Deconstructing a PB&J: Supply Chain Issues Still Causing HeadachesMar 28, 2022 05:32PM ● By Dawn Gonzales
Photo by Bill Sitzmann
The shared experience of hoarding toilet paper and paper towels is not-so-distantly tucked away into people’s memories from the early days of the COVID-19 pandemic. While toilet paper seems to now be in ample supply, shortages continue to plague grocery stores, auto dealerships, and truckers who are trying to get supplies to their destinations.
If it is not a component for manufacturing a product, it is a shortage in staff needed to get the product to market. Or it is the closure of a business because employees are sick with the latest COVID-19 variant or there are not enough employees to keep the doors open. In between these larger issues are the smaller ones that consumers rarely think about.
From weather issues to shipping and labor shortages, components such as peanuts, citric acid, sugar cane, and vegetable oils may be impacting a person’s ability to make a peanut-butter-and-jelly sandwich. While people don’t think that a shortage of cardboard could impact their beloved PB&J, it is in some parts of the country. A recent box shortage has made it more difficult to ship and stock bread. A shortage of citric acid, used as a preservative, is impacting manufacturing of products such as jelly, which uses citric acid to keep it shelf stable.
Ansley Fellers, executive director of the Nebraska Grocers Association, explained that grocery store staples continue to be in high demand, and demand for various products continues to shift due to changes in the supply chain. “It is something different every day and every week,” Fellers said. “We will probably not see the empty shelves of the products that people need most but manufacturers have gone to making products in more limited quantities of items that are in demand.”
Paper towels are now available, but stores may not be getting them in quantities they are used to. She said that there are more staples and less one-offs, meaning that the product is available but in fewer choices than it was pre-COVID-19. She said that consumer demand changes as businesses open and close. “When the rules change, behavior changes. It has been hard to predict consumer behavior especially early on in the pandemic,” Fellers said. This is an ongoing struggle as variants spread and retailers in general have to be mindful of how this impacts business.
Shipping problems have led some large brands—including Walmart, Costco, and Target—to charter smaller ships that can land at quieter ports, hastening the process of bringing product to market.
As the pandemic has continued, pricing of goods has also increased. Fresh groceries are impacted by winter—when the spread of COVID-19 is higher and weather is bad—which can delay delivery of perishables. “Winter is definitely harder than warmer months and meat prices are impacted by this,” Fellers said. She added that grocery stores run on a 1% to 2% margin and all the costs in the middle have gone up. Throughout the supply chain, trucking, processing, wholesale, and retail are all impacted by the increased costs from COVID-19. “Not everyone realized the middle costs. Maybe a year-and-a-half ago, there were many grocers trying to absorb that cost and get through it and then they couldn’t do it anymore,” she said.
While finding favorite products at the grocery store may pose an occasional challenge, finding a new car during the pandemic has left many buyers adding their names to waiting lists and hoping that the one they want will arrive within the next few months. Cody Gilmore, new car manager at Superior Honda, said that the main reason for the low new car inventory is that the computer chips were not being produced for the vehicles.
Gilmore said that the auto industry was forced into the inventory issue due to COVID-19. Computer chips for the vehicles started the supply chain issue and was followed with cars stuck in the ports coming in from overseas, or at railheads where they may be short-staffed getting vehicles off trains and onto trucks. Then there is the shortage of drivers that also contributed to the supply chain interruption. It has forced car dealers to ask buyers to place security deposits and pre-sell the cars before they arrive at the lot.
“I have 25 Odysseys due to me in the next few months and 15 are already essentially sold,” Gilmore said. “People have placed a security deposit to hold the car. We notify them once it is built, then we have a four-day window to know when it will be shipped to us. Once it has been built it gets here quickly.” Gilmore said that most of the Hondas they sell are built stateside. Some are coming in from Mexico, Canada, and Japan but well over 50% are built in the United States.
The percentage of lot occupancy is running low, Gilmore said. “Old occupancy was a couple-hundred cars on the lot and now it is less than 10. On the north side of our lot, there used to be three rows of cars parallel to the building where we housed most of the Accords, Civics, Pilots, and Odysseys. You would see the lot full and the rows in the back of the lot were full,” he said. “Driving through the lot is very bleak, it feels weird.”
Gilmore, who has been selling cars for 18 years, said that the dealership is still busy and consumers are being more flexible when it comes to getting a new car. Tangible vehicles are hard to buy right now and 20% to 30% of customers will upgrade depending on the availability of the vehicle they want to purchase. “If you are looking for a car today—be open to the possibilities,” Gilmore advised. If you are in a time crunch, be open to a pre-owned vehicle.” He said that car inventory levels will continue to improve but not to look for many new models being introduced in the next year.
As we continue to live and learn through all the variants of COVID-19, the biggest lesson that Fellers hopes we have all learned is how fragile the system is here and abroad. “The way we source things and prepare for demand, I hope people have learned how interconnected everything is,” she said.
This article originally appeared in the April/May 2022 issue of B2B Magazine. To receive the magazine, click here to subscribe.