By Lisa Baertlein
CHICAGO (Reuters) – The US supply chain is recovering from the early pandemic shocks that sent shipping costs skyrocketing and depressing stocks of everything from toilet paper to pasta, but more than three years later, material shortages and hiring problems remain.
Rates on freight, ocean shipping and other transportation fell as U.S. consumers shifted their spending from expensive items like furniture, barbecue grills and big screen TVs to travel and other entertainment, providing respite for beleaguered shippers.
“However, there’s still a pretty big mess out there,” said Ryan Patel, a senior fellow at Claremont Graduate University’s Drucker School of Management.
The labor market remains tight, driving up costs. Elsewhere, machine parts shortages persist and cement is hard to come by as automakers and other manufacturers meet demand and the US ramps up infrastructure projects.
U.S. supply chains are suffering from a “prolonged hangover,” said Dean Croke, principal analyst at DAT Freight & Analytics, a transportation data provider.
Speakers from Walmart, Colgate-Palmolive, Toyota and other companies will discuss their supply chain strategies at the Reuters Events supply chain conference in Chicago on Wednesday and Thursday as inflation and rate hikes threaten to push the economy into recession.
“We still have certain industries that are on the rise and some that are in trouble, which has been a hallmark of the pandemic,” Croke said.
That’s true even within industries, Croke added, pointing to recent manufacturing data, which remained low even as segments such as motor vehicles reported gains. Manufacturing accounts for the majority of U.S. truck ton miles, he said.
Having spent whatever it took to keep store shelves stocked during the early days of the pandemic, supply chain executives are now squeezing costs to protect profits against declining demand, said Alan Amling, senior fellow at the Global University of Tennessee Supply Chain Institute.
For example, Target aims to reduce the cost of shipping from the store by establishing local consolidation centers that pull inventory from local stores and package it on site, reducing fulfillment costs and the number of orders shipped in separate boxes. It also groups deliveries by area to reduce delivery miles.
“We are entering a new phase from just trying to keep our heads above water to a return to an efficiency mindset,” said Amling. “That’s a really good thing for the supply chain.”
(Reporting by Lisa Baertlein in Los Angeles; editing by Bill Berkrot)