Wednesday, September 15, 2021

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.



Juandonjuan said...

The Evergiven was the inflection point in the JIT economy transitioning to the SOL economy

Long read, but from 2011 this piece from David Korowitz put in context many of the fragilities of the NeoLiberal economic model

Coffee Man said...

I work in the ship repair industry, primarily working on US Navy ships. Supply chain issues are huge. It is a rare day that I order parts that have less than a 18 week or longer lead time. I am waiting on a gasket now for a cruiser that has a 185 day lead time. I ordered a bellows for an actuator 6 months ago and can't get any word from the manufacturer on where it is (it is over a month late).

It is a major concern. I can thank Bill Clinton for signing the law that taxes items sitting on the shelf of the manufacturer as "potential income". Since that passed, manufacturers have stopped keeping stock on the shelf and have turned to "just in time logistics" which means 2-8 month lead times.

Francis Turner said...

Rural Japan is like Thailand. I'm not noticing shortages of things I really care about and a spot check of car dealerships suggests they still have plenty of stock of 2nd hand vehicles (but the availability of new is hard to confirm as new cars tend to be delivered after purchase so not much on the dealer lot anyway).

I may be about to discover the availability or not of air conditioners and/or the parts for them because one of our external units is not looking happy. It executed a snake a month ago and hasn't really been the same since so I fear it's going to need parts replaced (or the whole thing as it's quite corroded at the base). From some tentative enquiries the local electricians seem to think they won't have a problem but we'll see.

What is lacking is stuff from Europe. Specifically European made bike parts but also some booze and I'm suffering a marmite emergency because that is no longer in stock in country. Allegedly it is available (at great expense) if flown in. We shall see if that is true shortly. Not seeing any issue with US food products (e.g. US pork and beef are in decent supply at the local supermarket)

Ann K. said...

What is the best way to get out of the stock market?

Gerry said...

Our local Kroger had no ice cream for almost 3 weeks. Considering the variety of vendors and that they are all made in the US I wondered what could be the issue.

It turns out the refrigeration unit broke and it took that long to get parts.

JIT is killing the local GM plant. They have shut down three time for lack of parts. Every Corvette for the next two years is already sold but can't be built.

I would not be surprised if we see a return to big businesses owning their complete supply chain domestically.

lee n. field said...

" There are lengthy backorders."

Quoted a computer for a customer last week. Specific configuration their software vendor wants, though, from my perspecitive, it's nothing special.

Note in our Dell partner configuration screen says this system, if ordered now, is likely to ship in November.



As someone who was the "Lean Manufacturing Champion" for a > 1 million square foot factory, I kept hammering on the idea that MURPHY is out there and he's an SOB.

Lean / JIT works great when the system functions smoothly. It's when it doesn't that things go south.

They're going south now.

I was at the supermarket this morning looking for, among other things, my kids' favorite box juice. GONE. Totally gone, and has been for days.

Unknown # 4B, Jr. said...

Some of us have been "our own JIT" for quite some time; having grown up in a very rural area - the "big city" was 35 miles away and Grandma made the trip only once a month - you kept supplies on hand, made your own or did without.

I think people are painfully learning the downside of JIT and the need to keep one's own adequate supplies on hand. It may not be the most efficient, or economical, for every John and Jane to maintain their own stock of nearly everything, but it is prudent.

For years whenever I've gone to buy Item X I will usually buy 2 or 3 of them, depending on the item. That's money "sitting on the shelf" but it's saved me a LOT of time and aggravation over the years; now, today, it may mean having it vs not having it, or at the very least, not having to pay an exorbitant price.

As Coffee Man (above) pointed out, the federal government is, as it usually is, at the root of the problem, and if the feds try to fix this they'll make it worse. If we can get the feds out of the way, and replace the corporate bean counters who drove all this to extremes, once we get past all this #*%& we can turn it around.

Or, more likely, our younger children and grandchildren will. Maybe.

boron said...

I asked the price on a 22 semi-auto I had just rented at the range I use. They told me they no longer selling their rental pistols (any caliber); they just couldn't replace them at reasonable cost, if they could find them at all.

Richard said...

I have had a critical test gas on order for 2 months. The supplier has NO idea when I will see it. It is mixed in Utah and I am in Colorado

Texas Mike said...

The last part would be great, primarily the domestic part. Even if the big corporations don't own their entire supply line, moving back to a domestic supply chain would be a wise strategy. It is not a good idea to be reliant on competitors (at best) and adversaries for critical resources.

Tregonsee said...

On the refrigerator front our 26 year old machine started coughing up blood last Friday. Saturday we went to a local (i.e. NOT big box or nationwide) appliance store. Because we wanted a relatively simple piece of hardware (<20 cu Ft, no fancy ice makers or connectivity) we were able to choose from 4 models. However, there were no more than 3 of any of the models in stock and 2 of the models only had a single example in stock. The local store watches the big box stores to compare prices and stock and NONE of the big competitors had stock on ANY of the 4 models. Only reason the little store had as much stock as it did is because they have a big warehouse in Salem Ma and an older owner who buys popular items in moderate (5-10) quantities when available. We heard other customers getting wait times of 6+ weeks or basically told you can order it we won't take your money until we can deliver it on a stove, a dishwasher and a variety of other appliances for new construction. Having used these folks for other appliances in 2015 and 2018 there was NEVER an issue with stock before. Something is seriously screwy

Will said...

On a recent trip to a San Jose Costco, I didn't find any canned stews. Not the first time, either. WalMart was similar.

Dad29 said...

I work for a car dealer, and I 'fetch' used cars/trucks that we purchase from 3-4 adjacent States.

For the first ~7 months of this year, we purchased a lot of 'creampuff' used vehicles off-lease. Low mileage, 2-3 years old, nice stuff.

About a month ago, all of those were gone, at least within 600 miles or so.

Now we're purchasing vehicles with 50K-75K miles, late models but obviously not 'creampuffs.' Not many of those around, either.

Yes. Sourcing vital components from overseas in a JIT environment is extremely risky.

Chad said...

Electrician - Having a hard time finding some common parts - certain breakers, exterior panels, nail on boxes. Generally things you need for new construction.

Today, one of my supply houses didn't have freaking 12-2 romex. Others did, but to me it's a sign.

Things are crazy. If I could, I'd stock up in a shipping container to make sure I could keep working or sell it later if needed.

Anonymous said...

I can echo what Larry says about Thailand, tho I live in a different Asian country. But still, some delay or "cannot promise a delivery date" for some products from China and from Europe.

Anonymous said...

You and others have been warning about this for a few months now, so what are people doing about it? Any signs of bringing manufacturing back to the U.S. (or at least abandoning Chinese sources or looking for alternatives)? And I remember people warning about this effect of the Kung-Flu about a year ago, so I'm sure the bright sparks in higher management and government have been working on it. Right?

Xoph said...

It's not just a JIT issue, its a where is it manufactured issue. We lost so much capability and even with all the bragging about how much came back under Trump it wasn't still nearly enough.

We need to bring back more domestic manufacturing. Let's hope we learn our lesson.

Paul, Dammit! said...

Ship traffic is still at maximum in the US's major container terminals. The number of ships at anchor (losing money as products age) is still far too high, but hasn't increased in the past 2 weeks. We're taking arrival now of ships that left China while one of their major ports was shut down for Covid, and so the logistical chain is still as messy as a baby's diaper with containers having to be rerouted and left at already-saturated terminals to be addressed at some time in the future. The Rollover (missed loading) rate is still over 30%. The handling rate of containers ('moves') has increased disproportionately high relative to the number of containers moved, further complicating things.

The proposed Ocean Shipping and Reform Act of 2021 OSRA21, is supposed to address some of the problems here, although it doesn't address the need for onshoring of our supply chain.

Oh, and thanks to our wonderful administration, the number of ships bringing foreign crude oil is increasing month over month while sweet American crude production has stagnated.

Dad29 said...

Also heard--reliable source--that part of the problem here is moving the freight from the docks to the buyer's warehouse. That's a "lack of truck drivers" problem!

Richard said...

A friend runs two Fed Ex ground districts. The lack of drivers issue is very serious. People are out there but they do better over all on unemployment and COVDI supplements. Add on the rent moratorium and why work is how the thinking goes.

In fact he did an experiment and ran an ad offereing $50/hr. Zero responses.