State of the Supply Chain

Written by Diane M. Calabrese | Published December 2024

It’s not over yet. A short lived (October 1–3, 2024) longshoremen’s strike did not end; it paused. The new deadline for meeting the union’s demands is January 15, 2025. Ports on the East and Gulf Coasts may close at some point. And as we write, another hurricane— Milton, following fast on Helene— threatens both coasts of Florida.

Even without the trials of labor disagreements and natural disasters, supply chain issues require ongoing attention. But the how, when, and where of disruptions are difficult to predict.

In fact, until the last quarter of 2024, problems that began in the spring of 2020 were abating. “Over the last 12 months we have finally seen supply lines normalize and lead times from vendors get back into normal delivery times,” says Curtis Braber, owner of BE Power Equipment in Abbotsford, BC, Canada.

Yet stabilization does not hold in every dimension of the supply chain. “While delivery times have normalized, there is still a lot of volatility in container pricing,” explains Braber.

Count Braber as optimistic that equilibrium—in other words, predictability—will return. “Hopefully as we work through the slowdown in the economy and interest rates come down, we will see demand for product normalize to pre-pandemic levels and have a clear line of sight from suppliers through to the dealer network,” he says.

On the southern side of the U.S.–Canada border, there is also optimism about continuity in the supply chain. There has been a “dramatic improvement, except for supply of a few components,” says Dennis Black, president of McHenry Pressure Cleaning Systems Inc. in Frederick, MD.

Black says that lead times for most equipment have reverted to pre-pandemic levels. He adds, however, that there are still issues that require attention.

“I have concerns that as the supply chain has caught up, the economy has slowed, sales are down, and money is tighter,” explains Black. “We find that companies are not spending and/or funding like previously.”

Because manufacturers lowered lead times, some may experience overstocks if sales fall. “This could drive availability and production back the other way,” says Black.

Although Black concedes it may not be realistic, he does have a concept of what an ideal supply chain might look like. It would couple seven to 10 days lead time (to have items built) with stabilization—and eventually lowering—of the cost of everything. In short, “inflation” would be tackled. Optimism must be tempered within the sphere of commerce and industry. Black is not completely sanguine.

“Although lead times have decreased, we feel the quality of manufacturing has suffered,” says Black. “I’m not sure of the exact reasons but have concerns that companies have been lacking on quality control and pride in manufacturing in order to increase their product.”

An example? “We are experiencing more equipment coming in with problems right out of the box and with poorer quality,” says Black.

Difficulties in hiring and retention may be in play. “I have wondered if it is not due in part to the lack of available employees and the level and quality of workers that are being hired,” says Black. “A deterioration of pride in work and quality of work appears to be occurring.”

IF ONLY…

An ideal supply chain is always somewhere on the wish list of a business owner. “That more products would be made in the United States would be a good place to begin in moving to the ideal,” says Linda Chambers, brand and sales manager at GCE/Soap Warehouse Brand in Norcross, GA.

Moreover, the ideal might also involve the way stock is maintained. For instance, “Vendors would inventory a larger amount of their goods instead of only making to order or relying on overseas production,” says Chambers.

Being able to source goods closer to home would mean “retailers could count on faster shipping when placing orders,” explains Chambers. When Chambers responded to our queries, she shared the wide concern over the port strike, which may not be finally resolved until January or beyond.

Although shipments move better now than they did in the first years of this decade, they could move better still. “Some items from overseas continue to take weeks to get here and to us,” says Chambers.

“U.S. vendors have been getting better with increasing their supply on hand here in the United States,” explains Chambers. “They can get things to us faster, but it still can be hit or miss, and prices are still high or going higher and not showing any chance of coming back down.”

The uncertainty hanging until there is a conclusion to the negotiations between dockworkers and management may be less intense while dock work and talks continue side by side. But the lack of assuredness is most unwelcome just when things began to move away from the perturbations caused by the virus.

Aaron Lindholm, CEO and president of Veloci Performance Products in Burnsville, MN, offers some of his insights into the current situation. “Travel times for products from Asia continue to get longer, and there is an oversupply of some goods in the market still,” he says.

But Lindholm also tracks many positive changes. “Raw material pricing has improved for stainless steel, as an example, and we have seen less price increase from various vendors this year compared to years past. Overall, the supply chain is in a more stable spot than it was during Covid, making inventory management easier and more predictable.”

There’s one issue that Lindholm sees as more vexing than any other. It’s not the lead times coming from Asia being as long as they are. “That’s frustrating, but the biggest supply chain issue I believe needs to be addressed is the de minimis rule,” he explains.

“Allowing Chinese manufacturers and suppliers to sell direct to the American consumer has many unknown economic consequences,” says Lindholm. “In the United States you can purchase goods for less than $800, and they come in duty free. In Europe this amount is $250, and in China the amount is $7.50.”

Yes, that’s only seven dollars and 50 cents; then China attaches a tariff to the import.

Lindholm explains that enabling U.S. consumers to purchase lower-priced goods duty free helps them in the short term. In the long term it compounds economic problems.

“With consumers stretched thin, budgets being squeezed, and rising unemployment since January 2023, people are looking for deals, and this is an easy way to save money and still procure goods,” says Lindholm. “I believe that in the short term it may be helpful, but in the long term our country cannot allow this massive supply chain disruption to continue.”

IT’S AN ELEPHANT

Recall the fable of blindfolded people each envisioning an elephant differently, depending upon which part of it they touched—an ear, a trunk, or a foot. With a supply chain, there’s no one who is fooled because of their vantage.

Whether in finance, sales, or standing at the ownership helm, everyone has the full supply chain in view. (For all the commitment to integrating the digital systems that keep a business humming, the physical supply chain got there first.)

Consider the two perspectives that follow. The first is from a finance officer. The second is from a warehouse expert.

“Overall, I’d say the supply chain is pretty healthy,” says Christopher J. Vargo, the director of finance at Hydro-Chem Systems in Caledonia, MI. “We have very few substantial delays.”

Vargo sees the chain as essentially returned to preCovid lead times with prices mostly stabilized. He cautions it’s important not to attribute all supply chain issues to the pandemic because a couple antedated the global disruption.

“Some items have historically had longer lead times, such as aluminum products, so those are not a blemish on the overall quality of the supply chain right now,” explains Vargo. “For some time after Covid, electrical items had a fairly high level of uncertainty around them.”

How much uncertainty? “Some items would take up to 180 days to receive,” says Vargo. “Now we have very few items that go past 30 days.” He adds that even the extended lead times on equipment have fallen in line with what they were prior to the pandemic.

“As a chemical manufacturer, a significant portion of what we purchase is commodities,” says Vargo. “While things were very volatile for a few years, those markets have leveled out, and there is much more predictability.”

With the predictability, shipping to customers is essentially at 100 percent on-time rate, says Vargo. Of course he, too, has concerns about a dock strike that resumes or does not get resolved.

“We saw the impact of backed-up ports in the last few years, so we have a pretty strong reference point of what could happen,” says Vargo. “The overall impact could be fairly debilitating to the supply chain.” It is an impact that could include lack of raw materials and finished components and could spiral into layoffs and price increases.

Vargo says there is also concern about the impact of the presidential election “not only on the supply chain, but business as a whole” should there be “financial reactions” that often accompany major elections.

Weighing the effects of the economy on the supply chain matters whether there is a global crisis or relative harmony. “As the inflation slows and borrowing becomes a bit cheaper, it would seem spending could increase,” says Vargo.

During the most difficult part of global supply chain disruption, Vargo’s company took measures to mitigate problems. “Not long ago we were placing substantial orders well ahead of when we’d think we’d need them…” That’s no longer necessary.

Providing “customized solutions” to buyers, says Vargo, always adds a bit to lead times. But customization also means a cohort of buyers who will wait a bit to get exactly what they want, and that’s a big assist with any supply chain issue.

IT’S AN ELEPHANT (II)

As we write, Hurricane Helene’s destruction means a major supplier of IV fluid based in North Carolina can neither make fluid nor ship it to hospitals. Anything can happen globally or locally.

Take locally. “At this point in time, the supply chain is on uneasy waters quite literally,” says Daniel Horn, who takes the title “warehouse ninja” at Atlantic Pressure Washers in Linthicum, MD. “It started with the tragic Francis Scott Key Bridge collapse in March 26 earlier this year.”

Because of the collapse, the Port of Baltimore was closed for just under three months as the bridge was cleared from shipping lanes to the port. “As a result the port lost approximately $15 million a day, and most shipping containers were rerouted to Virginia,” explains Horn.

Although the port is now open, Horn notes it will have to close again in 2025 during construction of a new bridge. Problems caused by a single closed port would be magnified enormously if the International Longshoremen’s Association returns to picket lines.

Any disruption to the chain cascades. It leads to shortages and price hikes as well as bulk buying, explains Horn.

No one wants to reexperience the disruptions that began in 2020, but Horn recalls them as a cautionary tale.

“Companies who have had the means dove headfirst into bulk purchasing to compensate for extended lead times,” says Horn. “As businesses strive to cut costs, ideally the goal is to return to lean management.”

The lean approach requires some confidence in stability. “Being able to follow trends of supply and demand from year to year certainly makes purchasing easier,” says Horn.

No one wants to reexperience the disruptions that began in 2020, but Horn recalls them as a cautionary tale.

“Companies who have had the means dove headfirst into bulk purchasing to compensate for extended lead times,” says Horn. “As businesses strive to cut costs, ideally the goal is to return to lean management.”

The lean approach requires some confidence in stability. “Being able to follow trends of supply and demand from year to year certainly makes purchasing easier,” says Horn.

Even so, “easier” is not what Horn expects. He points to many factors across the next few months that will make prediction difficult—the possibility of an ILA strike, wars, and the national election. And now, hurricanes and their aftermath.

What to do? “As we await supply, it would be a good idea to devote some time to renewed marketing strategies,” says Horn. “Having good social media and website content on hand to promote your products is essential and will offer a boost in interest and promote sales in the long run.”

In short, Horn has a recommendation we can all embrace: Be positive