Supply Chain Challenges: Completing orders an issue in 'bent' system

·10 min read

Oct. 20—TRAVERSE CITY — A can of pumpkin weighs 15 ounces.

The average sailboat tips the scales at nearly 9,000 pounds without additional gear or people.

One can be difficult to get into a Thanksgiving pie, the other adjacent to a summer pier.

COVID-19 and its variants put several kinks in the global supply chain. Factors like workforce, manufacturing and transportation wreaked havoc with the nature of global supply and demand, and damaged distribution of domestic goods.

The effects of this interruption can be seen locally from the scarcity of certain goods on store shelves to the increase of prices paid for everything from coffee to cars.

"Between 55 and 60 percent of what we order, we get," said Jim Sommerville, director of operation's at Oleson's Food Stores in Traverse City. "On a good day we get 70 percent. Perishables are a little better, about 70 percent and above.

"It goes up and down."

Right now the 'down' at the two Oleson's locations in Traverse City include some products for the upcoming holidays. Sommerville said items like pumpkin, gravy, chocolate chips and Starbucks coffee seem to be difficult to get into the back of a delivery truck and onto grocery store shelves.

"Who knows what tomorrow brings," Sommerville said. "A month ago it was bottled water."

After the spring of 2020 kept the United States population at home for large chunks of time, the demand for recreational products like campers, boats and bicycles boomed.

Brick Wheels, Irish Boat Shop and TCRV told tales this spring of making orders early in the year with hopes of the products arriving months later.

Still waiting

Scott Wilson, owner of Sailsport Marine on East Traverse Highway (M-72) in Leelanau County ordered a shipping container of four sailboats in January of 2021. Originally scheduled to ship in April, the four sailboats arrived in September.

The boats arrived after the sailing season ended and some of those customers are no longer in their summer homes.

"I'm still waiting on getting boats delivered that we ordered in March," Wilson said. "I still have stuff trickling in. We'll probably put stuff in storage rather than delivering it to people."

The problem with supply chain issues — getting products from producer to retailer to consumer — is that there are multiple links in the process.

Some of the links in the process are severely damaged, while others are completely intact. Some of the links are merely scuffed and scraped, but others are cracked and in danger of splitting.

"It's been very challenging; a very hard struggle," said Sommerville, who cited labor shortages, labeling and transportation as some of the issues. "It's an everyday battle. We don't have access to a lot of items."

And it's not just grocery stores like Oleson's that are feeling the supply chain woes. Wholesale warehouse stores like Costco in Traverse City use a sign at the entrance where member identifications are checked to let customers know when some staples, like toilet paper, are limited or out of stock entirely.

Outages of staples at big-box stores cause some customers to turn to regional retailers, putting additional stress on those stores, Sommerville said.

The Food Chain

When certain food items are difficult to find, the ripple effect widens. The next ring is usually hospitality.

"I think everybody's had challenges with supply chain. It's not just the restaurant industry," said Paul Barbas, owner of Opa! Grill and Taproom and Uptown Catering. "I talk to a lot of people and, even though they say business is doing OK, business could be doing much better if their supply chain was constant."

There was probably no hotter food commodity during the pandemic than pizza.

In a June 2021 Record-Eagle article, Todd Bruce said 2020 was a huge year for pizza. Bruce started A. Papano's Pizza in 1993 and still owns two of the five locations.

Bruce is quick to point out that while 2020 was a great year to purvey pizzas, those selling slices could easily have been telling a different tale. Bruce said he reminds his employees and anyone else the year of the pandemic could have gone much differently, as it did for businesses throughout northern Michigan and restaurants in his second home of Chicago.

Bruce said he was also fortunate to have bought and stored many of the protein components his business required in 2020 before plants reduced capacity.

"It was pure happenstance," said Bruce, who reported that many Chicago eateries either closed or drastically cut their menus. "We got lucky."

Barbas said getting rid of menus that looked like a big booklet of selections is something he and others have done in northern Michigan.

"We've simplified our menu," he said. "I think, as time goes by — this is what I'm predicting anyway — you're going to find that any restaurant out there that's trying to streamline their costs and procedures, they're going to start sticking to what they do best — because they know where their margins are at."

Streamlining is on the minds of many employers not only because of supply chain hiccups, but also because of the continuing shortage of employees.

"Some bakeries I talked to, they would make cookies," Barbas said. "Now, they're like, 'You know what, cookies can get moved to the side and we're just going to focus on our bread' — because of just the labor."

Great Lakes Potato Chip Co. president Chris Girrbach said producing a product — like his company does — has an unusual position in the supply chain.

"We're blessed and cursed with our supply chain," Girrbach said. "We only need four things: Potatoes, oil, film (for the bags) and seasoning. Those four things really drive our business."

Girrbach gets his main 'ingredient' from Sackett Potatoes in Mecosta. Getting 95 percent of the potatoes from a Michigan farm means its grown nearby and easier to acquire.

But also having just four products going into the Great Lakes Potato Chip Co. means the pricing of the final product can fluctuate dramatically. And it's not like Great Lakes can produce tortilla chips or popcorn when the price of sunflower or canola increases.

Girrbach said he hasn't had shortages or a lack of items to make Great Lakes potato chips, but he's seen costs swing during the pandemic.

"Supply has been tight and it's been reflected in the pricing," he said.

Peaking Price Points

Those 40-foot shipping containers seen on ships and later semitrucks have risen dramatically from the summer of 2020.

According to a July 2021 article in the Wall Street Journal citing London-based Drewry Shipping Consultants, Ltd. the average price to ship a 40-foot container has more than quadrupled from July 2020 to July 2021, to more than $8,000.

Prices to ship from China to major ports in Europe and to major United States ports in Los Angeles and Long Beach in California are closer to $12,000 for a container, according to the article. Last-minute deals can go for $20,000 a container.

In a separate Wall Street Journal article, some big U.S. retailers are chartering their own cargo ships to import goods for the holiday season. This move is expensive, and also further clogs the ports on the West Coast.

"Everything is a big substantial issue with the supply chain," Girrbach said.

Wilson said getting shipping containers of boats for Sailsport Marine from places like China, Indonesia and Sri Lanka isn't a problem on the front end of the issue.

"The containers are being stuck on ships, stuck here in the U.S," Wilson ssid. "We can't get them moving."

System isn't broken, but it is bent

Getting the containers moving is most often the job of semitrucks that head into the interior of the country to get goods into stores. And getting the products has increasingly come at a price.

Jon Asiala owns Blue Water Transportation in the Cass Commerce Center. Blue Water operates four semitrucks and also brokers freight for other trucking companies.

"It's not broken, but it sure is bent," Asiala said of the global and national supply chain.

For a five-year period, the rate for freight shipped out of the East Coast varied between 80 cents to $1.20 a mile. The last two to three years — and especially in the last 18 months — that rate has more than doubled to $3 a mile.

"That's unprecedented," he said.

As another example, Asiala said if he was hauling freight from a local customer to the Cleveland area and looking to pick up a return load coming into the area — the only way to make money — he could charge an average of $800-900, a little less in a slow time, a little more in busier seasons.

Prices recently have stabilized at $1,300 to $1,800.

"The rates have skyrocketed the last two years for everything," said Asiala, noting these increases wind up on the backs of consumers. "Of course it does."

Then Asiala said there's the transportation link in the supply chain "or lack thereof" of finding enough drivers for the trucks. Asiala said Blue Water had a semitruck that needed a driver for a period of months, couldn't fill the opening and decided to lease it out.

"There's an incredible shortage of drivers," he said. "A lot of drivers are getting out of the business. They're retiring early if they can or just doing something else.

"If I had 50 drivers, I could keep them busy. It wouldn't all be (hauling) up here, but it would be coming and going from Michigan."

Asiala said drivers in more populous markets are also working independent of companies, often moving into busy markets like Atlanta. He said some drivers are also not hauling more than 30,000 pounds in trucks. Cutting as much as 15,000 pounds from trucks' maximum capacity improves gas mileage and puts more money into the driver's pocket.

"It's really tough to find drivers and then to pay them enough to keep them happy so they don't look elsewhere," Asiala said. "They can't name their price, but they can make it pretty tough."

End Game

Because the supply chain contains so many different parts and complexities, those in the area dealing with the issue have different views of when those pressures will begin to ease.

Girrbach thinks if consumers start to temper buying and reduce demand, the supply chain may be able to catch up. Girrbach isn't sure if that will level out in a year or if it can be accomplished in as little as half that time.

Earlier this spring, Wilson predicted that "supply is going to be more of an issue this year in terms of last year" and admitted the "the supply chain on manufacturing is broken."

Wilson didn't waver this week on his assessment.

"It's still broken; it's crazy," Wilson said. "I thought things would get better this summer and in fact they've gotten worse on a lot of things."

So Wilson and Sommerville are left wondering when things will get better.

"I don't think this is getting resolved any time soon," Wilson said.

"There doesn't look like there's an end in sight right now," Sommerville said in a separate conversation.

Business Editor Dan Nielsen contributed to this report.

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