goods, combined with an overwhelming ….
goods, combined with an overwhelming demand for imported products. Almost daily, the ports are setting new records for ships in port, caused by a pandemic buying boom that will only grow worse as the holiday shopping season approaches.
In the UK and other parts of Europe, fuel shortages are preventing huge swaths of workers from commuting to their jobs. It actually resulted in the postponement of an eagerly anticipated football game because of the not-unreasonable fact that neither the players nor their fans could get to the game. A slowdown in economic activity across all sectors is expected to continue for the remainder of the year due to persistent shortages in staff and supplies.
In China, the lights are out as utilities cut power to electricity customers. Power rationing began in some provinces in June but had spread to the rest of the country by mid-September when it hit the residential sector. In some areas of Northeastern China, residents were experiencing blackouts for hours with even the traffic lights turned off and people getting trapped in elevators. Numerous reports during late September and early October detail factories having to close or find ways to work around the shortages. These planned power outages have factories in manufacturing regions shutting down for weeks at a time. There is little question that the effects of all this downtime will last longer than the outages themselves.
It’s a perfect storm of a supply chain crisis.
An article appearing in the August 26 issue of The Wall Street Journal followed the manufacturing process involved in making a hot tub to explain the complicated network that is the supply chain. The article details the tortuous journey that materials must make from across continents and oceans, and given recent calamities and challenges, why it is so difficult for manufacturers to keep up with demand.
Utah-based hot tub manufacturer Bullfrog Spas saw demand surge for their hot tubs as stay-at-home restrictions inspired consumers to upgrade their backyards. Meanwhile, disruptions in the global supply chain have made it nearly impossible for the hot tub maker to keep up.
For example, one of their hot tubs is assembled from 1,850 parts that come from seven countries and 14 U.S. states, traveling a cumulative 887,775 miles.
The shell of the hot tub begins as a flat acrylic sheet in Kentucky, which is then driven on a truck to Nevada, where it is then fused with a different kind of plastic before being driven via truck to Utah, where a chemical called urethane – which comes from Georgia – is added.
The first hiccup is a trucker shortage. For years, there has been a chronic trucker shortage for a variety of reasons that include poor compensation for long hours and generally unsatisfactory working conditions. According to the latest data from the American Trucking Associations (ATA), the industry was short 60,800 drivers as of late 2018. The issue is also related to an aging population. According to the Bureau of Labor Statistics, the average age of a commercial truck driver in the U.S. is 55, and baby boomers are retiring at a faster pace than people coming into the industry. Meanwhile, federal law prevents drivers younger than 21 from hauling freight across state lines.
Another obstacle is a new requirement for drivers to pass pre-employment and random drug screenings. Beginning in 2020, the federal government created a national database of drivers who failed drug tests, which has had a significant impact on drivers, knocking out nearly 60,000, according to Bob Costello, the ATA’s chief economist.
Furthermore, in the early stages of the pandemic, many trucking companies shut down. According to a report from transportation industry data firm Broughton Capital, a total of 3,140 trucking companies ceased operations in 2020. But when shipping volumes rebounded later, trucking capacity didn’t rebound at the same rate.
All of this has led to longer-than-ever lead times to transport materials across the country – a challenge that Bullfrog Spas has felt.
Then in February, a massive winter storm shut down the power in Texas and parts of Louisiana, which supply a huge chunk of the country’s chemicals – namely, the raw materials that go into plastic – which took months to recover from. And that meant that Bull Frog Spas, which depended on those materials to make urethane and the plastics that go into their spa shells, was stuck without the products they needed. While Bull Frog wasn’t hit by the storm itself, they were forced to cut production by 75% and weren’t back to full capacity for two months.
Meanwhile, Bullfrog gets their electric motors and the exterior cabinets, which wrap around the outside of the hot tub, from China. These are moved across the Pacific Ocean via container ship and imported through the ports of Long Beach or Oakland, California. However, port slowdowns in China, related to container shortages, have restricted the exit of goods. And on the other end, staff shortages at the ports in California, combined with the aforementioned trucker shortages, have held up unloading the containers.
(This is why there is a container shortage, by the way. Largely because of the pandemic, shipping containers were delivered to ports across the world and then, due to lockdowns, not unloaded and reloaded to be sent on. Instead, the containers piled up in ports and inland rail depots around the world. Now, overwhelmed ports, like California’s massive Los Angeles/Long Beach port, are struggling to unload and load these containers fast enough to keep up with the ships waiting just offshore.) To get around this hurdle, Bullfrog paid to transport some of their made-in-China components by plane to an airport in Salt Lake City. Then they had to rent extra warehouse space for a place to put it.
Bullfrog’s touch screens are imported from China and Taiwan, but a global semiconductor shortage, which was caused by cancelled orders early in the pandemic, along with a fire at a key Japanese producer, meant that Bullfrog had barely enough electronics to prevent a plant shutdown.
Finally, to get to the consumer, the finished hot tubs are placed on trains or trucks. We’ve talked about the trucks… For consumers of Bullfrog spas, as far as the trains are concerned: struggling with the glut of recent imports, along with the bottleneck at the ports, along with a shortage of railroad workers, anyone who has recently decided to buy a Bullfrog Spa is probably going to have to wait.
Bullfrog is only one of thousands of manufacturing companies, but the same conditions apply to all. So, if you are having a hard time obtaining products, you can understand why.