How the 2021 supply-chain issues impact products made in the USA
Posted by Joshua, Gator Kennels on 2021-11-03
- Higher volumes of orders
- Suppliers without inventory
- Increased lead-times to restock common products
- orders not completely fulfilled
- Increased prices
- Increased shipping times
- Increased shipping costs
- Increased shipping delays and handling problems
- Order early
- Try to reduce the amount of custom items.
- Be sure to give us the complete ship-to address. I'm not sure why - but we are seeing a LOT of projects returned because the addresses are incorrect. We have resorted to double-checking every address before we ship - but this can take time. It also takes extra time if we cannot reach you through phone or email, so be sure to answer your calls.
- Be available to receive the shipment.
- Be patient. Trust me, we are trying to get through as many projects as we can given the challenges listed earlier. We build and ship projects as quickly as possible. Many times we are packing the project on a truck within hours of us pulling the last piece off the machines.
The Pandemic has severely impacted the manufacturing of most products - including Dog Kennels.
As we head into the typically busy holiday season, we are starting to see more severe impacts of the pandemic. This time of year is typically busy for us - but this year especially so as more companies are trying to catch up on projects they started before the pandemic.
Some of the issues we are seeing include:
Higher volumes of orders ran through our inventory fast!
The first impact we noticed was the increase volume of orders starting earlier this year. That made sense to us as orders last year were down - and we expected people to restart the projects they put on hold from the prior year. We were caught off-guard with the sheer volume of orders and how many projects all started at the same time!
These orders quickly depleted the inventory we did have on-hand - which prompted us to order more raw materials from our suppliers and ramp up production. Normally, this can happen very quickly and we do not see an interruption in production. However, our suppliers had some surprises waiting for us:
Our suppliers were also out of inventory...
We were not the only ones needing raw materials. Our suppliers make raw materials for the airlines, car manufacturers, solar panels, construction industry, hospitals, and food industries just to name a few. All industries saw major increases in the volume of orders for their respected industries - and all of us were demanding materials as the same time!
Even though we are a manufacturer in the United States - using materials also sourced in the United States - the fact that EVERYONE was trying to order materials at once quickly depleted what inventories were here - causing the suppliers to run out. This was exacerbated by the international supply-chain also running out of inventory and running behind. Some companies that were outsourcing all of their raw materials started buying US-made product simply because it was easier to get (at first). This further depleted the inventory and ensured the inevitable 'out of inventory' message we ran into.
Unfortunately, this created a huge backup effect as everyone was fighting over the raw materials. This led to the next major domino to fall in our supply-chain interruption:
Lead-times for more materials jumped overnight!
Since everyone was ordering raw materials all at the same time, lead-times for some products jumped weeks - even months overnight! We had some suppliers go from their usual 4-6 week lead-time to 27-32 weeks! Yes, that means that there are still some materials we ordered near the beginning of the year that we have not received yet!
The longer lead-times also meant we had to try to guess what the market would do MONTHS in advance! We had no idea if the large increase in orders would continue - or if that was a one-time effect of the pre-pandemic projects that were put on hold. This meant we had to guess what the rest of the year might look like. We could order more material and hope that the orders keep flowing in - but risk over-committing to product if the sales cool off. Some of the bigger companies can afford a little over-committing and some extra inventory - but the smaller companies working with smaller margins just can't afford to over-purchase. This meant as the year went on, we continued to run out of inventory - and now the lead-times are stretched out even further... so the problem continues to snowball.
Suppliers started to intentionally ship orders short!
To further compound the problem, some suppliers started trying to please everyone by entering a Force Majeure status with many orders. For us, this typically meant that only portions of the order was fulfilled. We'd try to order 10,000 lbs of material - but only 8,000 lbs would be delivered. Of course, by the time we realized that our supplier shorted us, it was months after we placed the order - and we would need to immediately place more orders to catch up. This lead to companies placing ever larger orders (they would try to get around the force majeure by intentionally ordering 30-40% more than they needed, knowing they would only get 70-80% of the order - but it would be sufficient for their needs). Unfortunately, this again favors the bigger companies with the bigger pocketbooks and bigger negotiating abilities.
Naturally, when you have a shortage of product - and in increased demand for that same product, it leads to the next problem:
Prices steadily climbed throughout the year - and will continue into next year as well.
Demand for raw materials jumped to levels not previously seen... and so did the prices. There was a time earlier this spring when prices were jumping on a daily basis. Orders placed one day would cost 5%-10% more the next. As lead-times stretched and companies became more desperate for material, they were also willing to spend extra in an attempt to 'expedite' orders. This again favored the large companies and inflated the prices for everyone. Suppliers only have a limited amount of time to produce parts - and when company 'A' is willing to pay 5%-10% more for the product, the suppliers naturally favor those contracts.
Of course, this lead to price increases for the finished goods as well. We had to raise the prices of our finished kennels due to these factors... and material prices continue to climb, so there will most likely be another increase in the near future. The problem is, the lead-times are so long that sometimes we don't even get the material before the customer orders the finished product. This can lead to a mismatch between the sales price and the cost of the goods to manufacture it.
Not all of the problems are at the supplier-level. Some issues can also be seen with the shipping:
Increased shipping times affect BOTH sides of manufacturing.
Manufacturing requires raw materials to arrive at the right time so they can be integrated into the finished product. This means a delay in shipping causes a delay in the manufacturing process. We cannot build products if we do not have the materials on-hand. This delay can cause a ripple effect throughout the manufacturing process. Most of the time, there are machines that need to be set up for a specific material - but if the material is delayed, then that machine either sits idle (which is never a good thing in manufacturing) OR it needs to be modified for a different material or process so that it can continue being used. This takes time - and might not be as efficient - but at least the machine is running. However, eventually, the machine will need to be converted back - once the original material finally arrives. These changes slow down normal production processes and reduces efficiency.
Even after the delays that shipping causes on the front-end, it also delays the delivery of the final product. Even a day or two delay on the front end can trigger a week-long (or in some cases longer) delay in manufacturing - and a day or two delay on the back-end could mean the shipment sits over the weekend before it is delivered. This means the combined delays can quickly add up to two to three weeks of delays from start to finish.
As everyone was shipping at the same time, it lead to shipping bottlenecks. Parts of the country experienced larger delays than others as the sheer volume of shipments overwhelmed the shipping companies. To try to alleviate some of the strain, some shipping companies resorted to alternative methods of moving product from point A to B. Other shipping methods included utilizing the railroad and hiring 3rd party drivers to move shipments.
As shipping became more congested, the prices climbed too.
Shipping companies incurred more costs to utilize those alternate methods to moving product - and they were also trying to reduce the sheer volume, so naturally prices climbed for shipping too! This impacted us on both the incoming raw material side as well as the outgoing finished product. What used to cost a few hundred dollars to ship now costs thousands! Unfortunately, all of the shipping companies are in the same situation, so shopping around for better rates really does not go far. Right now, it is whomever has an available truck/driver going the direction needed is pretty much able to name their price. As we head into the holiday shipping season, I expect the shipping situation to get worse. The sheer volume of shipments will keep the prices high - and keep the shipping lanes clogged for some time to come.
Clogged shipping lanes lead to more damages or issues during shipping.
As more and more products get smashed together in an attempt to fit everything on the limited spaces within the trucks, the potential for damages increases. This affects both the incoming raw material as well as the outgoing finished product. Damages to the raw materials can lead to manufacturing delays and even longer lead-times for the finished product. Damages to the finished product means we have to repair or replace the product. replacing the product means more of the precious material is used up - causing more shortages! Additionally, the time it takes to repair or replace the project causes a slowdown in production for the next job. Stopping production to back up and re-build a portion of a project that was ordered months ago is a very stressful situation for everyone. The end customers is upset because he/she probably ordered their kennels months ago. We (the manufacturer) is upset because we have to stop production on the next project so that we have machines available to repair/replace the previous project. The shipper is upset because they have to haul the project again - further crowding the overloaded trucks. The reputable shipping companies will haul this re-work for free if the damage is done while the project is in their custody (during shipping) - so they are effectively handling the project twice for the same price.
So when do things get better for the supply chain?
I really do not know the answer... it will probably take many months if not years to get all the kinks worked out. Due to the fact that there are so many moving parts and so many different reasons for the problems, I do not think it will be an easy fix.
There are some steps you can take to increase your chances of getting your order on-time:
Lead-times can be affected by multiple factors, so giving us as much time as possible to get your project complete increases the chances we can get it to you before you need it.
We have a lot of flexibility on the kennel design - but some custom features take longer to manufacture. Things like custom height on the kennels - or custom-sized pieces of glass tend to slow down the manufacturing process. We are happy to discuss with you specific questions you might have about customizing your project.
Again, I'm not sure why - but we are seeing an increase in the number of people going out of town around the time when their project ships. It causes delays with the shipping and derails the projects we are attempting to get to afterwards. This not only messes up the shipping company - but can roll back to us (the manufacturer) as we sort out what to do with the shipment until you return.