Supply Chain Issues Likely To Worsen As Holidays Approach
By Ed Semmler
South Bend Tribune
SOUTH BEND – Take a walk through a grocery store and you’ll notice product gaps in the aisles and refrigerated cases; visit a car dealership and you’ll see more asphalt than inventory; go to a restaurant and you might be told what isn’t available.
Such is what happens when an economy rebounds from a pandemic-induced recession a lot faster than expected and demand for goods and services is greater than the supply chain’s ability to satisfy those wants, said Michael Hicks, an economist at Ball State University.
“The supply chain isn’t broken,” Hicks said. “It’s mostly just stretched.”
Ports have been at near capacity for decades and there’s been a shortage of truck drivers needed to move products for quite some time, so it should come as no surprise that nearly every business is coping with shortages to some degree.
Elkhart-area manufacturers have been complaining about the challenging supply issues – and labor shortages – they’ve been facing for more than a year. And though they’re producing RVs and boats at record-breaking levels, most are reporting a backlog of orders extending through much of next year.
“Most Americans continued to work through COVID, and now many of them are spending what they might have saved,” Hicks said. “Demand is high for almost everything, but the ability to supply that demand is pretty stressed.”
Computer chips have made it impossible for auto manufacturers to keep up with demand for new cars, and higher prices for used cars has now pushed business to repair shops as some consumers are opting to hang onto vehicles a while longer.
But, don’t count on quick service there, either.
The need for employees, high demand for services and the possibility of having to locate a part, could result in a wait of several weeks, according to Jay Basney, general manager of Basney Honda in Mishawaka.
“It could be more than a month if it’s a part with computer chips,” Basney said, adding that the problems have caused stress for customers, as well as Basney employees who work with them. “We’re doing everything we can to keep people happy.”
Except perhaps for the computer chips needed to produce vehicles, many of the shortages that consumers might notice appear to be fairly random from week to week. That makes it especially difficult for restauranteurs who might be dependent on specific products for their menus.
“It’s weird stuff every week,” said Pegg Dalton, co-owner of PEGGS restaurant in downtown South Bend. “It might be plastic cups or the chicken we use with our waffles one week. And then it’s plain bagels or a specific tea we offer.”
Dalton said most customers are aware of the supply issues that are affecting businesses – and consumers – across the country and are pretty understanding when they’re informed about a menu problem.
South Bend-based Stanz Foodservice and other restaurant purveyors are working harder than ever to find the food and supplies needed by their customers, and when that doesn’t work, the company’s sales staff makes recommendations for substitutions, said company president Mark Harman.
‘”We were running at a 99% fill rate for orders prior to the pandemic,” he said. “After dropping off a bit earlier this year, we’re now back to about 97.5% because of hard work and the flexibility of our customers.”
Beyond the bottleneck at ports, shortages of truck drivers and an overall tight labor supply, companies that produce food also might be impacted by the social distancing required at a plant that is processing food or an ingredient or packaging that they can’t get, Harman said.
“The non-food side of the business is very challenging,” he said, explaining why certain paper and plastic products might be in short supply.
As an economist, Hicks wonders whether some of the shortages that consumers are noticing also might be connected to items with the lowest profit margins – especially at grocery stores. During a recent trip to the supermarket, he noted, there was an abundance of fresh and exotic fruits, but empty shelves where saltine crackers once sat.
“If you have a limited number of drivers, it makes sense that you’d use those trucks to move items with the greatest profit margin,” Hicks said. “And it’s not going to get any better with the holiday season fast approaching.”
For many businesses – including restaurants – it’s all about persistence and flexibility to get through the current supply-side issues.
If his order from Stanz is missing a few items, Mark McDonnell, founder of the LaSalle Grill in downtown South Bend, won’t hesitate to stop by a grocery store or retailer to get what’s needed at the restaurant.
“Disposables such as gloves, aluminum containers and paper cups can be a problem,” McDonnell said. “You never know what you’re going to be shorted.”
Because of the labor shortage that was plaguing the hospitality industry, LaSalle initially cut down the size of its menu to make it easier for the staff to keep up with food orders. But the change has had the added benefit of reducing the restaurant’s reliance on a wide range of available foods and ingredients.
McDonnell said he’ll also visit a variety of stores in the area to find any perishable and non-perishable items that the restaurant needs, even if it means paying higher retail prices.
“You have to be flexible,” McDonnell said.
Harman said he’s already noticed some improvements in the supply issues that were affecting restaurant suppliers across the nation, and he expects things to continue to improve in the first half of next year.
After the holiday rush, Hicks is expecting the same, though there could be some permanent price hikes to account for higher labor costs.
“The great thing about our system is that there are built-in incentives for solving these types of problems,” he said.
Until then, consumers will have to be patient and business owners will have to be adaptable.
“You’re not surviving,” Dalton said, “if you’re not flexible.”
This article was made available through Hoosier State Press Association.