Supply chain issues: Where are they now?

Do you ever find yourself wondering “Whatever happened to [fill in the blank]?” While many wonder about former child actors, American Idol competitors, or snacks from their childhood, we at Retail Brew have been pondering what happened to all those “supply-chain constraints” that’ve popped up since 2020.

So, we’re giving arguably one of the most overused phrases in earnings calls over the last three years the “Where are they now?” treatment to find out which issues from transportation to commodities are still at work and which have fallen into obscurity eased.

The extra mile: Getting products from A to B has been tricky and expensive over the last few years, and many supply-chain hold-ups for brands and retailers resulted from congestion at ports like the Port of Los Angeles starting in late 2020. Congestion has since eased, peaking at 109 queued ships in January 2022 before dipping to just four in October, the Wall Street Journal reported.

• Prices are dipping too: Shipping-container prices from Asia to the West Coast of the US dropped from the sky-high cost of $20,000 in 2021 to just $1,028 this week, per the Freightos Baltic Index. When retailers pen long-term contracts with ocean shippers this year, they’re banking on lower rates.

Things are going so well that ports are now dealing with too many empty containers, Lisa Ellram, professor of supply-chain management at Miami University of Ohio, noted. An even bigger issue, she said, is ongoing contract negotiations with the Port of Los Angeles and unions and groups representing port employees and dock workers, which have led many shippers to divert cargo to other ports.

• Port of Los Angeles executive director Gene Seroka said he’s hopeful agreements will come by spring.

On land, transportation costs are still high, as fuel prices remain elevated, causing retailers to spend more $$ on small package carriers that have raised prices.

Laboring away: The last few years have seen a flurry of strikes and unionization efforts within the CPG and retail world, leading to both worker shortages and, in many cases, higher wages.

Walmart, Target, and Home Depot recently raised their minimum wages as a result, but the tight labor market still persists, as Home Depot, Unilever, and Mondelez were among companies still referencing labor as a major issue in recent earnings calls.

“Wherever there are frontline workers—so in retail in warehouses and factories—it is still incredibly competitive and challenging to both hire and retain frontline workers,” Gartner supply-chain analyst Claudia Clemens noted.

According to the Bureau of Labor Statistics, there were 50,000 new job openings for manufacturing of nondurable goods, i.e. products like food and clothing, between December 2022 and January 2023. But there’s some positive news: Retail trade job openings in January were 870,000, down from 964,000 the month prior and 987,000 the year prior.

Package deal: In 2021, the US cardboard and containerboard supply was running out, leading to price spikes and making it difficult for retailers to ship orders. However, the need for cardboard and other packaging materials has dipped this year, likely due to “changing demand” as consumers aren’t shopping online as much as they were during the pandemic’s peak, Ellram noted.

• Increased at-home beverage consumption contributed to an aluminum-can shortage that hit beverage makers, but aluminum demand is now returning to pre-pandemic levels.

But now, Clemens noted a new packaging problem is popping up: Following petitions from the tin mill product industry, The US International Trade Commission is investigating whether to impose additional import duties on tin milled products from eight countries. Tom Madrecki, VP of supply chain for the Consumer Brands Association, said these duties could negatively impact US CPG manufacturers, and potentially inflate prices for canned products.

Hot commodity: The pandemic-driven everything shortage is largely behind us, but some non-COVID-related issues, like the bird-flu driven egg shortage and the Dole salad-kit shortage from a cyberattack, continue to plague retailers.

Some impacts on commodities remain, largely resulting from the Russian invasion of Ukraine.  The two countries accounted for 80% of sunflower-seed meal and oil exports prior to the war, and nearly half of those exports have been halted since. But farmers have resorted to exporting uncrushed seeds for buyers to process on their own, shipping out 190,000 tons of seeds in January, per the Wall Street Journal. That’s led to lower prices and lead times.

But commodities remain a “big concern,” Clemens said, not due to the pandemic or war, but droughts reducing crop yields.

• She said 64% of US-grown corn and half of US-raised cows are in a drought zone.

And these climate-related shortages likely aren’t going away. “Instances of drought have increased 70% in the last 100 years, and as global warming continues to rise, that frequency and magnitude of drought will also increase,” Clemens noted.