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Supply and demand issues may cost you this holiday season

Supply Chains
Posted at 2:20 PM, Oct 13, 2021
and last updated 2021-10-13 16:25:06-04

TAMPA, Fla. — While most Americans happily spend plenty of money during the holidays, get ready to shell out more for just about anything you want to put on the table or wrap as a gift this year.

Costs of everything are rising as inflation continues to impact both prices and the average Americans’ purchasing power. Combined that with supply chain issues causing shortages of goods, it has yielded empty store shelves where goods used to overflow.

There’s not one issue impacting prices and supplies of goods. Instead, it’s a perfect storm from a power crisis in China, to driver shortages, to the logistics of the pandemic. All of it is contributing to making this one of the most stressful holiday seasons for global businesses.

China and Southeast Asia Issues

As much of the world relies on China and Southeast Asia to supply goods, any types of issues impacting the region can have a cascading global impact. In Southeast Asia, COVID-19 problems have cut back on shipping or closed ports completely. In China, much of the problem comes from energy issues.

Chinese factories have been forced to shut down and homes have been left without power as rolling blackouts have hit some key regions in the country. The power cuts come as the country works to meet official energy targets from the government. According to CNBC, at least 60 companies in China have gone through power-related disruptions, so far, with the list likely to grow.

The situation may not have a resolution anytime soon either. Demand for goods continues to grow ahead of the holidays. That sparks a need for increased production that runs into the issue of controlling and limiting energy usage. Combined with COVID-19 issues from neighboring countries and competitors in the region and the supply chain issues begin.

The problems from the area can impact everything from food to iPhones to shoes and cars/trucks. But the issues causing high price issues don’t end there.

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Gas prices are still climbing

File photo

Fuel Prices

Oil prices have risen to more than $80 a barrel as of Wednesday afternoon. Prices have surged along with demand as goods are sought and more trips are being taken as countries slowly return to normal from the COVID-19 pandemic. Adding to the surge in prices is the Organization of Petroleum Exporting Countries and allies (OPEC+) have not boosted supplies in a major way. As oil prices and resulting gas prices rise, it makes it more expensive to ship goods overseas.

But when the goods do ship, they run into problems in the supply chain when they arrive in the United States.

Port Problems

From closures overseas to not having enough workers to unload goods in the U.S., ports around the world are facing issues at a level they haven’t had to deal with in decades.

The White House announced Wednesday it put together a deal to move the Port of Los Angeles toward 24/7 operations. This comes after images of ships waiting to deliver goods have made headlines. The Biden Administration said it’s working to unblock the flow of goods into the United States to help the retail industry.

But once the goods are unloaded, that puts them into another realm that is facing serious issues — domestic transportation, specifically truck drivers.

Driver Shortage

For the last several weeks, long lines and fuel rationing have been the norm in Great Britain as the country deals with a major shortage of truck drivers. It’s a scene that is slowly spreading to other parts of the world and businesses in the U.S. have been warning about for several years.

Big trucks are responsible for moving 73% of all the goods Americans consume, or roughly 11.84 billion tons of goods, the American Trucking Association said. According to trucking.org, “nearly every good consumed in the U.S. is put on a truck at some point." Trucks travel approximately 450 billion miles each year to get goods to their destination.

Truck Driver Shortage

But having enough drivers to make those treks has proven increasingly difficult. According to the American Trucking Association, in 2019 the industry was 61,000 drivers short of what was needed to meet demand. It’s led the trucking industry to increase wages and offer bonuses to fill positions. Still, the shortage of drivers impacts everything up and down the supply line.

Still, with so many issues facing the supply chain, demand continues to rise for goods as citizens around the globe work to re-establish normalcy that was interrupted by the COVID-19 pandemic. That leads to the problems American consumers are facing now.

Shortage of Goods

As the supply chain continues to be impacted at nearly every level, goods that were once plentiful on shelves are becoming this year’s version of toilet paper. The shortages have forced some retailers like Costco and Sam’s Club to implement limits on how much of some products you can purchase.

Other companies like Walmart, Home Depot, and Costco have decided to charter their own ships to move products across the Pacific Ocean, the New York Times reported Wednesday.

The shortage of goods has hit every retailer at some level from clothing to the grocery store. Axios reported grocery products that could see shortages include: Rice Krispies treats, Sour Patch Kids, some Ben and Jerry’s ice cream flavors, Marie Callender’s pot pies, and others. As of October 10, up to 19% of sports drinks and juices were seen out of stock in stores while snacks were showing 15% out of stock.

Credit cards with cash
FILE - This file photo taken Tuesday, May 3, 2011 shows a Visa card in a wallet in Richardson, Texas. (AP Photo/LM Otero, File)

Rising Prices

When you do find your goods, the supply chain issues and rising demand has yielded higher prices almost across the board. According to the Bureau of Labor Statistics, the consumer price index rose 0.4% in September and has increased 5.4% year-over-year in September. That rate was higher than expected and 3% higher than before the pandemic.

With prices rising, demand hasn’t started to ease yet, which puts a further strain on the shaky supply chain that is working to restore itself and the goods available.

What Now?

According to Treasury Secretary, and former Federal Reserve Chairwoman, Janet Yellen, the higher prices for goods are “transitory” and eventually will return to normalcy as the entire supply chain recovers from COVID-19 and other issues.

“I think there’s no reason for consumers to panic about the absence of goods they’re gonna want to acquire at Christmas,” Yellen told CBS News.

It’s a view shared by current Federal Reserve Chairman Jerome Powell. He has repeatedly said inflation is transitory and will begin to subside.

Meantime, the White House said six companies have made commitments to help ease the supply chain issues. According to the White House:

  • Walmart is committing to increase its use of night-time hours significantly and projects they could increase throughput by as much as 50% over the next several weeks.
  • UPS is committing to increased use of 24/7 operations and enhanced data sharing with the ports, which could allow it to move up to 20% more containers from the ports.
  • FedEx is committing to work to combine an increase in nighttime hours with changes to trucking and rail use to increase the volume of containers it will move from the ports. Once these changes are in place, they could double the volume of cargo they can move out of the ports at night.
  • Samsung is committing to moving nearly 60% more containers out of these ports by operating 24/7 through the next 90 days. 72% of U.S. homes have at least one Samsung product, from appliances to consumer electronics.
  • The Home Depot is proud to join this effort by committing to move up to 10% additional containers per week during the newly available off-peak port hours at the Ports of L.A. and Long Beach.
  • Target, which is currently moving about 50% of its containers at night, has committed to increasing that amount by 10% during the next 90 days to help ease congestion at the ports.

Still, it will take time to meet the demand and for companies to again build up inventories. Any further shocks to the system could yield more problems and rising costs.

Sources: Bureau of Labor Statistics; CNBC.com 1; CNBC.com 2; CNET; American Trucking Association; New York Times; NBC News; Axios; IRIWorldwide.com; Reuters; Marketwatch.com; FoxNews.com; CNN Business; CNN