NEWS
provided a cushion for Acme in 2021, but now the manufacturer is working on extended lead times for 2022. For example, products are being made currently that might not be delivered until next summer – something Johnsen described as “completely ridiculous”.
Analysis: Supply chain squeeze
OP companies battle to overcome supply chain and inflationary pressures
www.opi.net
The quarterly earnings season at the end of October/early November has been an interesting one this year, given the well-documented distribution and cost input challenges impacting the global economy. As Acme United CEO Walter Johnsen summed up: “We have had supply chain shortages, increased labour costs, extraordinarily high shipping costs, heightened energy costs and inflation nearly across the board. In addition, we have had many positions unfilled at most of our locations despite increasing wages. It was, and is, a very challenging time.” He referred to the situation as “a mess” and “chaos”, saying the supply chain was being run “cluelessly” and that not enough was being done on a macro level to alleviate the problems of containers stuck in ports and a lack of truck drivers. He warned it was much more serious than consumers simply facing a shortage of toys over the holiday period and that the US economy could “grind to a halt” if essential parts and components do not get through.
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INFLATION CONTINUES According to Johnsen, inflationary trends aren’t going to dampen in the short term and he feared that higher consumer prices could be a drag on the US economy. In addition to increased shipping costs, he noted that production costs in China had also risen by around 10% this year, fuelled by more expensive raw materials, energy and transportation, plus labour shortages. The vendor began stepping up inventory levels in the middle of 2020. This 30% build-up was in anticipation of disruptions caused by the Chinese New Year in February 2021, not the pent-up, post-COVID demand which has strangled supply chains. It has
INVENTORY CHALLENGES ACCO Brands is another company holding more inventory than it normally would. It has also benefited from shorter supply routes, with around 40% of its products made in the regions where they are sold. Indeed, this is something Acme has been looking at, too. Today, approximately half of its SKUs are sourced from the US and all of its acquisitions over the past six years have been North American companies. One strategy at Newell Brands over the past few years has been to rationalise the number of products it sells. It has gone from more than 100,000 at the end of 2018 to 42,000 today, with a target of 30,000. While this process started before the pandemic, one result has been the simplification of Newell’s US supply chain. Furthermore, the vendor recently announced Project Ovid. To be implemented in phases over the next 18 months, Ovid will consolidate 23 business unit-specific distribution networks into an integrated group platform. This will not only create efficiencies for customers (one order and one invoice, versus 23 currently), but enable more full truckload shipments and reduce the number of vehicles on the road.
The US economy could “grind to a halt” if essential parts and components do not get through LAST MILE SOLUTIONS Meanwhile, in The ODP Corporation’s (ODP) Q3 earnings call, CEO Gerry Smith said the reseller was better placed than many others to deal with the current supply chain and sourcing challenges. For instance, contracted shipping prices have reduced the need to pay extortionate spot rates for containers. Another focus for ODP has been maintaining service levels in terms of last mile deliveries, where capacity has been severely constrained. This is something its private fleet and relationships with more than 25 parcel carriers have helped achieve. US wholesaler S.P. Richards is also addressing this last mile issue as third-party carriers struggle to meet next-day deadlines and increase their prices. It launched an initiative called the Reseller Delivery Network, a matchmaking programme that will enable dealers with their own fleets to deliver on behalf of fellow independent resellers. As suppliers, distributors and resellers look to alleviate supply chain disruptions on many different levels, consensus is that the problems aren’t going away anytime soon and will be a factor in doing business well into 2022.
