Continuing Supply-Chain Challenges, Solutions (Part 1)
CHICAGO — David Bernstein, executive director of CSCNetwork, a resource for independent laundry and linen services, says that pandemic-induced challenges in the global supply chain continue as the world works to recover from COVID-19.
Entire sectors of the global economy—manufacturing, transportation, logistics and energy, just to name a few—are being strained beyond their limits.
“Under normal circumstances, disruption in any one of these sectors could cause temporary ripples in global markets, but when they occur simultaneously it creates a perfect storm,” Bernstein points out.
CSCNetwork hosted the webinar “The Perfect Storm: Managing Supply Chain Risks in 2021,” reviewing what caused the crisis, how long experts expect it to last, strategies and tactics to help with supply-chain planning, sourcing, and procurement, and what laundry-industry professionals can do in the long term to protect their businesses.
Bernstein moderated the webinar panel, which consisted of American Dawn’s Jeff Landry, director of global solutions, and Steve Kallenbach, director of market solutions; Jon Wynkoop, CFO of Gurtler Industries Inc.; Jeremy Lott, president of SanMar Corp.; and Ty Acton, president of Tingue.
Landry started the webinar with an overview of some of the issues facing the global supply chain, which affects laundry operations.
“One of the largest issues we are dealing with today, and I believe every company in America is dealing with, is transportation issues,” he says. “That becomes multi-level, starting with containers coming from overseas production.”
“What we’ve seen … as all of the containers that were full of COVID product arrive, some of those goods move quickly, and there are goods that are stuck in containers. So this created a great container shortage and that’s a global impact and that is from every continent.”
With the container shortage, Landry says he’s seen costs go from $2,000 a container to $12,000, even $20,000. The cost increase eventually gets passed onto the customer—linen services and end-users.
But the transport issue doesn’t end at the docks.
“Once a container arrives in the United States, we’re having tremendous inland shortages,” Landry says. “There’s about a 140,000 truck driver shortage, and chassis shortages. So getting product off the boat, getting in and out of the port, getting it into your dock, getting it unloaded—the reliability schedule is down, the costs are up. We’ve seen over 300% cost on some containers, 8% unfinished product, and that’s grown on a daily basis.”
For a textile products company like American Dawn, supply and shipping challenges for materials are problematic, but then there are increased fuel costs.
“As the world seems, politically, to want to flex to more of an electrical market, they start cutting off somewhat of the exploration of petrol products and the production of petrol products, and that increases the price of oil,” Landry points out.
“Now people are driving again, ships are going, planes are flying, and so oil is going back up and I’m not saying they’re reaching record levels but they’ve gone from basically zero to somewhere in the high 50s and the 60s, and that affects all transportation costs but it also affects the manufacturing cost of raw supply.”
The limited raw supply is of petrochemical products used to make polyester goods. Add in cotton shortages, and the textile side of the supply equation is very tight.
This next challenge, Landry says, is somewhat of a complicated issue—the monetary policy of the United States. In the past year, the United States has printed trillions of dollars, not revenue generated, he points out. The government printed cash and brought up the national debt.
“Now, what does that mean for us? Well, most countries, and a lot of the countries that we produce product in, base their monetary policies on the U.S. dollar, but as the U.S. dollar gets printed and exploited into large amounts of cash, trillions of dollars, not billions, but trillions, that all of a sudden changes the currency factors,” Landry says.
“What we’ve seen in some of our main countries, like Pakistan, is we’ve lost 9% value of the rupee to the dollar. So that means the U.S. dollar basically buys 10% less product. So, the cost of labor in other countries, the cost of water, the cost of chemicals, the cost of fuel, with no other factor affecting any of these things, the costs have gone up 10% That’s what our dollars buy.
“In China, we’re seeing about 10% also, but you can almost go to every country around the world and the United States dollar is the gold standard, but it has been weakened as we continue to print cash. And so until the dollar starts to strengthen again, we will see a continuation of currency revaluations.”
Finally, Landry says the Consumer Price Index, a factor of inflation, has hit the industry and the supply chain hard—especially in a tight labor market.
“I hear this from the laundries because, to some extent, they’re buying extra product because they’re having such a hard time processing product because they’re having such a hard time hiring people to work,” he shares.
“We struggle to hire good people, and when you get to that type of economy, the way you have to accommodate that is you start paying a higher wage, and that’s what I think you’re seeing around the country is an increase in wages. That’s an inflationary pressure that affects the CPI, like the monetary policy, higher fuel costs, all of those started getting into everything we do.
“We live in a world with Kaizen as a manufacturing concept—everybody wants to run ‘just in time.’ Inventory is money. You don’t maintain huge amounts of inventory, so any disruptions in your supply chain will impact your cost and your delivery and … very significant impacts on every aspect of everything we do in our business.”
Check back Tuesday for Part 2 when the participants begin discussing issues and laundry solutions.