Diamond Brand COO, Lauren Rash, is in a shelving aisle with pieces stored at the Diamond Brand Factory in Asheville, North Carolina, on August 11th. According to experts, the US economy is affected by the shortage of commodities. (Howard Schneider, Reuters)
FLETCHER, NC: For Lauren Rash, it’s the little things that have produced the production of her tent factory here, like the many shades of black velcro.
His company, Diamond Brand, has just launched a new line of high-end tents called Liminal, thick with openings and closures demanded by the most demanding campers. But that means using a lot of velcro. And that’s a problem, because black velcro comes in many shades, depending on the type of raw plastic resin used to make it.
“If I have older stocks and put them in with new ones,” the colors won’t match, Rash said. “Black is not black is not black.”
Before supply chain failures and shortages swept the world in the wake of the COVID pandemic, buying pieces and parts for an assembly line was often as easy as clicking a button and waiting a few days or so. , at most, a few weeks of delivery.
Not anymore.
Scarcity of metals, plastics, wood and even liquor bottles are now the norm.
The result is a world where buyers have to wait for the delivery of items that were once plentiful, if they can get them. Rash has loads of tents that he can’t ship because he can’t get the right aluminum tubes for his frames, for example, while others don’t have proper zippers.
Along with scarcity, there are sharp price increases, which have fueled fears of a wave of sustained inflation.
There is growing tension among Federal Reserve policymakers over how to measure the long-term impact on prices. Some Fed policymakers are more convinced than others that price pressures will ease after resolving some of the supply chain disruptions. The evolution of this debate could influence the speed with which the Fed moves to slow down the pace of asset purchases launched at the start of the pandemic and the timeframe of raising the policy rate. current level close to zero.
Rash and other local producers were part of an extensive forum recently with Richmond Fed Chairman Tom Barkin, which focused on the challenges to U.S. recovery posed by supply chain issues that they are not being resolved as quickly as policymakers had hoped.
The shortage is affecting everything from excavators to bourbon. Caterpillar, a heavy equipment maker, warned in July that its profits would suffer in the current quarter, in part due to rising prices for hard-to-get components. The company said, among other things, that it is looking for ways to procure supplies from non-traditional sources to address the shortage of plastic resin and semiconductors.
Lawson Whiting, chief executive of liquor producer Brown-Forman, told investors earlier this month that the shortage of “key packaging materials, especially glass” continues to create problems for brand maker Jack Daniel’s and Woodford Reserve.
New challenges continue to emerge, including hurricane disruptions at U.S. oil refineries, which again threaten the supply of plastics and other basic materials.
Some industries are rushing to build new factories, including producers of pressurized semiconductors to fuel a growing appetite for the chips needed in automobiles and electronics. But not all growers want to build new plants. The bicycle industry, for example, is highly concentrated in Asia and producers are concerned that the current increase in demand will be only temporary.
“Asian factories have seen it over and over again,” said Brent Graves, CEO of Cane Creek Cycling Components, another small manufacturer in Fletcher, NC, which relies heavily on Asian bicycle parts suppliers. “They say, ‘Well, we’ll do extra overtime.’ But when it comes to gross investment in facilities, they’re generally reluctant to do it.”
The current problem consists of clogged supply lines. With so many manufacturers rushing to build supplies at the same time, the containers, ships and trucks needed to move the merchandise are often unavailable and have increased in cost when they are. This has altered some of the mechanisms that normally help control supplies and prices.
David Reilly, president of United Solutions, a plastics maker in Leominster, Massachusetts, said resin prices (which he estimates have risen 100% for some types over the past year) is his biggest challenge.
Typically, their buyers traveled to foreign markets, including China, to obtain cheaper resins.
“But we can’t do that,” he said, because shipping prices have risen so much that they erase any price advantage. “Right now, North American producers don’t have the tough competition they would have if container prices went down.”
Back at the tent factory, Rash said his approach to the problem has undone years of work to make his factory more “lean.” It’s not uncommon for a tent to require 48 separate parts, he said, and when you can’t depend on getting all those items, you tend to stock up on what you can, which is seen in the corners of the factory.
As he passes through a maze of shelves, he pulls out a galvanized steel tube. “I have a hundred of that, which is fine. I’ll go through it,” he said. “But the two (tube sizes) I’m late for, I can’t get them.”