Santa and the supply chain

by Paul Holmes ([email protected]) 491 views 

We won’t have Black Friday for more than a month, but already we’re being urged to part with our green now. Reuters is reporting that Americans are expected to spend $1.3 trillion on holiday shopping this Christmas season, up from last year’s $1.1 trillion.

Granted, it doesn’t feel like Christmas just yet, though strings of lights and strands of garland are already pushing pumpkins from retailers’ shelves. That push not only will continue but also will accelerate in the coming weeks. It appears elves are better than goblins at fighting for shelf space.

The fall has been condensed so much that you’ll likely still have much of your pumpkin spice coffee creamer left after the first snowflake of the holiday season falls.

Retailers have for years kicked off their big holiday sales push on the Friday after Thanksgiving, called Black Friday because it gives merchants their best chance to get in the black financially before year’s end. This year, however, that message has changed.

Retailers are telling consumers that if they want it for Christmas, they’d better get it now to avoid disappointing the kids. I can’t imagine the look parents will get from children who were expecting the hottest new toys and video game consoles but instead found that Santa Claus left them either something they didn’t ask for or fewer gifts altogether.

According to a recent survey of nearly 1,100 consumers, 37% of shoppers began their holiday shopping between August and September, if not earlier. An additional 22% said they were starting their Christmas shopping in October, and 24% planned to start in this month before Thanksgiving, not waiting until Black Friday.

Some retailers are urging consumers to get their credit cards out now, pointing to what retailers describe as supply chain challenges, longer delivery times, and lower inventories.

By now, we all have some idea what the retailers are talking about. Whether it’s being talked about in the coffee shop or the board room, it seems no discussion of the issue of supply chain disruptions would be complete with the mention of the word pandemic.

The Sam M. Walton College of Business at the University of Arkansas notes there is a shortage of shipping containers, causing shipping rates to soar. Manufacturing sites are at capacity, and ports are congested and causing delays. That situation is exacerbated by a shortage of truck drivers. While trucking companies are offering higher wages, it will take time to fill positions, the Walton College of Business noted in a recent report.

Freight is likely to sit at facilities for longer periods before it gets where it needs to go, leaving retailers struggling to get the full variety of products for their shelves. Shipping times are expected to double during the holiday season, and delivery times will increase without enough truck drivers. Add to that a shortage of logistics warehouse space, and the result, in a word, is a mess.

Some say the global supply chain disruptions began in earnest after the World Health Organization (WHO) declared at the end of January 2020 the COVID outbreak to be a global health emergency. Such a crisis affects the supply network at the source and destination, and interrupts production. Once the first wave of the virus began to be controlled and countries who shut down economies began to ease up on restrictions, consumer demand rose beyond the supply chain’s ability to accommodate the demand, thus creating shortages and higher prices.

Some commentators have said the ironic condition that there are more jobs than workers to fill them may be explained in part by the pandemic. Some workers, it is said, got accustomed to doing their jobs remotely and now do not wish to resume reporting to a worksite every day. Some workers are said to be unable to match their skills with the available jobs. Others, including hospitality workers, may have been unable to return to their old jobs because the facilities that employed them did not survive or because their positions were eliminated when anti-virus shutdowns hit the food-and-beverage industry particularly hard.

Other observers believe extended unemployment compensation left other workers unwilling to return to regular employment. Many manufacturers in Northeast Arkansas continue to hang the “Help wanted” sign.

The headlines in much of October highlighted the scores of container ships anchored off the coast of California waiting to be unloaded. Big-box retailers including Arkansas-based Walmart, along with shippers FedEx and UPS have expanded container operations at the ports of Los Angeles and Long Beach as part of an effort to unclog the bottleneck. The ports are now unloading container ships 24 hours a day instead of 16. The efforts were expected to result in an additional 3,500 containers per week moving at night at the two ports.

Lowell-based J.B. Hunt Transport Services said during its third-quarter earnings call in mid-October many of the nation’s supply chain obstacles are rooted in a shortage of workers. Hunt reported earnings for the quarter that beat analysts’ estimates and as a result, shares of the company’s stock were up 9.7% following that news.

P.A.M. Transportation of Tonitown reported that its third-quarter earnings more than tripled year-over year, despite what it called the obstacles of high freight demand alongside severely constrained transportation capacity.

If the third quarter performance of those two Arkansas companies are any gauge, when the Gordian knot of the supply chain is unraveled, just think what a merry Christmas it will be – whenever it comes.

Editor’s note: Paul Holmes is Editor-at-Large for Northeast Arkansas Talk Business & Politics. The views expressed are those of the author.