the risk of lower service, err on the side of increasing your inventory.”

Increase your number of approved sources for any imported chemistry or ingredient. The depth of field for sourcing your materials can help offset pockets of constraint in the supply chain. Expand transportation providers in your network to improve the odds of finding carrier capacity closer to the timelines you need.
 

October 2021

 

References

• Ngo, M., Swanson, A. “The Biggest Kink in America’s Supply Chain: Not Enough Truckers.” The New York Times, https://www.nytimes.com/2021/11/09/us/politics/trucker-shortage-supply-chain.html. Accessed 10 Nov 2021.

• "Industry Short 80,000 Drivers Today, May Be Short 160,000 by 2030." American Trucking Associations, https://www.trucking.org/news-insights/ata-chief-economist-pegs-driver-shortage-historic-high. Accessed 10 Nov 2021.

• Siqi, Ji. "China shipping: from its monopoly on containers, to its critical role in the global supply chain." South China Morning Post, https://www.scmp.com/economy/global-economy/article/3155405/china-shipping-its-monopoly-containers-its-critical-role. Accessed 10 Nov 2021.

• Cox, Jeff. "Economists expect shipping problems to linger well into 2022." CNBC, https://www.cnbc.com/2021/10/25/economists-expect-shipping-problems-to-linger-well-into-2022.html. Accessed 10 Nov 2021.