More about supply chain shortages

 

Following my lengthy article yesterday about how problems with the supply chain are affecting US businesses and consumers, I had a number of e-mails from people sharing how they're experiencing the problem (or, in one case, not).  I also found, or was referred to, a few other articles discussing the issue.

First, from Michigan, reader B. N. writes (I've shortened and tightened up his lengthy comment, and removed a few profanities):

Part of the problem is that same-company stores in different areas get different selections for their customers.  Poor neighborhood = smaller quantities, fewer selections, and they often run out of essentials.  Richer neighborhood = larger quantities, better selection, and they seldom run out.  (Their prices are often higher, too.)  It's like consumer apartheid.  Your supply chain in your area depends on the color of your and your neighbors' wallets - the greener (and fatter), the better.

That's probably an accurate comment.  Not surprising, either.  Companies will "follow the money" with their products.  They'll put more effort into areas where they can make more money, and vice versa.  Customers with less money are less important to their bottom line.  Capitalism, baby!

Divemedic has a couple of interesting posts.  In the first, he notes:

[The in-laws] went shopping for a new refrigerator, and there were not many to be had. It turns out that there is no supply coming from overseas, where most of them are made. The ones that ARE getting through are not enough to meet demand. There are lengthy backorders.

Yet another sign that the economy is grinding to a halt is coming from the auto industry. GM and Ford have suspended the production of pickup trucks because of the shortage in computer chips ... If this is a disaster for Ford, it is also a disaster for the US economy. Ford is the 21st largest company in the USA, and GM is the 22nd.

We are seeing shortages in all sorts of things: supplies are hard to find. Chicken, lumber, microchips, gas, steel, metals, chlorine, and ketchup packets are all in short supply. We shut down the world’s economy, and it is not wanting to restart. We can’t even get people to return to work.

“Experts” can argue about it for months, but no matter the cause, the result is the same. This slowdown of the economy is going to continue for months, perhaps several years. How many businesses will fail as a result is anyone’s guess. One thing is for sure, though. The economy is going to get much, much worse. Inflation is going to increase markedly as the law of supply and demand begins to take hold. Once Suzy Soccermom figures out that there is a problem, expect panic buying and even more shortages as she begins to panic shop for things.

The things that begin to skyrocket in price and see scarcity will probably not make sense. Remember the toilet paper shortage of last year? Like that, but with more products being involved.

Significantly, he concludes (and I can't say I blame him):

I am getting completely out of the stock market. We began a complete sell off last week. As soon as funds are released, we are moving into other investments, things that are not based in the US dollar.

There's more at the link.

In a follow-up post, Divemedic adds:

There are shortages, but they are being stealthy about it. My local grocery store isn’t doing anything so obvious as to leave shelves bare. A great example:

The canned soup section was most of one side of an entire aisle just before COVID began. Now the selection is much smaller, and the soup section has shrunk down to less than half the size that it was. The produce doesn’t look as good as it used to - more blemishes, more wilting on the leafy greens, that sort of thing.

He added this video, containing a price warning from Canadian Prepper.  It's worth watching.  I've blocked out a 2¼-minute segment containing the meat of the matter, so it won't take you long to listen and learn.  If you'd like to watch the whole thing, follow the YouTube link at the bottom of the picture.

Atomic Fungus has similar observations to mine.

There isn't enough spare shipping capacity to make up for the backlog, either. "Just in time" has been wrecked; there's enough shipping capacity to keep the stuff flowing as long as nothing interrupts the cycle--but because of the Coof shutdowns, now there's a backlog, and the ships cannot carry more cargo lest they sink, and they can't move any faster.

And all those people who load and unload ships are union babies. You do the math on that one.

So let's revisit "For want of a nail":

For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.

Now, when "just in time" is working, that nail gets to the blacksmith just in time for him to shoe the horse so the rider can carry the message etc. But right now? Nails aren't being delivered just in time.

I've been out of docking stations for laptop computers since May. They were ordered at least that long ago. About six weeks ago, the customer service person at the near grocery store said they weren't getting any diet Mountain Dew even though they'd repeatedly ordered it. Getting my wife's favorite water-flavored water is hit-or-miss. KFC doesn't have chicken wings. Can't buy pre-packaged Jell-o.

So? Ford can't get chips so they can't build trucks. Guys who need trucks to accomplish tasks can't get trucks so they can't get things done. The people who need those tasks done can't get them done at any price, which makes their productivity fall. And on, and on, and on--

Again, more at the link.

Let me provide a few more personal perspectives.  I was browsing online, and noted that the house air-conditioning filters we use had gone up in price from the mid-$20's per pack to double that in some stores.  (Needless to say, they're made in China.)  That galvanized me to run down to Sams Club, which usually offers them at lower prices:  but even there, they're now in the $10-per-filter range.  That's horrifying, considering that it was only a couple of months ago that I bought them for less than two-thirds of that.  I bought a couple more packs, to ensure we have enough for the next year.

I also decided to look for the synthetic oil we use in our vehicles, and some spare oil filters.  The filters weren't available at all from our usual source, and the 5-quart container of oil was 60% higher in price than the last time I bought it.  Again, Sams Club to the rescue:  they had a different variant of synthetic oil from the same manufacturer, of the same viscosity, packed in quarts rather than larger containers.  A 6-pack was only about 10% more (on a quantity comparison) than I paid last time.  Guess what got added to my cart, instanter?  I may just go back and get a couple more today!

As for vehicle tires . . . that's a conundrum.  If you buy a spare set of tires to fit your vehicle, while they're available at present, but you won't need them for a couple of years, they'll deteriorate while sitting in your garage (the rubber compound perishes over time).  On the other hand, they may not be available when you do need them.  I'm going to have to mull over that question.

Another question is vehicle replacement.  After our mechanic's comments yesterday, I spoke to a friend who sells cars at a local dealership.  He said bluntly that used car prices are now "stupid".  Cars up to 3-4 years old, with less than 50,000 miles on the clock, now cost almost as much - in some cases, more - than brand-new vehicles.  To get any sort of bargain today, you're looking at buying something 6-8 years old, with 80,000-100,000 miles on the odometer.  Unless you're prepared to live with that, his suggestion is to put your name on a waiting list for a new vehicle (making sure that if you don't take it, you won't lose your deposit - some dealers will be flexible with that, others won't).

However, not all countries are experiencing the supply chain crunch as badly as we are.  From Thailand, Larry C. e-mails:

Outside the USA and other “Western” countries, its not like that.  Not yet, anyway.  I live in Bangkok, Thailand;  American business owner, now retired.  I read Peter’s column every day from over here.

Food and supplies here in good supply.  Not great.  Not every color or flavor, but still plenty to buy.  Supermarkets have abundance of rib-eye steaks and home-style sausages.  Convenience stores (eg. 7-Eleven) plenty of Lay’s potato chips and Haagen-Dazs ice cream.  And many stores deliver free, with plenty of workers available to do that.

Many small shops – like mobile phone repair shops – have closed due to lack of business, but some, enough, are still open.  My old computer printer died last week.  At nearby mall, first two computer shops I went into were sold out of the model I wanted.  Third shop had exactly that model.  At exactly list price, no gouging.

In this part of the world, people don’t “prep”, because they can always retreat to the family farm.  But from what I see here so far, plenty of rice and fish and vegetables in every market.  I like Saba fish.  Imported, frozen.  Two years ago, order today, delivered tomorrow.  Now, sometimes out of stock.  So, I make do with other fish like Pacific Cod or Barramundi.  Not a problem.

Am I stocking up?  Not at all.  Even essential drinking water.  Order today and the water company delivers tomorrow.  Delivery is free for order over $15.00.  And plenty of workers to handle deliveries.

Will this horn of plenty dry up?  Maybe, but I don’t see any signs of it happening.  I’m thinking, instead of paying thousands to rebuild the engine on an old truck, why not buy a plane ticket to some other country.  Thailand is difficult because of the language gap, but Mexico might be a worthwhile option.  Web blog “Jim Stone Freelance” reports no shortages of anything where he lives in central Mexico.  Even high quality air guns are plentiful.

I escaped from America 20 years ago, and, now, reading comments here, very pleased that I took the risk to get out.

Thanks for writing, Larry.  It's good to get an external perspective.

I emphasize once again, the supply chain crunch in the USA is a reality that cannot be changed in the short term.  Like it or not, we're stuck with it:  and, like it or not, we're stuck with the economic problems and hard times it'll bring with it.  There's no undoing that now.  It's inevitable.  The best we can do is to prepare for it as best we can, by stocking up on essential items right now, before they vanish from our shelves, and then by being super-careful and vigilant every single day.  It may boil down to searching online every day for something we need, and rushing in with our credit card to buy it as soon as we find it, irrespective of price, before someone else gets in ahead of us.

That's not a pleasant thought.

Peter