Last week, I covered the big picture of this supply chain breakdown, as well as why it is happening and my forecast. In Part 2 this week, I cover the whys behind the shortages of some major items, the innovation needed, and when we might see more improvement.
Shortages of Some Major Items and More
From chicken tenders to medical equipment to glass bottles for liquor, the supply chain in the U.S. is struggling to keep up. Here’s a brief discussion of each category.
One of the US’ Favorite Foods: Chicken Tenders. US consumers love chicken tenders – especially when they’re battered and fried. Not only has the price per pound risen by nine percent, but fast-food chains are discovering they can’t get them at all. A&W, the root beer chain, canceled a chicken tender marketing campaign this year because its supplier could not deliver the additional poultry to its restaurants. For restaurants, the costs for delivery, plastic, and packaging have all gone up. One positive effect of the Pandemic is that Tyson, one of the largest chicken producers in the world, has raised wages and is launching new childcare and medical facilities onsite for its workers. Tyson also intends to automate its less attractive and more dangerous jobs for which it has struggled to find employees.
Spirits-Not So Bright: Beer, wine, and liquor. Don’t expect the same selection of alcohol at this year’s holiday parties. Some beer makers are hunting the world for carbon dioxide, generally used to carbonate brews. Brew masters are also searching for metal parts for machinery, aluminum for cans, and even for malt and hops. Some have even taken to hoarding raw materials they know they will need. With glass bottles in short supply, liquor and wine producers are also struggling to replenish their supplies of receptacles. Glass manufacturers in Italy and France ran into Covid-related export issues. Roman Roth, winemaker at Wölffer Estate Vineyard on Long Island, New York, said he has to order bottles 10 months in advance to be assured of having what he needs when he needs it.
Medical Supplies and Equipment- A Major Challenge. From crutches to wheelchairs to walkers, and even C-pap machines, medical supply stores are struggling to get the equipment they need. The rubber for the tires for wheelchairs comes from Vietnam, particularly hard hit by low vaccination rates. Due to the high demand for coronavirus patients, oxygen tanks are still in short supply. To help with these shortages, hospitals in some states are asking former patients to donate their slightly used wheelchairs and crutches. And there are also scarcities of IVs, suction canisters, and even bedpans. My husband has been waiting for a call from a medical supply store about a C-pap machine for months. Making matters worse are the increasing costs of shipping. Medical distributors report that the costs for moving cargo containers have skyrocketed and, in some cases, the shippers are holding the containers hostage until the distributors agree to pay exorbitant fees.
And I haven’t touched upon computer chips, gasoline, or toys.
Who is Hit the Worst?
It’s not the Walmarts or the Targets that are hit badly by these supply chain issues. The Big-Box retailers can afford to pay the increased costs. It is the small retailers, the mom-and-pop stores that cannot absorb the additional shipping costs. At the same time, they cannot have bare shelves at holiday time; they will not be able to stay in business; they need that revenue.
The Situation is Slowly Improving
The situation is already improving. Biden’s Supply Chain Disruptions Task Force is helping free up the backlogs. Walmart’s inventories are up by 11 percent over last year. The imposition of a fee for containers that stayed onsite in the ports of Los Angeles and Long Beach for more than 9 days helped a lot. Additionally, the administration instituted paid apprenticeship programs for truckdrivers. My best guess is that most of these current issues will be resolved by the end of the first quarter of 2022 – not including computer chips. However, there are longer-term problems to address to create greater capacity in the goods-movement chain and those will take more time. Some solutions include training more truckdrivers and using alternate distribution channels including rail.
What’s Needed: Innovation
In the words of my colleague Marshall Goldsmith: “What got us here won’t get us there.” We need new ideas, new solutions; and the best sources for those answers are the front-line employees. Typically, the staff doing the work know more about how the business works and where creativity and innovation can make a difference than the top executives.
Next Week’s Herman Trend Alert: From The Great Resignation to The Great Retention
Next week, I offer solutions for employers to be able to stop the resignations and retain their talented workers. You won’t want to miss that one!