Shoppers are still finding many items — heat lamps, refrigerators, laptops, and more — on back order.
You don’t appreciate how indispensable your refrigerator is until it stops working.
When Slomique Hawrylo’s Kenmore fridge broke down in mid-August, she realized this is especially true during a pandemic. At first, Sears quoted her two-and-a-half weeks to deliver a replacement — already a long wait for a five-person household — a date the retailer pushed back once, then twice, then three times, until she was looking at sometime in October.
After an expensive experiment with dry ice, she bought a dorm-size mini-fridge to tide the family over. It wasn’t much help, though.
“I mean, once you put a gallon of milk in the refrigerator, that’s it,” she says. “So we found ourselves going to the store every day, we found ourselves eating out every day.”
Eventually, she gave up and canceled the order, finally tracking down one of the few available models at a local Lowe’s. “It was a humbling experience, to be honest with you,” she says.
It’s also a familiar one during the Covid-19 pandemic. Nearly seven months into the pandemic, people across the US are still finding themselves thwarted from purchases due to empty shelves or months-long back orders. While toilet paper may no longer be a scarce commodity, the supply of new bikes hasn’t yet caught up with the cycling boom, and dumbbells continue to see the kind of resale markups usually reserved for limited-edition Air Jordans. Now, as Americans get ready to hunker down for a projected next wave of the virus — or settle into masked and distanced school and work routines — they’re buying up a whole new range of products to prepare.
Retailers are struggling to keep up: Wayfair had sold out of nearly its entire selection of patio heaters by mid-September as people snatched them up for safer outdoor gatherings. School districts are facing shortages of Chromebooks, leaving tens of thousands of students without laptops for online learning. Big-box stores can’t keep enough furniture and appliances in stock to fill the homes where their customers are now spending so much time.
The disruptions are everywhere — and with the busiest shopping season of the year still ahead, experts say more delays are inevitable.
If it were merely an issue of quarantine fads and a shift from offline to online shopping, these problems might have a quicker fix. But behind every sold-out product, there’s a vast supply chain linking raw materials to factory floors to distribution centers, and the fallout from the pandemic is impacting them in ways we are still coming to understand.
Many of the shortages we see now are the direct result of decisions made six months ago, says Rafay Ishfaq, an associate professor of supply chain management at Auburn University. In April, retailers looked at the growing economic and human toll of the virus and adjusted their purchase orders accordingly. At a time of record unemployment, it was understandable to think Americans might be inclined to buy less.
“Imagine a big-box retailer saying, ‘Let’s hold off. Let’s see where things go, and then we will restart [the supply chain].’ That’s what’s happening,” he says. When retailers told their suppliers not to produce more, those companies told their suppliers not to produce more, setting off a chain reaction.
As lockdowns eased and people started shopping, however, there was no switch anyone could flip to ramp back up to a pre-pandemic pace.
“It takes time to gather that momentum and get this global supply chain or even the domestic supply chain going,” says Ishfaq. “For the producers to start making things, they need demand planners and merchants and the retail firms to tell them how much they need.”
While it may seem obvious from today’s vantage point that restrictions on indoor gatherings would lead to a run on outdoor heaters, that was hardly the case back in the spring. When Walmart placed its orders for fishing tackle earlier this year, it estimated that 25 million Americans would be fishing regularly. None of its forecasts predicted that number to jump to 35 million as lockdowns propelled interest in outdoor recreation.
Now, looking ahead, there’s no historical data to model whether people will still be scrambling to buy inkjet printers and chest freezers next April, or whether, by then, there will be a whole new “new normal.”
Plus, says Ishfaq, even if retailers could meet every spike in demand at a few weeks’ notice, it’s not necessarily worth it for them to do so.
“Every retail chain is focused on their big sales items: what they sell most, what they’re known for, what the customers come to the stores to buy,” he says. “If that means that the peripherals or seasonal items or secondary product categories run short, then so be it.”
This is especially true when manufacturers are dealing with supply chain issues of their own. Fans of Coke’s or Pepsi’s more esoteric soda flavors — Diet Mountain Dew Code Red, Cherry Vanilla Coke Zero — have found them out of stock for months as the companies prioritized their “high-volume” products.
Like other beer and soft drink makers, they’ve also had to contend with an aluminum can shortage — a consequence of consumers suddenly drinking at home en masse rather than at bars or restaurants, where most beer comes from a keg — as well as earlier disruptions in the supplies of artificial sweetener (imported from China) and carbon dioxide (produced as a byproduct of gasoline, for which demand plummeted this spring).
It’s not just beer and soda cans that are harder than usual to come by. Sales of canned food and home canning supplies have soared during the pandemic, and while the leading can manufacturer, Ball Corporation, has ramped up production at two US plants and begun construction on another, that extra capacity won’t come online until the latter half of 2021. Even that’s a better timeline than most: Paper towels are out of stock at many retailers, but “producers have no plans to build new manufacturing capacity,” reports the Wall Street Journal. “The central piece of the machinery needed to make paper towels takes years to assemble.”
Transportation bottlenecks are another culprit in the back order bonanza. Early on in the pandemic, US imports plummeted and shippers canceled planned voyages from countries like China, anticipating lower demand. As economic activity picked up and Americans tore through retailers’ inventory of standing desks and roller skates, freight couldn’t keep up: Ships were filled to capacity, leading to congestion and delays in ports.
Months later, importers are still struggling to find shipping containers to send certain goods, and when they can, it’s costing nearly three times as much to ship from East Asia to the US’s West Coast as it was pre-pandemic, according to the Freightos Baltic Index. Shipments are also less reliable, and those delays and costs get passed along to the consumer.
“Transportation has a limited capacity,” says Simone Peinkofer, an assistant professor of supply chain management at Michigan State University. “There are only that many containers that fit on a ship or number of products that fit on a truck, and thus, if there is not enough transportation capacity, then products will take longer to reach their destination.”
Stateside, the effects of Covid-19 have exacerbated a shortage of truck drivers, caused by the industry’s decades-long failure to increase drivers’ wages and benefits to reduce turnover. With workers retiring or changing careers in droves, companies aren’t able to recruit or license new drivers fast enough to meet increased demand.
Steven Melnyk, a professor of supply chain and operations management at Michigan State University, says we’ll be feeling the effects of many of these disruptions for months — and in some cases years — to come. One threat he expects will eventually trickle down to store shelves is supplier bankruptcies. In July, the International Monetary Fund warned that the bankruptcy rate for small- and medium-sized businesses could triple this year due to the pandemic, potentially destabilizing the supply chains they support.
“Many companies are just going to disappear,” says Melnyk. “Why? Because if they file for bankruptcy and then they decide to reconstitute themselves, they have a 25 percent reduction in their ability to secure a loan from a bank because they previously declared bankruptcy. So guess what they do? They just shut the door.”
These so-called “silent bankruptcies” are already underway: One amusement ride manufacturer told the Washington Post that many of its suppliers in China and South Korea have simply stopped returning messages.
In some industries, such as aerospace, suppliers may be highly specialized and therefore hard to replace when demand returns, says Melnyk. “When they go bankrupt, you don’t have a supplier. And it takes time for you to find an alternative and qualify them and develop them and vet them and integrate them.”
Even if the market for children’s rides seems unlikely to see a sudden surge in demand, those companies, in turn, support a network of other businesses that could crumble if orders dry up — subcontractors who make specific components, suppliers of raw materials and manufacturing equipment, transportation and logistics companies, and so on — making a quick rebound even harder.
In the shorter term, the holiday shopping rush is going to be a test of Americans’ patience. A recent Salesforce report found that as many as 700 million packages could face delays if online orders exceed shipping capacity by the expected 5 percent.
Shoppers could also see fewer bargains on Black Friday, says Melnyk. While retailers usually compete on price during the holidays, this year, “The issue is going to be availability. … You might see some discounts but they’re not going to be the crazy discounts we’ve seen in the past.”
For those who have their eye on fitness equipment, a new guitar, or a working refrigerator, the question may not be, “Where can I find this on sale?” but rather, “Can I find it at all?”
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Author: Hilary George-Parkin
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