Supply chain issues lead to shortages and higher prices for all
Walk around a grocery store and you will notice gaps in aisles and refrigerated cases; visit a car dealership and you will see more asphalt than inventory; go to a restaurant and you might be told what is not available.
This is what happens when an economy rebounds from a pandemic-induced recession much faster than expected and the demand for goods and services exceeds the ability of the supply chain to meet those needssaid Michael Hicks, an economist at Ball State University.
“The supply chain is not broken,” Hicks said. “It’s mostly just stretched.”
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Ports are almost at capacity for decades and there has been a shortage of truck drivers needed to move products for quite some time, so it is no surprise that almost all businesses face shortages to some extent.
Manufacturers in the Elkhart area are complaining about supply issues – and labor shortages – they’ve been facing for more than a year. And although they are producing RVs and boats at record levels, most are reporting a backlog of orders spanning much of next year.
“Most Americans have continued to work with COVID, and now a lot of them are spending what they could have saved,” Hicks said. “Demand is high for almost everything, but the ability to meet that demand is quite stressed.”
Computer chips have made it impossible for automakers to meet the demand for new cars, and higher prices for used cars have now pushed companies to turn to repair shops as some consumers choose to go. hang on vehicles a little longer.
But don’t count on fast service there either.
The need for employees, the high demand for services and the possibility of having to locate a part could lead to a wait of several weeks, according to Jay Basney, general manager of Basney Honda in Mishawaka.
“It could take over a month if it’s a part with computer chips,” Basney said, adding that the issues have caused stress for customers, as well as Basney employees who work with it. them. “We do everything we can to make people happy. ”
With the possible exception of the computer chips needed in vehicle production, many of the shortages consumers might notice appear to be pretty hit and miss from week to week. This makes it particularly difficult for restaurateurs who might depend on specific products for their menus.
“It’s weird stuff every week,” said Pegg Dalton, co-owner of PEGGS restaurant in downtown South Bend. “It could be plastic cups or the chicken we use with our waffles a week. And then we offer plain bagels or a specific tea.
Dalton said most customers are aware of the supply issues affecting businesses – and consumers – across the country and are quite understanding when made aware of a menu issue.
South Bend-based Stanz Foodservice and other restaurant vendors are working harder than ever to find the food and supplies their customers need, and when that doesn’t work, the company’s sales staff recommend solutions. substitutions, said company president Mark Harman.
“We were operating at a 99% fill rate for orders before the pandemic,” he said. “After dropping a little earlier this year, we are now down to around 97.5% thanks to the hard work and flexibility of our customers. ”
Beyond bottleneck in ports, truck driver shortages, and a tight overall labor supply, businesses that produce food could also be affected by the social distancing required in a factory that processes food or an ingredient or packaging they want. can’t get it, Harman said.
“The non-food side of the business is very difficult,” he said, explaining why some paper and plastic products might be in short supply.
As an economist, Hicks wonders if some of the shortages consumers are noticing could also be related to items with the lowest profit margins, especially in grocery stores. On a recent trip to the supermarket, he noted, there was an abundance of fresh and exotic fruit, but empty shelves where crackers once stood.
“If you have a limited number of drivers, it makes sense for you to use these trucks to move items with the greatest profit margin,” Hicks said. “And it’s not going to get any better with the holiday season just around the corner.”
For many businesses, including restaurants, it is all about persistence and flexibility to overcome current issues on the supply side.
If his order from Stanz is missing a few items, Mark McDonnell, founder of LaSalle Grill in downtown South Bend, won’t hesitate to drop by a grocery store or retailer to get what he needs in a restaurant.
“Disposable items such as gloves, aluminum containers and paper cups can be a problem,” McDonnell said. “You never know what you’re going to be bypassed.”
Due to the labor shortage in the hospitality industry, LaSalle initially reduced the size of its menu to make it easier for staff to track food orders. But the change had the added benefit of reducing the restaurant’s dependence on a wide range of foods and ingredients available.
McDonnell said he would also visit a variety of stores in the area to find all the perishable and non-perishable items the restaurant needs, even if that means paying higher retail prices.
“You have to be flexible,” McDonnell said.
Harman said he has already noticed improvements in supply issues affecting restaurant vendors across the country, and he expects things to continue to improve in the first half of this year. ‘next year.
After the holiday rush, Hicks expects the same, although there may be permanent price hikes to account for higher labor costs. “The great thing about our system is that there are built-in incentives to fix these types of issues,” he said.
Until then, consumers will have to be patient and business leaders will have to adapt.
“You don’t survive,” said Dalton, “if you’re not flexible.”