Supply chain issues have plagued America since the beginning of the pandemic but got progressively worse through 2021. The problems are far from over, but we’re taking a rearview look and learning that while the disruptions were record breaking, companies like ours were able to pivot and find new ways to cope.
The Thomas Index Report for the week of January 24 illustrated that the disruptions were more significant than those during the financial crisis of 2008. The data from the report shows that demand for ocean freight services was up 111% over the previous quarter. There were several reasons for that higher demand and COVID-19 was one of them.
COVID-19 disrupted the supply chain as issues such as demand drops and surges had to be addressed, along with supply shortages, inventory placement challenges and reduced productivity due to lockdowns and the spread of the illness. Nearly overnight, our economy shifted from going out to staying in, which meant the demand for goods shifted dramatically.
The Council on Foreign Relations (CFR) explains the supply chain problem in this article. As more people around the world stayed home, they demanded goods such as musical instruments, workout equipment, books, electronics, and more. This demand drove the supply chain to experience a major problem. How were manufacturers, who also had a diminished workforce due to lockdowns and illnesses, going to get these goods to those who ordered them?
From our perspective at DSI/Dynamatic, Inc., we provide variable speed equipment to places that manufacture goods like these. For example, our eddy current drives can vary the speeds of motors on metal stamping presses. If those stamping presses made goods such as electronics, those drives have worked harder than ever, which meant mechanical failures could happen, which meant that repairs or replacement parts would be needed. As situations such as this occurred, we found ourselves in a predicament. Demand was high and supply felt short. That meant wait times for parts became longer, and that meant the end user or customer had to wait for whatever it was they needed.
CFR also reported that the demand of goods was also coupled with a shortage of workers, so containers piled up on docks at on ships at sea. The shortage can be attributed to multiple things, including The Great Resignation, but 1.6 million people in the U.S. are still suffering from long COVID. According to a recent report from CBS News, long-term symptoms such as fatigue, brain fog, headaches, memory loss and heart palpitations top the list and can leave people incapacitated for months. Shortages of workers means, fewer people to work on those cargo ships, less production, and fewer people to move the supply chain along.
According to MarketWatch, supply chain issues continue to plague industries such as electronics, automotive, and even flowers. Inbound and outbound shipping, labor, and digital marketing costs were higher for many of these industries, leading to profit declines. There is a silver lining, however. Supply chain problems may have already peaked. Of course, we won’t know for sure until we start seeing change. Our purchasing manager hasn’t seen the light at the end of the tunnel yet.
DSI/Dynamatic Procurement Manager Barb Konicek said the most unfortunate part about what’s happening with the supply chain is that costs and long lead times extend to our customers. One of the most difficult things to procure are electronic components. Konicek said there are several suppliers, but costs are nearly the same at each and supply is limited.
“You have to do the best you can with people not having inventory,” she said. “I can only do so much.”
Regarding increased costs, Konicek recalled the recent order of a particular shaft needed for a Dynamatic drive. One shaft was expensive, but when purchasing two together, even though two weren’t necessary, drove the costs of each down significantly. Konicek has learned to be creative in finding ways to make her purchases worthwhile for the company despite increased costs that are more than double what they were in early 2020.
“Customers understand,” Konicek said. “They’re not going to find (a part) elsewhere for any less.”
Supply Chain problems aren’t just found in manufacturing. For a company such as Velavu, an asset management firm in Ontario, Canada, their challenge has been in sourcing components. Marketing & Communications Director Michelle Riccetto said, “As constrained supply meets stronger than ever demand for semiconductor products, shortages and extended lead times are inevitable. In some instances, distributors cannot even venture an approximation on restocks, and as Economics 101 will tell you, when there is a limited supply and high demand, prices go up.”
Riccetto said Velavu has been able to navigate the issues by adjusting their design process. Since they manage all efforts in-house, flexibility and nimbleness have become part of their everyday movement.
“We have leaned heavily on our internal team to problem solve and find ways to accomplish our goals by changing design or production methods to match component availability,” Riccetto said. “At the same time, since we are a start-up, we don’t have the predictable demand that would allow us to place massive orders 40 plus weeks ahead of time like a major corporation with years of historic data that knows their typical quantity needs.”
In response, this has required Velavu to work closely with our partners and manufacturers to ensure awareness of potential shortages.
“Basically, we’re having many more conversations, much earlier on in the process,” she said.
For North American Coatings Laboratories (NACL) in Ohio, the supply chain remains disrupted.
Technical Sales Coordinator Kelley Plats said that while her company was not a traditional manufacturer, they still experience issues with witness samples, which allow testing without handling the actual part, to ensure the coating process is accurate.
“The supply chain shortage has impacted our ability to get witnesses in a timely manner and has made it nearly impossible to obtain more exotic materials used in infrared optic manufacturing,” Plats said.
NACL has seen fewer disruption in raw materials, but lead times are still lengthy.
“We are looking forward to the day where lead times are shorter and we can make some upgrades to the machines we have in house without having to wait years instead of months!” Plats said.
While it doesn’t appear that supply chain issues are going to subside any time soon, businesses have been showing effective ways to pivot. We, at DSI/Dynamatic, do our best to communicate with our customers about lead times and remain up front with them about costs. From adjusting design processes, to reshoring initiatives, and creative purchasing, companies are still trying to make their way through this very difficult time with the knowledge they have and will be doing so for a while longer.
By DSI/Dynamatic, Inc.