Supply chain, weak links are causing concerns across Texas and worldwide

supply chain, weak links
Posted at 11:28 AM, Nov 02, 2021
and last updated 2021-11-05 00:37:50-04

CENTRAL TEXAS — We used to joke about all the Christmas items that hit store shelves right after back-to-school sales, but now, that has become a dire warning about the American and the world economies.

Christmas is coming late this year because of a shortage of goods on store shelves.

Even everyday items have started disappearing, leaving the stores with nothing to replace them with.

Belton resident Laura Zarate said it started slowly.

She’d go to her local store to buy groceries and the store didn’t have something she needed.

Now her shopping list is getting lighter as more items move to her can’t get list.

"When I walk in, on the shelves I see they don't have a lot of things anymore that we used to buy. They're kind of empty sometimes. It worries me," Zarate said.

And it should worry all of us. In a global economy that lives or dies by its dependence on consumer spending, transportation becomes a vital link in getting products to consumers through something called “the supply chain”.

The supply chain is a network of transportation that takes goods from factories to airplanes and eventually to warehouses and eventually us.

And what's the weak link here?

"The breakdown is in the supply chain in general," a Port of Los Angeles longshoreman said.

However, this supply chain didn't just have weak links, it looked like a roving gang with bolt cutters tore into it.

Take Christmas for instance, those decorations that didn't show up in August could be the only thing we get.

"The cut-off was probably about a month ago," said a L.A. warehouse manager, talking about when most of Decembers merchandise should have been here.

But that supply chain, that network, now has holes in it and empty store shelves prove it.

What are stores doing about the supply chain problem?

Frankly, everything they can and everything they can think of because if they aren’t selling, they aren’t making any money.

Stores blame shipping companies and shipping companies blame overseas companies, who blame the shipping companies and it goes round and round until it just becomes background noise, leaving Laura Zarate, paying more for much less to buy.

People started noticing it when ships mysteriously started dropping anchor off the coast of California.

A backup caused by only so many parking spots and so many employees unloading the ships.

"Everything. Everything on paper, your shirts, your shoes, your bike, computers, air conditioner, everything. Everybody's waiting for," said dock workers when asked about the growing problem.

The world shutdown is the cause but experts say we added to the problem by believing stories shipping companies spun of how their super-efficient delivery system meant you didn't need a stockpile of stuff.

"We've had a lot of shortages, truck drivers and high utilization of our supply chains since the pandemic started. When you put all that together plus the shift of consumer spending from more services more towards goods, which has created more demand so it's kind of like a perfect storm really says everything that could go wrong did go wrong and all at the same time," said Michael Bomba, Ph.D., of the G. Brint Ryan College of Business, at the University of North Texas.

He says we will soon have to address the issue of better pay for truck drivers, another by-product of shifting spending and COVID.

Authorities at the Port of Los Angeles and Long Beach say, they know they've got their work cut out for them.

"We’re only weeks from Black Friday. We’ve got a lot of work ahead of us," said Gene Seroka Executive Director, Port of Los Angeles.

But experts say, there's only so much efficiency we can get out of ourselves, people, moving stuff around to other people. Until another Einstein can figure out how to slow time down, things take as long as they take, and our failure to plan on it is our fault.

Which again, does nothing to help Laura Zarate and the rest of us deal with those empty store shelves, and our emptier wallets.

"I can't find things that I'm supposed to use every time I go buy, you know, like, everyday items are missing. They're not just specialty stuff," she said. I don't how long we'll have to deal with this because it's not even better. So it's getting worse," said Zarate.

The plight of stores sets up a possible fight for survival in big stores against the little guy, deep pockets versus adaptability.

Just as COVID brought us an economic shutdown, the Delta Variant has added to the problem and contributed to a sequel to the severe product shortages we endured.

One Central Texas family was on their vacation when they found themselves right in the middle of the action.

Francisco Mendoza knows the problem well, making a list of what his family wants, then going to the stores to buy what his family can get.

Welcome to COVID part two where like the best vaccine, the best products are the ones you can get and these days Medoza says there's not much you can get.

"I've noticed like shelves empty and everything like you can't really get anything certain products and all that," he said.

Which made it all the more strange, when on a family vacation in California a few weeks ago, Medoza, his wife and his little girl found themselves in the middle of an unfolding global crisis.

On a trip to the offshore island of Catalina, they suddenly found themselves surrounded by ships that were loaded with goods, with nowhere to go.

"There was an abundance of ships just waiting to like dock and all that there was like 23 on like one side of like the ship there was like plenty more on like the other side just waiting to like dock and a bunch of cargo ships everywhere. It was just crazy," Mendoza recalled.

The so-called supply chain uses ships, trucks, trains, and even airplanes to get raw materials and finished products to market.

But one bump in the road sends the proverbial apple cart flying, stopping the movement of a significant amount of goods.

Why? Ships provide the cheapest way to move goods from overseas and when too many showed up at the port of LA and Long Beach at the same time, it resulted in a traffic jam that rivals that of LA's famous freeways.

The problem gets compounded with every ship that arrives, making the wait longer.

Combined, the LA and Long Beach ports may be the 8th biggest in the world, but it's not big enough when practically every ship shows up.

The craziest part of it all? A lot of what's out there aren't even finished goods. They're raw materials headed, for example, to a Dallas-based dressmaker making items for Callie's Boutique in Temple.

Owner Misty Dollar says orders that used to deliver in days now take weeks if you can get certain items at all.

"We're not really sure what Christmas looks like yet. With some companies, it's looking great, but we are having supply chain difficulties," she said.

In the last month, shipping times between China and the U.S. jumped by more than a month. But oh, the bill!

The cost of floating a 40-foot container to L.A. in the last two years went up, are you ready for this? 1114% according to Freightos.

Where it used to cost $1,300 to send a container, it now costs $16,000.

Now, do you get why we're paying more?

And even if you can afford a container you won't get access to it for, well, let's ask Randy Wells CEO of Discount Safety Masks.

"It's off the coast for a couple of weeks. Then it actually finally got to the OG and I believe this container, this ship, set a dock for a week, wherein a normal time, you know a ship will come into the dock, and then leave the dock same day," he explained.

And that's how store shelves look bare. We went to at least ten stores in four counties and saw the same thing. In fact, it doesn't even matter where we shot our pictures because every store has the same problem.

Some report delays of a month or more and then only getting 10% of an order.

"I feel for them," said Mendoza of the store owners.

Because he knows Christmas is coming and if he doesn't get going, he knows we're going to feel for him.

What's worse, he sees this as a fairly long-term problem.

"I think the supply chain will eventually fix itself within a good year because, by the size of the cargo ships, it's gonna be a good minute," he predicted.

As we struggle these days to find even everyday items that have run short in stores, many have started thinking about holiday shopping.

With Black Friday just a couple of weeks away, there's a concern that a lot of Christmas items just won't make it in time to hit the sales floor.

But some savvy business owners have turned lemons into lemonade, and are offering it as the new Christmas punch.

Killeen Mayor Jose Segarra sat down with 25 News to talk taxes when the conversation turned to why everything costs more these days and why there's so little of it.

He says his wife saw it first and then he noticed when she came home with a huge early Christmas Haul.

"I see it, right? My wife came home with gifts, big ones! Saying, 'those are for our grandkids,'" said Segarra.

Many say the Christmas season hasn't really unfolded the way it usually does when we nearly drown in holiday merchandise before Halloween.

Some call this year, understated. While others claim panic behind the scenes.

Misty Dollar of Callie's Boutique in Temple keeps her cool under fire.

She's doing what the very best small business people do, innovate all the time.

"We just have to constantly think outside the box," she said.

Something big business has big trouble with.

Misty has begun turning her small business and her intellect toward the customer.

"I have lots of things that I carry year-round that I'm really pushing and I'm hoping that'll be things customers want this Christmas," she said.

Why? Because she figured out a while back, that if Christmas comes, she'll need a mix of regular merchandise to supplement it, and have enough to sell.

Great items that she says are also "great Christmas items".

When it comes to the big retailers, the ones usually locked into huge displays of holiday cheer seem to be where the worry comes in.

They have a fair amount of items for now and are continuing to pray for re-stock.

So what do we do about this Christmas season? Well, the experts tell me if you see something you might want to give as a gift, buy it now. Because there might not be enough of that item to last until Christmas.

These days when an item’s gone, many times it’s gone for a while.

We first noticed it on grocery shelves and it started to show up, or rather NOT show up, in soft lines like clothing and hard lines like electronics and sporting equipment.

It's got the big boys crossing their fingers, and small businesses angling for advantage to move ahead, to survive.

Her business plan seems solid.

"I really want people to physically come in here and shop. You don't have to deal with shipping delays, wondering if you're going to have your items or not. We have things right here ready to sell and I think they'll be perfect. I think we're going to be getting a lot more inventory in the next two to three weeks," she said

And if Misty can get you in the door, she says she can get you Christmas, maybe a little less traditional... but every bit as good.

"I'm really looking forward to the holidays and kind of expanding your mind on what you might typically buy for Christmas," said Misty.

Shop local... shop outside the box "Nothing Bundt Cakes" anyone?

As the Mayor of Killeen will tell you, traditional Christmas is flyin' off store shelves.

"So I think what's gonna happen is Christmas is gonna come early. Everybody's going out there right now and shopping before Christmas. And I think that's probably a good idea. Because if you wait too long there's gonna be a lot of shelves empty," he said.

This great disruption, caused by a virus, leads to many new economic infections, and it could set up a battle for survival between big business, and small business.

Businesses both big and small have taken hits from supply shortages, as the world struggles to recover from its near shutdown of the economy.

Factories geared up to make up lost ground, and some of that's clogged ports, struggling to find enough workers to unload it all.

Misty Dollar began working to outsmart big business in a battle that's brewing around the world.

"We just have to constantly think outside the box," said the owner of Callie's Boutique in Temple.

COVID's resurgence, what you might call its "sinister sequel: COVID 2", hit the economy with supply shortages just as it finally had shown signs of getting on its feet.

Dollar thought she might get around that by relying more heavily on local suppliers.

"We do work with a company that actually does their manufacturing in Dallas and used to order from them and have things in four days, maybe five tops. Now I'm looking two to three weeks and you have to order right away because they may not have the items anymore," she explained.

Reminding her, we really had a global economy.

The most recent push to globalize came about the time Richard Nixon warmed relations with China.

Toyota, as a way to help keep the cost of the company's then-low-cost vehicles low, developed a system where parts for the assembly line arrived just minutes before their installation, eliminating the need for warehouses.

Years later, FedEx founder Fred Smith merged that idea with the air force he'd begun assembling, based on a delivery service idea that got him a C on a Yale economics paper.

FedEx became a household name, practically made logistics a science, and "just in time delivery" was not only possible, but its massive marketing machine made it something every business had to have until COVID.

Dr. Michael Bomba of UNT explains the world sneezed, and just in time delivery caught a cold.

"Really, I mean, it can go in many ways that you don't expect because a lot of the manufacturing that occurs in the United States and other parts of the world is bringing intermediate goods or inputs into that manufacturing from all over the world. So any breakdown in the system at any location can cause shortages, where you least expected," he said.

Q: Even a product made locally in the United States or somewhere in Texas, you can have a problem because they can't get the goods and stuff to make it?

A: "Exactly. Exactly," said Bomba.

Q: So what do you do with that? If you're a business, how do you hang on?

A: "Right, right. I mean, just in time is that you reduce your amount of inventory, which frees up more capital. We're learning that that doesn't always work. So if you're having to put more money into the inventory, you have less working capital to work with," said Bomba.

A similar incident in the 1990's nearly put Toyota out of business.

It happened when a fire broke out at an Aisin plant that makes parts for Toyota, as its sole supplier of the part, the loss of Aisin nearly stopped Toyota's production lines.

Now Aisin has multiple plants including in the U.S. plants in Indiana and Southern Illinois.

Q: We keep hearing how COVID has pushed us forward. This is one way that COVID has held us back, this new importance of inventory.

A: "That's right, that's right. We may see that some of the gains that we made, in efficiencies in the past, we're gonna have to rollback simply because they're not the systems are not very resilient with them," Bomba explained.

Business leaders will decide if just in time needs a band-aid, a makeover, or gets thrown out altogether.

Either way, Economist Ray Perryman says the repair work has already begun.

"The nice thing about markets is when you have a problem like this simultaneously create an incentive to solve that problem and we're seeing a lot of that work taking place right now," said the head of "The Perryman Group.

Dr. Bomba says that work could change the business landscape.

Many think inventory will make a comeback giving big businesses the advantage, but others point to the resiliency and adaptability of small businesses that stayed open during the pandemic through sheer force of will.

"I really want people to physically come in here and shop. You don't have to deal with shipping delays, wondering if you're going to have your items or not. We have things right here ready to sell and I think they'll be perfect," said Dollar who says she's ready to battle big companies for her economic livelihood.

Small businesses like Dollar's don't have a plug nickel for warehouses. They will have to survive on their wits, their gut instinct, and most of all their ability to act or react quickly to something big guys stumble on.

Bomba says, big businesses may have the advantage now, but don't count the little guy out.

Q: Sounds Like you're saying that we're getting, we're gonna see a lot of impacts, in a lot of different areas. The bigger companies will do better... smaller ones that used to be the backbone of the economy are gonna have the toughest time. What's the deal?

A: "Well, I think that's, that could be an outcome. I mean, they're gonna have to be more nimble, they're gonna have to be able to adapt more easily to these things, or more easily to these things. I think if they're rigid, and they don't try to adapt, and I think they're gonna face trouble. So I think it's always been the case as it has been, hopefully, they'll be nimble and be able to come out of this better than they were before they started," said Bomba.

And may the best business model win, because as Ray Perryman pointed out, the search for solutions to our new market weaknesses seems well underway.