Stock

: Shoppers expertise bottlenecks and better costs as provide chains affected by COVID shift to restoration

Starbucks Corp.
SBUX,
-0.10%
makes headlines, not just because of new summer beverages, but also because of the scarcity of ingredients and supplies making it difficult for consumers to buy their favorite beverage.

This is just one example of the challenges retailers, consumer businesses, and their loyal buyers face as a supply chain turned upside down by the coronavirus pandemic tries to prepare for the post-COVID recovery.

“It relaxes. In some cases, we are seeing similar effects in the first few months of the pandemic. Some of that is the other way around, ”said Dan Kowalski, vice president of the Knowledge Exchange Division at CoBank. CoBank provides loans and other financial services to the rural community in the United States.

At the beginning of the pandemic, some shoppers who went to the grocery store to store groceries and other items were greeted with empty shelves. Companies worked feverishly to move the distribution of restaurants, cafeterias, and other food and beverage outlets that were now banned during the lockdown.

Fitness equipment and other items also became hard to find as all sorts of activities were relocated to home offices, living rooms, and backyards.

See: What is inflation Note: It's not the 12% increase in rental car prices over the past month

Now with the introduction of vaccines and the return of consumers to the world, there is a renewed demand for things that were useless during COVID.

"There is part of the economy that has been relatively calm over the last year that has reopened," said Chedly Louis, vice president and senior credit officer at Moody's. “The quiet part of the economy is turning up faster than the manufacturer thought at the beginning of the year. This is the realignment that is taking place in the supply chain. "

Companies have spoken extensively about the supply chain hurdles they are currently facing.

Read: Swimsuits and luggage are hot items as U.S. shoppers prepare for summer events with COVID restrictions eased

Sumit Singh, chief executive of pet supplies retailer Chewy Inc.
CHWY,
+ 0.39%
said on the conference call late Thursday that high levels of out-of-stock items had been headwinds in the last quarter.

"This is clearly a supply-driven situation that we expect to subside in the second half of this year as additional manufacturing capacity goes online," he said, according to a FactSet transcript.

"Until then, we will continue to actively manage our inventory and use our recommendation engines to help customers find attractive alternatives."

Read: Chewy swings to surprise the profit but warns of labor shortages and delivery disruptions

Costco Wholesale Corp.
COSTS,
+ 0.51%
described a wider range of supply chain problems.

"From a supply chain perspective, port delays continue to have an impact," said Richard Galanti, Costco's chief financial officer, on the company's third quarter conference call last month, according to a FactSet transcript.

The company also had bottlenecks with pallets, ships and containers. The need to catch up is also an issue.

"The biggest way we have dealt with supply chain delays is by custom ordering and frontloading, if you will, orders of many items," he said. “And we think we have that pretty well under control. The feeling is that it will stay that way for most of this calendar year. "

Clorox Co.
CLX,
-1.07%
discussed the higher prices of raw materials, particularly the resin used in its garbage bags, during its last conference call. To cover the costs, the company has announced price increases.

Clorox is one of the few companies including Kimberly-Clark Corp.
KMB,
-0.19%,
Hormel Foods Corp.
HBW,
+ 0.39%
and Procter & Gamble Co.
PG,
+ 0.02%
announced the price increases.

Moody’s Louis also notes that the supply chain has been impacted by weather and other factors in recent months.

Likewise: Why bottlenecks in the supply chain and price pressure can subside by the end of the year

"Manufacturers are doing this carefully when it comes to price increases," said Louis. “Most companies don't raise prices to increase margins. Most of it serves to offset costs. It will be interesting to see what happens to these higher prices when we establish higher prices and the raw materials decrease a bit. "

The National Retail Federation said in an announcement Monday that April was the busiest in retail container ports in the country, with May setting a possibly record.

“There is no shortage of consumer demand, but there is still a lack of manpower, equipment and shipping capacity to meet that demand,” said Jonathan Gold, vice president of supply chain and customs policies for the organization.

"Disruptions in the supply chain, congestion in ports and rising shipping costs could continue to pose challenges until the end of the year."

Cowen analysts describe in their report on the state of the ports "a battle for equipment and space", a lack of drivers and high fees for "dwell times" during which shippers cannot move cargo.

"Although the backlog has been partially worked off, there are still huge volumes (three-digit year-on-year growth and double-digit growth compared to 2019) coming into the ports," said the June 3 report.

"Dock workers, warehouse workers and other key transport workers are finally getting vaccinated (75-80%), which has also enabled ports to improve productivity."

And: US consumer prices are rising again, pushing CPI inflation to a 13-year high

Mikey Vu, retail and operational practices partner at Bain & Co., says there has been a shift since the pandemic began as consumers increasingly shop online and businesses resolved some of the issues that emerged when the pandemic began .

But more change is needed.

In a Bain report entitled "It's Time to Build Resilience in Retail and Consumer Goods Supply Chains", researchers found that 67% of companies in these categories expect to include supply chain managers in the decision-making process following COVID-19.

"We see an overwhelming majority of retailers saying they will increase their investments and make big changes in the supply chain," Vu, one of the report's researchers, told MarketWatch.

Businesses are still clarifying what consumer behavior will persist after the pandemic, what is returning to pre-COVID behaviors, and how best to meet demand for businesses.

"Retailers know there are a number of outcomes and have prepared for them," he said. “I don't expect to see inventory problems as bad as at the beginning of the pandemic. However, the consumer experience will be slightly different from what it was before the pandemic. "

Related Articles