Supply bottlenecks create more pauses
Covid-19 forces U.S. businesses to wait longer for items that are crucial for work
Catrike has 500 of its three-wheeled bikes sitting in its workshop in Orlando, Fla., nearly ready to be sent to expectant dealers. The recumbent trikes have been waiting for months for rear derailleurs, a small but crucial part that is built in Taiwan.
“We’re sitting on $2 million in inventory for one $30 part,” said Mark Egeland, the company’s general manager.
The company’s problems offer a window into how supply-chain disruptions are rocking companies in the United States and around the world, pushing inflation higher, delaying deliveries and exacerbating economic uncertainty.
It is unclear when the snarls will clear up — and it is possible they will get worse before they get better. The start of the holiday season is right around the corner, American companies are running light on inventory, and coronavirus outbreaks continue to shut factories around the world. Demand for goods remains strong as households use money saved during months stuck at home to buy athletic equipment, couches and clothing.
The critical questions for economic policymakers are how long the problems will last and how much they will feed into consumer prices, which have jumped sharply this year, both because of data quirks and bottlenecks. Federal Reserve officials regularly say they expect the faster price gains to prove “transitory,” but they are careful to stress that supply chains are a major source of lingering uncertainty, making it unclear how quickly rapid gains will fade.
Container costs have rocketed up. Earlier this month, container shipping rates from China and East Asia to the United States’ East Coast climbed above $20,000 per container, compared with about $4,000 a year ago, according to data from the freight-tracking firm Freightos. Those attractive high prices are encouraging ships to abandon other routes, causing the problem to spread.
It will take time to know whether the bottlenecks will lead to more permanent damage. Supply chains are still badly snarled. The time it takes for parts from one of Catrike’s suppliers to arrive by sea in North America from a factory in Indonesia has jumped to three months, and sometimes it takes four — double what it took before. Estimates from Flexport confirm the problem is widespread along that shipping route.
For Full Speed Ahead, which produces crank sets for Catrike, average transit times have increased from about a month to up to seven weeks.
“There’s been bottlenecks at, I’d say, every point along the way of the supply chain,” said Mark Vandermolen, the company’s managing director. “Even if they’re small bottlenecks, that just adds up all the way through.”