This is the second in an occasional series on the worldwide supply-chain disruptions. The first, “Need a Truck? The News Isn’t So Good,” TCI Magazine, October 2021, touched on the trucking side. This time, TCI takes a broad look at the subject, cutting through multiple industry segments.
Sometimes it’s the little things, and sometimes the big things, that contribute to the worldwide supply-
chain bottleneck. One thing that just about everyone at any point in the chain, from manufacturing to purchasing, can agree on is that the situation is likely to be with us well into 2022 and, in some cases, 2023.
To illustrate how even the smallest piece of a product puzzle can be affected, Joel Spies, vice president of Rainbow Ecoscience, a 23-year TCIA corporate member company based in Minnetonka, Minnesota, points to how a potential delay in receiving plastic bottle caps for the company’s tree care health products may be causing a slowdown in production. Spies, who is responsible for business development and overseeing the marketing strategy for all Rainbow divisions, says, “We supply insecticides, herbicides and growth regulators, products used for tree-health-care management. We use chemicals primarily produced in China and, at some levels, in India. The whole supply-chain issue does affect a majority of these products.
“We hear news about Ford producing trucks and awaiting one piece (computer chips) to complete them. We are affected in the same way. If one ingredient is in short supply, we cannot make our products. That includes not only active ingredients, but also things you might not think of, such as plastic bottles, caps, seals and labels. A variety of items are being shorted,” he explains, pointing to the shortage of plastic bottle caps when a factory overseas shut down because of the COVID-19 pandemic.
“We have had some plants shut down due to COVID infections, and that caused two to three months of delays.”
Spies says the agriculture industry, which uses many of the same agricultural chemicals, may be facing an herbicide shortage of up to 50% in 2022, but quickly adds, “We have not been affected to that level.”
Capitalism plays a role, too, he says, pointing to a common insecticide used in tree care. “It is a lower-profit product, and because manufacturing plants are running at full capacity, they choose not to produce a product for which it does not make the most economic sense to produce.”
On the positive side, as echoed further along in this article, manufacturers are doing whatever they can to keep up. “While we import a lot, much of our manufacturing is in the U.S. Up to today, we have stayed ahead of demand,” Spies said in early December.
How? “We are buying more than in the past and are producing more product earlier than we usually do, and thus far have been able to mitigate the situation.
“What we are telling clients is, if you are going to need something, buy it,” Spies says. “We have product today, but cannot promise it for June, July and August. Ours is a seasonal product. If you need it in July and cannot get it until September, it doesn’t do you any good. So it’s best to sit on inventory rather than hope you can get the products you need when you need them.
“The bad news is that there appears to be no end to the supply-chain issue. The best we know from suppliers in China and India is that this will move into 2022 and 2023, and will not resolve quickly. The other bad news is rising prices. Shipping containers that previously cost $1,500 to $2,000 to send across the ocean now run about $20,000,” he states, adding, “Parts and pieces are being raised nickel-and-dime. Everyone adds 10 to 15%, and that results in 10 to 50% increases in your total cost.”
He notes that this is another argument for buying before the next price hike. “The price now will not be the same in a few months,” Spies predicts. “We are seeing big swings every two to three months.” He also points to other variables boosting prices, such as local freight prices.
Concluding, Spies notes how everyone has had to change how they do business, including Rainbow Treecare, a sister company to Rainbow Ecoscience. “We now buy all electric chain saws,” says Spies. “We switched for pruning needs when we found repair and maintenance for traditional saw pieces and parts were all bought up.” He says the company had been looking into migrating away from gas-powered saws, but the parts shortage accelerated the decision. He calls it an innovative way to solve the problem.
On the other end of the spectrum are manufacturers like Richard Goforth, one of the owners of Southco Industries, a 40-year TCIA corporate member company based in Shelby, North Carolina, and maker of truck bodies for tree care. While the cost of steel, as with other raw materials, has gone up, it is still available at a higher cost. Says Goforth, “Our biggest problem is getting chassis and cabs. Many truck manufacturers aren’t making any more until 2022. Fortunately, we have some in stock and some chassis on order, but we do not know when manufacturers will be making them.”
Southco typically adds bodies to truck chassis from the likes of Kenworth, Ford, Peterbilt, International and Freightliner. “The companies are taking orders, but buyers have no clue when they will get delivery.”
Regarding steel pricing, Goforth puts that into perspective. “Last year, steel prices went up $1,000 per unit. Prices went up $1,000 just in the Third Quarter of 2021.”
Goforth says, “If you order from us now, my guesstimate is that you would get it in the Second Quarter of 2022.” He looks to the microchip shortage affecting vehicle delivery worldwide and says, “If we could get chips, that would be a good thing.”
All suppliers and virtually all brands are affected.
“Supply-chain disruptions have been wreaking havoc on equipment manufacturers large and small,” says Jason Showers, director of tree care products for Morbark, LLC, a 42-year TCIA corporate member company based in Winn, Michigan. For his company, “The hardest-hit components have been hydraulic components, electrical parts and engines, which outside of steel, pretty much sums up the major components needed to build brush chippers, stump cutters, mini-skid-steer loaders and articulated wheel loaders.”
Showers adds, “While we have been fortunate in some instances, supply-chain disruptions continue to cause manufacturing delays and production stoppages. Heavy cost increases on steel and other purchased components, extended lead times on purchased items and increased sales volumes all compound the complexity of navigating these challenges.
“To combat these complexities, we have adjusted our approach to purchasing commodities, requiring heavier front-end investments, to ensure we have enough product on order to keep the supply pipeline full, and have adjusted forecasting models to better predict emerging trends and provide a better look into the future when making strategic supply-chain investments.”
He echoes the worldwide lament. “The key question is, when will the supply chain balance out and resume some sense of normalcy? Our best estimate is, 2022 will remain a significant challenge on the procurement end and will not correct course until sometime in mid-to-latter 2023.”
Jason Morey, marketing manager for Bandit Industries, a 34-year TCIA corporate member company based in Remus, Michigan, is succinct in his assessment. “This situation is a challenge, making it difficult to forecast business,” Morey says. “We have been increasing inventory for a lot of components to ensure we have a ready supply geared up for demand.” He adds that one of the biggest challenges is in the area of hydraulic components where, he notes, Bandit is looking for alternative sources and regularly testing for quality.
Morey states that, for Bandit, steel supply “is not an issue, but the cost is increasing dramatically.” The challenge there is to try to keep a lid on costs as much as possible and ensure that margins are good.
“We have substantial inventory on order, and there are delays,” Morey says. “We build what we know we have parts for.”
Acknowledging a good inventory of engines, Morey maintains, “What helps us is that we offer a wide variety of engines. If we do not have the exact engine for a machine, we will have another with comparable horsepower. That has really helped.”
“Most of our professional chain saws are produced in Sweden,” says Ben McDermott, senior brand manager for professional chain saws at Husqvarna, a 28-year TCIA corporate member company based in Charlotte, North Carolina. “We, like many others in the tree care industry, faced significant supply disruptions in 2021, especially during the first half of the year. Since mid-year we have steadily recovered, and we are now in a much better supply position to serve our professional customers and the industry.”
“It’s still a global challenge. There is still a pandemic,” he stresses. “Factories we deal with continue to see shutdowns and labor shortages – and we do not necessarily see that going away in the immediate future.
“The pandemic created a demand a lot of us in tree care did not initially expect,” McDermott says. Initially faced with a global slowdown, he says, “We were prepared for the worst and expected a drop in demand, but the reverse has been true. While we have been dealing with supply constraints, demand also has remained strong.”
That phenomenon was addressed in a lengthy White House blog, “Why the Pandemic Has Disrupted Supply Chains,” dated June 21, 2021. That opinion piece and many others from around the world attribute such increased business for some companies and some sectors to unexpected demand for services (tree care), spot supply dislocations among competitors, driving buyers to products in existing inventory and a need or desire by buyers to get out ahead of real or perceived shortages and buy or stockpile goods for their own inventories (think the toilet-paper madness). McDermott offers that there were times in 2021 when professional customers would go to a dealer and a specific saw was not on the shelf, “and when it gets to that point, they will choose what’s available.”
Regardless of the source of demand, McDermott says, “Our materials, purchasing, logistics and distributions teams have been working diligently since the start of the pandemic to minimize the impact of supply shortages to our customers. We constantly monitor the supply situation, making necessary adjustments to our plan, to minimize significant gaps in supply and maximize flexibility with the current demand situation.
“We do expect to see delays in transportation and component shortages in 2022, and therefore cannot rule out a supply gap, but we are cautiously optimistic about continued supply recovery.”
In a wide-ranging interview of manufacturers across the U.S. during the fall of 2021, National Public Radio interviewed Jason Andringa, president and CEO at Vermeer Corporation, a 39-year TCIA corporate member company based in Pella, Iowa, about specifics affecting his company. When asked about wiring harnesses and hydraulic components being hard to come by, Andringa said that’s what’s holding up the production of things such as stump cutters, which are in high demand after events such as Hurricanes Ida and Henri. He maintained, “We take pride in the fact that our equipment is used to help clean up after a natural disaster. And we try to maintain inventory during the normal hurricane season, but we can’t do that at all right now.”
When the NPR radio host asked about the 73-year-old company, which Andringa’s grandfather started, enjoying record sales and being on track to add about 300 workers this year, Andringa noted he could have added twice that many people if he had had more parts to work with.
“My grandfather never dealt with supply-chain challenges this troublesome,” said Andringa in the interview.
If any statement sums up the world’s supply-chain snafus, that might just say it best.