China Daily Global Edition (USA)
Supply chain breakdowns bring widespread strains
FLETCHER, North Carolina — For Lauren Rash, it is the little things that have snarled production at her tent factory here, like the many shades of black Velcro.
Her company, Diamond Brand, just launched a new line of highend wall tents. But that means using lots of Velcro. And that is a problem, because black Velcro comes in many shades, depending on the type of raw plastic resin used to make it.
Rash said if she puts older stock with the new, the colors will not match.
Before supply chain breakdowns and shortages swept the world in the wake the COVID-19 pandemic, buying bits and pieces for an assembly line was often as easy as clicking a button and waiting a few days, or at most a few weeks for delivery. Not anymore. Shortages of metal, plastics, wood and even liquor bottles are now the norm.
Rash has piles of tents she cannot ship because she cannot get the right aluminum tubing for their frames, and there are other tents that lack the right zippers.
Along with the shortages are hefty price increases, which has fueled fears of a wave of sustained inflation.
There is growing tension among Federal Reserve policymakers over how to gauge the long-term impact on prices. Some Fed policymakers are more convinced than others that price pressures will recede after some of the supply chain disruptions are resolved. How this debate evolves could influence how quickly the Fed moves to reduce the pace of asset purchases launched at the start of the pandemic, and how soon it lifts the policy interest rate from its current level near zero.
Rash and other local producers were part of a recent wide ranging forum with Richmond Fed President Tom Barkin that focused on challenges to the United States’ recovery posed by supply chain issues that are not getting resolved as fast as policymakers had hoped.
Shortages are hitting everything from bulldozers to bourbon.
Rising prices
Heavy equipment maker Caterpillar warned in July that its profits would suffer in the current quarter in part because of rising prices on hard-to-get components. The company said, among other things, it is looking for ways to get supplies from nontraditional sources to deal with shortages of plastic resin and semiconductors.
Lawson Whiting, chief executive of spirits producer Brown-Forman Corporation, told investors earlier this month that shortages of “key packaging materials, most notably glass” continue to create problems for the maker of brands such as Jack Daniel’s and Woodford Reserve.
New challenges continue to arise, including hurricane disruptions to US oil refineries which is again threatening supplies of plastics and other basic materials.
Some industries are rushing to build new factories, including semiconductor producers under pressure to feed a growing appetite for chips needed in cars and electronics.
But not all producers are eager to build new plants. The bike industry, for instance, is heavily concentrated in Asia and producers there worry that the current surge in demand is only temporary.
“The Asian factories have seen this time and time again,” said Brent Graves, CEO of Cane Creek Cycling Components, a small manufacturer in North Carolina which relies heavily on Asian suppliers for bike parts. “They say, ‘Well, we will run some extra overtime’. But in terms of raw investment in facilities, on the whole they are reluctant to do it.”
Compounding the current problem are clogged supply lines.
David Reilly, president of United Solutions, a plastics maker in Massachusetts, said soaring resin prices — he estimated they are up 100 percent for some types in the past year — is his biggest challenge.
“Right now, producers in North America don’t have the stiff competition that they would if container prices came back down.”