Articles

The Supply Chain Crunch

Categories: Business Management, Distribution & Supply Chain

If you are like most people, when you want or need something, you want it now.

The problem is that the supply chain doesn’t work entirely on demand, the way some might think it does. It has proven to be a fragile network, with many strong and weak links in the chain, powered by people, trucks, trains, planes, machinery, and circumstances, some good and, right now, mostly bad. And any link in the chain can bend or even break at any time. If there is one simple truth, it is that supply chain issues have been underestimated these past two years.

During the pandemic, links were bending and breaking. In some cases, this is still happening. Some are being repaired, and others are wearing down. This is despite the fervent efforts of dedicated professionals working overtime to get you the supplies you need. When you want something, and you don’t get it, it’s not due to a lack of trying or effort.

Pandemic-related supply chain disruptions, both domestically and globally, with backlogs at manufacturing plants and shipping ports, have created headaches all around. It is rare to find someone who says they haven’t been affected in some way.

BONUS: Video spotlights on Mike Marks and Dirk Beveridge

And it’s more than about not getting supplies and the inconvenience that it may cause, on both the personal and professional levels in your life. The supply chain crunch is a contributing factor to inflation, as a surge in demand for products means everyone is willing to pay more for what they need.

There are many solutions tossed around conference rooms and virtual meetings, such as increasing the use of autonomous and robotic equipment, drone deliveries, better tracking software, improved collaboration between manufacturing and distribution, and more. There are plenty of viable solutions; the challenge is implementation and bringing it to reality.

This State of the Industry special report dives deep into the root causes of supply chain disruption.

Blind spots

A common theme among industry experts about one blind spot that snuck up on everyone was “the belief that inventories of raw materials would always be readily available,” claims Jay Shearer, president of J.J. Shearer Company, which represents several product lines that serve the cleaning industry. Shearer also serves as the manufacturer representatives’ director for ISSA. “The idea of just-in-time (JIT) is wonderful in an environment devoid of any wrinkles or hiccups, as the chain is only as strong as the weakest link,” he added.

Leonard Shutzberg is the CEO of Americo Manufacturing Company. He also serves as a manufacturer director for ISSA. Like Shearer, he sees the lack of available inventory as one of the blind spots for the industry. “Like so many businesses in a variety of industries, none of us could anticipate that the supply chain wasn’t as perfect as those at Toyota first thought when they introduced just-in-time manufacturing to the world more than 40 years ago,” Shutzberg explained. “It worked for the past four decades… until COVID.”

The pandemic forced everyone to recognize that minimal inventories and reliance on an imperfect supply chain were not solutions, especially when there were significant challenges, Shutzberg added.

Michael Wilson, the vice president of marketing and packaging for AFFLINK, a supply chain and procurement services company, echoed the issue with the JIT challenges. “Most distributors have inventory management systems, some automatic and computerized, others manual, which helped them determine how often it is necessary to reorder a product to meet customer demand. This allowed them to buy what they needed, when they needed it, which saves money, frees up warehouse space, and helps reduce waste.”

But this created a blind spot, Wilson said. “Most of us never figured, for instance, that the raw materials needed to make these just-in-time products would be in short supply, or worse, no longer available. In other situations, the materials were available, but the demand was so high that manufacturers had to wait in line for those materials, something most had never fathomed they would have to do, at least for such a prolonged period.”

Distribution experts, Wilson added, have warned about something like this happening since the just-in-time purchasing concept was embraced in the United States. “It works as long as we can get the products we need when we need them. But when we can’t, that’s when things start to unravel.”

Forecasting and collaboration were also issues and added to the blind spot challenge. Supply chains over the years have focused on taking out costs and having inventory just-in-time, which creates challenges when demand spikes, according to Tim Engstrom, the senior vice president of supply chain at distribution company Essendant.

“Demand historically has spiked in a certain category or product line and is short-lived. The pandemic raised demand across the board, starting with toilet paper and then to all products, when the country shut down,” Engstrom said. “The significant shift in demand was more than the global supply chain could handle. Secondly, the supply chain has historically been a transactional relationship model. So, when the pandemic hit, companies did not know how to open up communication and work together. Everyone internalized the problem, creating miscommunication and gaps in product and information flow.”

Andrew Abel is the general manager of Mailender Inc., a solutions provider of janitorial, paper, and other supplies for the industry. Abel also serves as a distributor director for ISSA. He notes that relying too much on Asian imports was a blind spot, as it has been in the past. There were relatively few issues getting products, but with the pandemic, that changed overnight. His advice? “Find alternative sources, stay in weekly communication with suppliers, and have more people involved with procurement.”

Some see the blind spot issue a little differently. “I don’t think there was a blind spot, but a blindside,” according to Keith Angel, the senior vice president of marketing of Avision Sales Group, a manufacturer’s rep agency. “No one saw this coming—at all. Many who work in the supply chain were perceived as having failed because the expectation to fill supply demand continued with pre-pandemic assumptions, but that was impossible. From personal protective equipment to disinfectants, warehouses were quickly cleaned out. They sat empty. No one had anything.”

Howard Coleman, the principal at MCA Associates, a management consulting firm that serves the distribution industry, agreed. “I don’t think it was so much a matter of a blind spot, but more simply, a confluence of low-probability, high-impact, pandemic-related circumstances that quickly became worldwide issues, as opposed to what we’ve become more accustomed to—a regional supply anomaly, a nuclear reactor meltdown, a tsunami, or a hurricane. Basically, though, this time, we found ourselves dealing with a once-in-a-lifetime event.”

Coleman noted that some companies were more flexible and had more mitigation policies in place than others, which helped them cope with inventory and supply issues. He then posed an interesting question: “Will similar events now be in our future?”

John Shoffner, the executive vice president of facility supplies with Avision Sales Group, sees the challenges the industry faced, yet recognizes the efforts of dedicated supply chain professionals. “The industry performed quite well, remarkably well, in impossible circumstances,” he said. “So many of our manufacturers, along with distributors, did a remarkable job with sourcing items that were needed during the early stages of the pandemic. Many of them were nimble and came up with great solutions. Others struggled. But bottom line, I believe we had a lot of people that performed great.”

A common theme among industry experts is that the supply chain crunch is ongoing and will not end soon, but it also won’t fix itself without a lot of hard work in uncertain times. Just when there is the proverbial light at the end of the tunnel, another variant makes its way into our lives and creates more disruption.

But disruption and hardship can foster positive change. As Coleman noted, “Times of uncertainty also present opportunities to innovate and experiment, even though those innovations and experiments present, on their own, additional changes.”

Freight issues

Part of the challenge isn’t just the lack of supplies. It is also getting supplies to the intended destinations.

There are plenty of stories about shipping containers sitting at ports and waiting to be processed. Unfortunately, there are not enough truck drivers to handle the demand on roadways. And there are just not enough in the labor pool to manage all the various tasks of getting items from one point to the next, from the manufacturer to the end user.

“One of the most heavily reported and dramatic expressions of this squeeze, as we’ve all learned, is the loaded containers on ships sitting off the coast of Los Angeles and Long Beach, California,” Coleman said. “It’s like too many drivers trying to use too few lanes. Add to that the shortage of trucks, truck drivers, and port workers,” and you have a huge, messy challenge.

“Some products reach our shores and are unloaded onto docks,” Wilson explained. “But there they stay, because there are no trucks to deliver them. Or if there are trucks, there are no drivers for those trucks.”

Supply chains depend on many factors. When it works, it’s often described as a system of dominoes falling forward, Coleman explained. “Right now, it’s a reminder that dominoes can fall backward, too.”

Shifting and pivoting

When the pandemic hit the global scene, and the supply chain bent, broke, or sometimes shattered, most rolled up their sleeves and got to work, and that hard work started to pay off.

“We worked extremely hard to take every call and answer every email, to deliver the message from the manufacturer to the distributor customer, and ultimately to the users of products, what everyone was doing to help,” according to Shoffner. “It was a really difficult time taking calls from unhappy people, but we had to get through this.” He added that by collaboration and focus, what could have remained a bad situation has started to improve.

Angel noted a significant shift in doing business now compared to pre-pandemic times. Up to 2020, he said that the focus was on spending time and resources “trying to sell what our manufacturers made.” That makes sense. But now, “it isn’t about just selling. It is about finding what they (distributors) need. We went from selling to finding. Our work functions are dramatically different from what we were doing pre-pandemic.”

Engstrom sees another solution to the issue facing us right now, what he calls a valuable lesson in continuity planning outside an individual company. And it’s never too late to start.

“In the last two years or so, some companies have learned they did not have a robust continuity plan for their supply chain, nor a true understanding of their supply partner’s continuity plans,” he explained. “If the partnership for core products were partner-based rather than transactional-based, the partners could have worked together to move products that would benefit both organizations. Stability created complacency, which took everyone off guard.”

Shearer sees it as well. “When everything is working well and has been for many years, complacency sets in. That’s human nature.” What’s the solution? Having alternative plans. “Just like my computer, do you have a backup? When did you last review that backup plan? Is it still viable?” he asked. It’s something to think about.

What EVERYONE wants to know

The big question, if you don’t know already, is this: “When will it end?” When will the supply chain crunch subside and distribution get back to what we like to refer to as “normal?”

“If you have a crystal ball… do share!” joked Shutzberg. “Most pundits are suggesting that this paradigm will continue well into 2022. We are not expecting to see any relief until sometime in the third quarter of 2022, or even beyond.”

Both Angel and Shoffner echoed that timeline. “I would say we are starting to feel a normalization,” Shoffner said. “People are tired. They have hit the wall, and we all hope the new year will be a new game.” Angel added: “We will see improvement by the second quarter of 2022, and a ramp-up from there.” That ramp-up may take us into 2023, they both agreed.

Abel predicts a late 2022 to early 2023 normalization in the supply chain.

Engstrom sees this bullwhip effect continuing through all of 2022 and into 2023 as global supply chains stabilize. “As product flows in large waves across the supply chain, we will continue to experience constraints and capacity challenges, particularly in transportation and labor. It’s going to take time and resources to rebalance the flow.”

No one knows when the shortages will end, Wilson adds. The consumer may have to live with shortages, everything from furniture to food, longer than those in the professional cleaning industry. “Things are still totally out of balance in many supply-chain sectors,” he said. “Ultimately, time will heal the situation. We believe that by the middle of 2022, the supply-chain chaos we are now experiencing will begin to dissipate.”

Shearer sees the market balancing itself out throughout 2022, but it may leak into 2023, depending on the impact of any new coronavirus variants. Additionally, he notes the huge gap in pricing during the pandemic, such as disposable gloves bouncing between $38 per case to up to $220 or more. “Now they are down in the high $40s,” he said. “We will see this trend with virtually all product categories as they balance themselves out.”

The verdict is in. Consensus: In mid-to-late 2022, things will get better. During 2023, we should see a strong stabilizing, and we can put this behind us.

About the Author.

Jeff Cross is the ISSA media director, with media brands that include ISSA Today, Cleaning & Maintenance Management, and Cleanfax. He can be reached at [email protected] or 740-973-4236.