Supply chain woes persist as demand rebounds
Businesses grapple with how to handle shortages
For months, cars were driven sporadically or not at all. So as the economy reopened, when many people grabbed keys and headed out the door to work, shop or visit with friends, an odd thing happened.
Nothing.
Many vehicles didn’t start. Others badly needed service. And while that is good for a mechanic’s business, it has been bad for getting the parts needed to do the work all at once, said Kevin Keller, a Norcross, Georgia-based mobile technician for YourMechanic.com.
Prices are higher and everything has to be ordered early or the job gets postponed – which has happened, Keller said. “Even for simple stuff, like brake pads, I have to be preemptive. I need a fuel pump tomorrow for a Dodge Charger. I better have it today.”
The problem – supplies coming up short as demand suddenly rebounds – is widespread. And it means consumers sometimes can’t get what they want right away, or they have to pay more to get it.
Inflation, as measured by the U.S. Consumer Price Index, soared 5.4% in June from a year earlier, its fastest pace in 13 years.
Prices for used vehicles surged 10.5% from the previous month, fueling much of the run-up, amid a global shortage in semiconductor chips used in cars and trucks.
But prices on other goods and services also rose sharply last month, from airline fares to apparel.
That worries some economists and businesses, who wonder whether it’s time for the Federal Reserve to lift interest rates and choke off inflation. Pressed on the idea, Fed Chairman Jerome Powell this week told Congress he thinks price spikes will be temporary, but that depends on how long the supply chain’s gears keep grinding.
It is, of course, all about the pandemic.
Fifteen months ago, business closures and stay-at-home orders triggered shortages of consumer products like toilet paper and yeast.
Most kinks got straightened out but reopening the economy jangled the supply chains. Like a machine revving up after running in low gear for months, the multi-trillion-dollar global supply network has bucked, rattled and run rough.
Part of today’s problem is the efficiency of the pre-pandemic system, said Pinar Keskinocak, professor in Georgia Tech’s Stewart School of Industrial and Systems Engineering.
For decades, supply chains were increasingly designed to be economical, using cost-saving tricks like keeping inventories as low as possible. Supply chains “are not designed for flexibility and responsiveness. They are not like race cars. If you turn to the right or the left, they don’t turn quickly,” she said. The effects run the economic gamut. When Winton Machine in Suwanee, Georgia, orders an electrical strip that is a component in the fabrication equipment it makes, it used to wait about six weeks, said Maureen Paige, operations manager. “Now, it is looking like 17 weeks.”