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Global supply chain issues impacting consumers, businesses as experts ponder future

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Posted at 4:41 PM, Sep 23, 2021
and last updated 2021-09-23 17:41:48-04

WACO, TX  — From the ocean waters of the pacific to the shelves in Central Texas, issues in the global supply chain are impacting Central Texas consumers and businesses.

Ahead of peak U.S. shopping season, Brandon Cook is planning purchases.

"I've been thinking about buying a necklace for my girlfriend," said Cook.

But whether the products he wants will be there, and how expensive they may be are two very real concerns.

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Brandon Cook is a Waco resident already planning his holiday shopping

"Yes, I've heard things are going up. So I am a little concerned about that," said Cook.

Emblematic of how issues in the global supply chain continue to plague the industry. Striking consumers right in the heart of Texas.

Jim Patterson is the President of Heart of Texas Builders Association. Earlier this year, lumber was his primary concern as it arrived in short supply and at record-high cost.

"We can get lumber now for the most part and we can still get dimensional material," Patterson said. "But we're having issues with getting appliances electrical fixtures, and plumbing fixtures of that sort."

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Jim Patterson, President, Heart of Texas Builders Association

But in the automobile industry, the effects of the semiconductor shortage, at least short-term, doesn't seem to be waning.

Dr. Pedro Reyes is a professor at Baylor University, with close to 40 years of expertise in global supply chain management. This is a field that consumers, both young and old, are learning has a huge impact on our lives.

"I talked about what a supply chain is and the jobs in the immediate future for the high school students at La Vega High School," Dr. Reyes said. "And, the very first question 'when are we going to get chips'?"

From lumber to microchips, ketchup to coffee. We've all seen shortages of some of things we buy.

"Some industries it's getting worse, but [in] most industries its the same," said Dr. Reyes.

Now there is a container shortage in the U.S., coupled with COVID-19 related closures at ports and factories in Asia. This is on top of a lack of warehouse workers and truck drivers. Some businesses are seeing shipping delays, and some of us are seeing less complete products.

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Dr. Pedro Reyes, Associate Professor of Operations and Supply Chain Management, Baylor University

Semiconductors are a useful example because of their use in everyday products such as washers, computers, toys, or electronics general. Missing one part of the assembly can result in a delay in production.

"It's kind of like a game we play in my class with the puzzle," said Dr. Reyes. "And so just a simple puzzle."

Dr. Reyes describes the situation as like putting together a piece puzzle, when one piece is missing.

"There's no way you can finish the puzzle, so you're stuck," said Dr. Reyes. "And that's across mature products shoes, toys, clothing, groceries, etc."

This week, Target, announced it's chartering its own container ship to ensure merchandise arrives on time. Proctor and Gamble also announce its raising prices on diapers, and other products, to manage a surge in the cost of materials and transport.

Dr. Reyes said what's happening is fairly straightforward, the increase in cost for materials and transport is being passed on to the consumer.

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Baylor University

"What's happening is that when you have product coming into a warehouse distribution center or a fulfillment center like Amazon from the time they placed the order, receive it, put it into stock, and then go through the actual outbound fulfillment - that price of that product will increase somewhere between 30 to as high as 60 percent," said Dr. Reyes.

But surprisingly, despite the higher cost, consumer demand is high as ever. A wrinkle of panic buying in what Dr. Reyes describes as the bullwhip effect.

"There's still some of that artificially inflated demand due to panic buying," he said. "One of those things and the bullwhip effect. How do we know demand is artificial? We don't know, we just know its demand is increasing. So from a capacity side, I've got to fix it. I got I've got to be able to deliver."

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Dr. Matt Douglas, Assistant Professor Supply Chain Management, Baylor University . Douglas has created a framework for companies to develop a culture of integrity connecting values such as protection of employee health and welfare not just within their four walls but throughout an entire supply chain.

"It allows them to change or adapt when when things are not are not going well," he said. And i think it's important now as we as we continue to face lots of different things pandemic, social unrest, security issues, whether it's security or supply chain security issues."

Which can mean less variety. Dr. Reyes uses Campbell's Soup as an example. An item that consumers are probably used to seeing widely stocked on shelves.

"If you went to the grocery store and you went to the Campbell's, you know, it's probably 80 different brands or a selection of product," he explains. "Well, now instead of 80 is probably 60. So they lower the proliferation of products. They really just focused on the ones that will have a greater demand and forget the small stuff."

While the price perils and supply shortfalls of today may continue for the next couple of years, like in the semiconductor industry, the question of what the future holds is a tricky one with a different answer for a different industry.

"There's no slow solution, in my opinion, to fix it in the short run, it's going to take months to get there and months could be six, or nine, a year, 18 months," he said. "Some industries it could be a lot quicker."

Despite that, ahead of the holiday shopping season, Dr. Reyes said American consumers are in the position to help navigate the evolving situation in global supply chains.

"During the pandemic shutdown, our grocery supply chain saved the world," Dr. Reyes said. "In Europe there's no food, in Japan there's no food."

And compared to the rest of the world, extraordinarily lucky. A reality on display right here in Central Texas.

"We had a huge load today and he walked by and paid for our bill," said a Waco resident, as she unloads groceries in a Walmart parking lot. "It was a random act of kindness."