It’s summer. Most pandemic restrictions have been lifted. It’s time to go boating, stock up on fireworks for the Fourth and look at a new set of wheels for those long-delayed trips. If you can find those items, that is.
New cars, pickups and recreational vehicles are in short supply. New boats are on back-order. Just days before Independence Day, buyers might have trouble finding their favorite fireworks. And they will pay more for their backyard pyrotechnics.
Brad Witherell, owner of Colorado-based Davey Jones Fireworks, said his inventory is in good shape because his company has a number of suppliers.
“But I do know a lot of people who aren’t even opening this year because they don’t have product,” Witherell said. “I feel bad for the little mom-and-pop companies that just don’t have the product to open because their suppliers don’t have the product to sell them.”
Just as new COVID-19 cases occur and variants of the coronavirus create new problems, the effects of the economic disruptions keep rippling back and forth across the country and the world. Companies have tried to catch up after plant shutdowns, coronavirus outbreaks, labor shortages and backed-up shipping ports.
Kinks in the supply chain, starting with production and ending on store shelves, have led to shortages of toilet paper, pet food, cars, aluminum cans, boats and a range of other items. The knots aren’t expected to smooth out for several more months.
A worldwide shortage of computer chips has hit the auto industry hard, idling assembly lines in some plants and reducing the number of new cars in showrooms. Phil Long Dealerships, which has 13 locations in Colorado and one in New Mexico, has about 35% of its normal inventory of domestic brands and roughly 50% across all brands, said Kevin Shaughnessy, the vice president of operations and a partner in the group.
“We read news reports early and we asked for extra inventory from manufacturers where it was available early on,” Shaughnessy said.
Phil Long also bought new cars from other dealers and sent employees to auctions across the country to find used cars, which are also at a premium. “Despite everything we’ve done to try to plan ahead, we’re still impacted,” Shaughnessy said.
The dealership has been able to find customers what they want, even if it takes some scrambling or waiting. Customers have put down more than a thousand deposits for the new Ford Bronco and hundreds for the all-electric Ford Mustang Mach-E sport utility vehicle.
Profits are up overall for the industry, said Tim Jackson, president and CEO of the Colorado Automobile Dealers Association. Dealers are generally getting full sticker price for the new cars and good prices for used cars.
“Some of the factories that have been closed are now scheduled to reopen; so we see that as a bright light at the end of this dark tunnel,” Jackson said. “But that doesn’t necessarily mean that they are going to be long on supply by any means.”
Shaughnessy expects it to take months for inventories to catch up. “The question is whether or not they figure out the microchip supply chain disruption before we run out of cars.”
The supply chain’s unraveling
Cars figure in Gregg Macaluso’s metaphor for the way supply chains have worked and what happens when roadblocks crop up.
“You know how NASCAR drivers go 200 mph and 3 inches apart from each other, well that’s what we built over 30 years in supply chains. We could go 200 mph 3 inches apart and the only reason that’s possible is because the second car knows exactly what the first car is going to do,” said Macaluso, a faculty member at the University of Colorado’s Leeds School of Business in supply chain management.
But COVID-19 disrupted the flow and triggered the economic equivalent of spectacular wrecks. Factories in China and other countries closed. Coronavrius outbreaks thinned the ranks of employees at the world’s busiest ports. Shipping container costs have skyrocketed and major companies are paying up to 400% to move their products.
The pandemic made a nationwide truck driver shortage worse, said Macaluso. Complications like the massive container ship that went aground in the Suez Canal in the Mideast and blocked ship traffic for six days in March just added to the disruptions, he said.
Macaluso’s advice to the public for weathering what he calls the headwinds is patience and being willing to consider buying alternative goods or different brands.
People planning for the Fourth of July might not find all the same products this year, said the president of the National Fireworks Association. Steve Houser, also a wholesaler based in Joplin, Mo., said the industry group worked with federal transportation and maritime authorities and the Port of Long Beach to pry loose some of the fireworks shipments caught in the logjam at the California port.
“They recognize that fireworks are not only seasonal, they’re really hyper seasonal. It’s a one-week crunch time,” Houser said.
The good news is the Fourth won’t be a dud for those who love noise and exploding colors. There will be fireworks. However, Houser, who got in about 65% of his normal supply, said shoppers likely won’t find some of their favorites and they’ll pay more because of the higher shipping costs dealers have to cover.
Last year, there were plenty of fireworks even though communities across the country canceled shows because of the pandemic. Houser said the public spent an estimated $2 billion on fireworks in 2020, and most of that was by individual consumers. Nearly all retail fireworks are made in China.
“A lot of people were celebrating last year because they were so sick of being cooped up due to COVID and what not. So, now the factories really have to gear up to produce more fireworks for the world, but they couldn’t do that because of COVID,” Witherell said.
Although fireworks prices didn’t increase much, shipping costs did. “What used to be $10,000 to ship a container from China is now about $30,000,” Witherell said.
Dealers are looking at lower profit margins rather than pass on all the costs to the public, he added.
More choppy waters ahead
Like others, Patrick Penfield sees shortages continuing into 2022. Penfield, a professor of supply chain practice at the Whitman School of Management at Syracuse University, said chlorine tablets are in short supply. Beer bottles and drywall are starting to become issues. He expects school and office supplies to be a trouble spot come September.
Aggravating the situation was a recent slowdown at the Yantian container port in China’s Guangdong province after a small flare-up of COVID-19 cases. Penfield said about 90% of the world’s electronics go through that port.
“It’s just this ripple effect that keeps happening back and forth throughout the global supply chain,” Penfield said. “When the port does open up, it will cause this wave of all these materials. When they get to the U.S., that causes more congestion because the ports can’t handle that amount of ships coming in at once.”
Closer to home, problems at U.S. factories that make boats and recreational vehicles and the closure of oil refineries in Texas during a storm in February cut into inventories just as the public was flocking outdoors for recreation and release.
“I am completely out of boats. The supply chain has eaten everything up and the manufacturers can’t get us inventory,” said Eric Smith, general manager of the family-owned Colorado Boat Center in Johnstown. “Most everything is getting reserved and presold before it can even land on the floor.”
Smith said he’s happy the dealership’s sales volumes are high. “But on the flip side, it’s like surfing. You want to continue riding the wave, but unfortunately that wave is dissipating and that’s because of our supply chain.”
Most of the boats and recreational vehicles sold in the U.S. are built in this country. When the pandemic hit, factories shut down as people got sick and other businesses closed. The industry figures it lost eight to nine weeks of production, said Matt Gruhn, president of the Marine Retailers Association of the Americas.
A plant that produces nearly all the windshields for boats is in New York, which was a problem because the state was a coronavirus hot spot for a while. Then a February storm with below-zero temperatures in Texas knocked out oil refineries, the source of resin used for boats and RVs. Both industries are also grappling with ongoing labor shortages that have grown during the pandemic.
The pandemic is not like the Great Recession, when inventories were high but nobody was buying boats, Gruhn said. “We’ve got customers everywhere. We’ve got barely enough inventory to go around at the moment and we’ve got orders on the books for months if not a year out.”
