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Year by year comparison increase

Who is Affected:

With 80% of all goods being transported by sea, disruptions in the supply chain have created major price increases, product shortages, and service interruptions across the board. Virtually every retailer, supplier or distributor has been affected.

What is Affected:

Raw materials for manufacturing, manufactured goods, apparel, sugar, coffee and other food products have all seen limited or sporadic availability and soaring price increases.

What Are The Factors:

  1. Increased demand for products – From frenzy buying due to Covid 19 fears to government infused monies, more products have been in demand than ever before for a sustained period.
  2. Container Shortages – With the unforeseen demand for more products the global inventory of empty containers has been depleted. Manufacturing additional new containers isn’t an overnight fix due to construction lead times of 4-6 weeks per unit in many cases. A 40 foot steel container shipped from a port in China to a U.S. port pre-covid ran an importer roughly $3,500. In today’s global pandemic market, or the wake there of, that same container can cost a company upwards of $20,000 with the highest bidders getting the nod to fill the containers with their goods ahead of those jockeying for container space at the going market rate. We are seeing freight increases of 500% to 1000% in some cases.
  3. Over-Burdened Ports – As the demand for goods, containers and ships increase and the ports are being pushed past operation capacity. There is a significant labor shortage at ports along with a shortage of truck drivers that is causing significant backlog ports that is exacerbating the container shortage.
  4. Cargo Ship Shortage – Virtually every sea worthy ship has full bookings from 24-36 months. The building of new vessels usually is a 36 month process. You can’t just throw money at this one and you can’t speed up time.

Company and Consumer Choices:

  1. The Companies have to decide if the consumer will tolerate the increases in product prices and if the “juice is worth the squeeze” in selling particular products.
  2. The Companies must decide whether to pass on the increases to the consumer now or absorb them now (if they can support such a loss in revenue) and pass the increase on later. This is “robbing Peter to pay Paul” however it is an option to some mega companies, but “this chicken too will come home to roost.”
  3. Many Companies are being forced to limit offerings or shut down certain product lines or categories to accommodate either the products most in demand or those products with the best margins to be able to afford to do business and serve the customer, kind of. An example is when I went to buy a new refrigerator from a national big box home improvement store recently and was told there was a 60 day lead time which ended up being delayed by the manufacturer even longer to 75 days. The explanation was that the demand right now was for stainless front refrigerators and that all major brand manufacturers could not keep up with the demand for those, much less accommodate me in a timely manner since I wanted a white refrigerator.

Take Away:

Whether you are a consumer at your local retailer, a business owner, or an administrator of a public institution I would encourage you to continue to expect back order situations, out of stock notices, and sharp prices increases on everything from sugar to tee shirts and from coffee to refrigerators. Undoubtably this will affect your budget at home and at the office. One would be wise to not plan upcoming budgets on the last years Consumer Price Indexes or historical dollars spent per line item.

Outlook:

Based on my research of the projections on the global freight phenomenon by some of the leading industry experts I have found that many feel that their will be a “righting of the ship” (no pun intended) in early 2022 (After the Chinese New Year shipping season.) The big “IF” is that being possible if we are not shut down again Covid 19 mandates and “IF” the looming inflation fears do not come to complete fruition – but, I fear that ship has sailed! (pun intended)