U.S. businesses rush when supply chain breaks, shortages

Previously, the purchase of input products for an assembly line could be done easily by clicking on an “order " button. Buyers only need to wait a few days or at most a few weeks to receive the goods.But this is not so easy anymore, especially when supply chains are broken and supply shortages occur around the world because of the COVID-19 pandemic.
 

Workers work at a factory in Pocomoke, Maryland, USA on March 1, 2018. Photo by AFP / TTXVN
Lack of steel frame to bottle case

In the United States, shortages of metal, plastic, wood and even wine bottles are now common.

Buyers - often businesses have to wait for the seller to deliver goods that were once abundant, but only if they can successfully order. This is greatly affecting the business of many businesses. As with tent manufacturer Diamond Brand, they cannot deliver to customers because some tents lack qualified aluminum tubes as frames, while others lack suitable zippers.

Shortages in input supply are affecting every product, from bulldozers to bourbon wines. Heavy equipment manufacturer Caterpillar Inc. warned in July that its profits would be affected in the current quarter, partly due to rising prices for hard-to-buy components. The company says it is trying to find non-traditional supplies to cope with a shortage of plastic particles and semiconductors.

Lawson Whiting, CEO of brandy producer Brown-Forman Corp., also told investors earlier this month that a shortage of important packaging materials, especially Glass, continues to be a headache.

Challenges continue to arise

In addition, new challenges continue to arise. The hurricane-induced disruption to U.S. refineries has once again threatened the supply of plastic and other basic materials to U.S. businesses.

The further exacerbation of the current situation is the congested transport routes. With mass production flocking seeking to increase supply at the same time, the containers, ships and trucks needed to transport goods are often less available. And when there is, the cost has often skyrocketed. That broke down some of the mechanisms that often help control supply and prices.

Coupled with supply shortages are terrible price hikes – these developments have raised fears of a prolonged wave of inflation in the world's largest economy.

David Reilly, president of Plastic Manufacturing Company United Solutions, said the price of plastic has skyrocketed-with some of the types that have risen 100 percent in the past year-as the company's biggest challenge.

Often, he would ask his buyers to scour foreign markets, including China, to find cheaper plastics. The current situation can not use this way. Because freight rates have risen too much, causing all price advantages to be wiped out.

Long lines of vehicles waiting to enter port after announcing work return (photo: Los Angeles Times)

To address the immediate situation, a number of industries are rushing to build new factories, including semiconductor manufacturers under growing demand for the chips needed for automobile and electronics manufacturing.

But not all manufacturers want to build new factories. For example, the bicycle industry is heavily concentrated in Asia and manufacturers there worry that the current surge in demand is only temporary. According to experts, businesses accept increased production time, but are very hesitant to invest more in new infrastructure.

Pressure on Fed policy

There is growing tension among Federal Reserve policymakers over how to assess the long-term impact of supply chain faults on prices.

Some officials have acknowledged that the recovery momentum of the U.S. manufacturing sector remains limited by supply issues and that they are not resolved as soon as expected.

However, some Fed policymakers are confident that price pressure will drop after some supply disruptions are resolved. Others are more cautious. How this debate could affect the Fed's plan to reduce its asset purchases, as well as how soon the central bank will raise interest rates from the current near zero.