May 2022

From a growing reliance on nearshoring to obtaining more materials from suppliers that are located within the States, retailers have an all of the above mentality to overcoming all the supply chain issues that are kneecapping their operations. But import activity continues apace, and recently hit a record high as managers race to get ahead of seemingly unending inflation.

In March, the most recent month in which data is available, the nation's major shipping ports received approximately 2.34 million twenty-foot equivalent unit (TEU) containers, according to a newly released Global Port Tracker report from Hackett Associates and the National Retail Federation. That sets an all-time record in the number of import arrivals, topping the 2.33 million mark set 10 months earlier. It was also a substantial uptick on a month-over-month and year-over-year basis, up nearly 11% and 3.2%, respectively.

Jonathan Gold, vice president of supply chain and customs policy for the NRF, said consumer buying activity is the root cause of the growth in imports, but inflation seems to be having an influence as well.

"Retailers are importing record amounts of merchandise to meet consumer demand, but they also have an incentive to stock up before inflation can drive costs higher, Gold explained. "Whether it's freight costs or the wholesale cost of merchandise, money retailers save is money that can be used to hold down prices for their customers during a time of inflation."

While supply chain disruptions continues to frustrate consumers and business owners, inflation has summarily replaced it as their biggest economic pain point. Indeed, as a recent poll by Gallup of everyday Americans found, 17% point to the high cost of living as the nation's single biggest problem, up from 10% who said as much in February. Small-business owners share that belief, with 32% of respondents citing inflation as the country's biggest challenge in a National Federation of Independent Business survey.

Imports reached an unprecedented level in March.Imports reached an unprecedented level in March.

NRF says it's time to tame tariffs
The Federal Reserve has raised key interest rates in an attempt to get a handle on inflation by cooling demand. But this can take some time to bear fruit. A quicker remedy, according to the NRF, is by rolling back tariffs. Gold noted that despite what tariff supporters may claim, countries don't pay for tariffs — meaning those doing the importing — consumers and business owners do. Citing a report from Moody's, Gold also said that since tariffs were imposed in 2018 major trading partners like China have wound up paying only 7.6% of tariffs. Americans have wound up paying for the remaining 93%.

Since neither inflation nor tariffs are expected to abate any time soon, import volume at the nation's shipping ports is poised to remain robust. In June, for example, an additional 2.29 million TEUs are anticipated, which would be an increase of 6.6% from 12 month earlier, according to the Global Port Tracker report. The ensuing months for imports are also likely to outpace their monthly counterparts from 2021, rising 5.3% in July, nearly 1% in August and 0.3% in September.

The manufacturing sector and the organizations that represent it have encountered a host of setbacks and challenges as 2021 nears its midpoint, much of it linked to the supply chain. But April was a solid month, and companies' output outpaced what economists had forecast for the 30-day period, according to a new report from the Federal Reserve.

Manufacturing production in the U.S. rose in April nearly 1% on a monthly basis and by more than 6% compared to 12 months earlier, the Fed announced. This surpassed what economists polled by Reuters had predicted. Indeed, producers' actual output was two times higher than what they had anticipated, forecasting an uptick of 0.4% from March.

The increase in total industrial production makes it four straight reports in which the number was higher than 0.8%.

As has been the case for professionals in virtually all product-based industries, outside of inflation, the supply chain has been manufacturer's biggest issue from an operational and logistical perspective. Indeed, in the National Association of Manufacturers' quarterly survey, more than 88% of respondents cited the supply chain as their central pain point to better productivity and profitability, more so than the cost of raw materials or a lack of qualified talent.

But in April, the first full month of spring, productivity was in full bloom, among manufacturers of all sizes, industries and specialties. Indeed, the Fed report showed that production accelerated by nearly 4% for automakers during April. Similarly, manufacturers that work in durable goods also had more to sell and deliver. The only exceptions were producers in electrical equipment, furniture and related products and appliances and components.

Manufacturers were able to produce more than economists anticipated in April.Manufacturers were able to produce more than economists anticipated in April.

Manufacturers still struggle to fill open positions
Despite the encouraging uptick in activity, production could very well have been even more robust were it not for manufacturers' struggles with hiring and retention. Timothy Fiore, chairperson for the Institute for Supply Management, spoke to this point in this ISM's latest Report on Business.

"The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment," Fiore said. "In April, progress slowed in solving labor shortage problems at all tiers of the supply chain. Panelists reported higher rates of quits compared to previous months, with fewer panelists reporting improvement in meeting head-count targets."

Helping to offset the labor shortage in April was better capacity. As Reuters cited from the Federal Reserve's data, overall capacity utilization for producers rose to 79.2%, which is up 0.6% from March. This markets the highest capacity utilization rate for manufacturers in over a decade.

The National Manufacturers Association is working in concert with The Manufacturing Institute to help producers reach their hiring goals through the Creators Wanted campaign. Launched earlier this year, the Creators Wanted initiative spearheaded by the Manufacturing Institute and NAM seeks to recruit 600,000 new workers by 2025, increase student enrollments in technical and vocational programs by 25% and improve the perception of the industry among parents as a whole.

With Inflation raging, many products and services cost double what they did at this time last year. These ever rising costs have business owners feeling doubtful conditions will improve with any real significance in the months ahead, according to a new poll from the National Federation of Independent Business.

For the second month in a row, the NFIB's Small Business Optimism Index held at a reading of approximately 93, marking the fourth consecutive instance that it's been well below the historical average of 98.

Fueling business owners' discontent was inflation. Indeed, nearly one-third of respondents in the survey cited this as their biggest business problem, more so than the supply chain or the lack of qualified job applicants for open roles.

Bill Dunkelberg, chief economist at NFIB, noted that inflation affects every aspect of how an organization operates in terms of what decisions are made and when.

"Small-business owners are struggling to deal with inflation pressures," Dunkelberg explained. "The labor supply is not responding strongly to small businesses' high wage offers and the impact of inflation has significantly disrupted business operations."

Most business owners have raised their prices due to rising costs of their own.Most business owners have raised their prices due to rising costs of their own.

CPI rose again in April
Many of these wages have been offset by inflation. The government tracks the degree to which prices rise or fall through the Consumer Price Index, which has trended higher fairly consistently for well over a year. In April, the all items index segment of the CPI rose 8.3% on a year-over-year basis, according to the Department of Labor. Not including the cost of food and energy, the measure rose 6.2% from 12 months ago. According to the NFIB poll, the vast majority of respondents — 70% — have raised their average selling prices. Just 4% said they're pricing their products and services for less than what they do normally. 

Inflation isn't the only issue that's weakened small-business owners' overall outlook. As previously noted, over 90% of respondents said supply chain disruptions had adversely affected their operations — 36% significantly so, according to the NFIB survey.

Much like inflation, a confluence of factors have contributed to the supply chain problems that are keeping businesses from reaching their goals, one of which has to do with excessive container volume at the nation's largest shipping ports. But some of those problems could be smoothed out — or, potentially, become even more tumultuous — depending on the outcome of contract negotiations between the International Longshore and Warehouse Union with the Pacific Maritime Association. With the contract poised to expire on July 1, the PMA and ILWU are aiming to hammer out an agreement as soon as possible.

The two sides are at odds over several issues, chief among them being what role automation will play moving forward at these port locations. While the Pacific Maritime Association is in favor of implementing more of this technology to reduce operational costs and quicken the supply chain, the ILWU is staunchly against the further leveraging of automation, believing it will cost them their jobs.

Formula has become increasingly hard to track down for parents needing to feed their newborn babies and toddlers, the shortages fueled by a perfect storm of supply chain snags and production slowdowns. But the federal government has announced a series of actions designed to shore up volume while producers aim to overcome the obstacles that have hamstrung their operations.

On May 13, the Biden administration launched a website in conjunction with the Department of Health and Human Services. The online destination — — is designed to provide parents with real-time updates on where they can go to locate baby formula, contact information for formula manufacturers, access to community resources as well as general guidance from primary care providers as well as the American Academy of Pediatrics.

Additionally, as the White House said in a press release on May 12, the Biden administration is also in ongoing communication with retailers and formula developers to identify what strategies can get more formula from warehouses out on to store shelves more quickly and efficiently.

Why is formula difficult to find?
A confluence of worst-case scenarios have led to the formula supply crunch. One of which has to do with China and its recent COVID-19 mitigation measures. In a move designed to slow the spread of the virus — a so-called "zero-COVID" policy — officials have reimposed lockdowns on both business owners as well as the general population. This has crippled economic activity, in a nation that has the second largest economy by gross domestic product It also has a 49% share of the infant formula market, according to estimates from Statista.

Supply chains problems are now affecting babies.Supply chains problems are now affecting babies.

But the main cause of the shortage is what's happened domestically. As has been widely reported, in February, the Food and Drug Administration launched an investigation into a Michigan-based formula manufacturing plant in the aftermath of several babies who were sickened after consuming some of the plant's powdered formula. With the investigation still underway, the plant has remained offline ever since. The owner of the plant, Abbott, produced more than 40% of nation's formula in 2021, according to The Wall Street Journal. And while the U.S. does import some of its formula — much of it from China — approximately 95% of it is made within the country.

The resurgence of COVID in China, combined with the FDA-led investigation in Michigan, has created a perfect storm of conditions that has rippled throughout the supply chain and impacted virtually all of the United States.

In the meantime, the Biden administration announced other plans aimed at helping families find formula more easily. These include loosening the regulatory hurdles manufacturers have to clear to get product to the stores, cracking down on unfair market practices and price gouging and importing more infant formula, especially from trade partners like Chile, Mexico, Ireland as well as the Netherlands.

"The Biden-Harris Administration will continue to monitor the situation and identify other ways it can support the safe and rapid increase in the production and distribution of baby formula," the White House said.

In just about every product-driven industry, too many dollars are chasing after too few goods. From microchips to crude oil to food staples that are typically well stocked — like wheat, corn and eggs — the items you need to complete your manufacturing processes remain difficult to come by. This puts the suppliers that provide you with these necessities in a bit of a predicament — especially when they have other customers who are looking for the same hard-to-find raw materials that you are.

An approach that can help you more effectively manage this issue is to strengthen the relationships you have with your suppliers. This way, they may be more inclined to prioritize the neeof your supply chain over their other customers', just as soon as the relevant parts, foodstuffs and materials become available. 

1. Invest in strengthening their capacity
The amount of goods a supplier can procure is largely dependent on its capacity limitations — how much the business can obtain or produce at any one time. You may be in a position to help by investing in your suppliers' operations so they have the financial resources to enhance output. This is something tools and hardware manufacturer Stanley Black & Decker has done with its supplier. As Don Allan, the company president and chief financial officer, noted during an earnings call this past February, Stanley Black & Decker co-invested in some vendor projects that will boost capacity for rare earth metals like lithium, which are used for the making of batteries in power tools. Lithium is also need to develop the ion batteries that energize electric vehicles.

Long-term agreements can do a great deal of good to strengthening the relationship you have with key suppliers.Long-term agreements can do a great deal of good to strengthen the relationship you have with key suppliers.

2. Seek a long-term deal
How long have you and your supplier worked together? If all of your contractual agreements have been for a brief period — like a few months — you may want to consider inking a more long-term agreement that is for a year or longer. Long-term agreements help to strengthen the relationship you have with your suppliers by letting them know you're committed to their business. This can incentivize a supplier to attend to your production needs above others who are once-in-a-while clientele or who haven't shown the same level of commitment that you have, backed up by your financial investment.

3. Be open to feedback
Is it possible that some of your production processes are causing you to waste raw materials or use more than is necessary to deliver the same product? Your suppliers may be able to offer some suggestions, but only if they know you're willing to accept their guidance and won't consider their it a slight or somehow undermining your expertise. Making your suppliers aware that you're open to their recommendations on how to minimize waste can make life easier for everyone.

4. Be respectful of their financial commitments
Paying invoices on time — every time — shows your suppliers that you're sensitive to the needs of their business and their ability to run a tight ship. When you're consistently punctual about payment, they're more likely to return the favor by going above and beyond to get the goods that are essential for your profit-making processes.

With manufacturers responsible for approximately 11% of the United States' gross domestic product and employing nearly 8% of the nation's workforce, many of the supply chain problems the country is encountering have fallen squarely on the industry's broad shoulders. Expansive though they may be, manufacturers are feeling the pressure. Indeed, of all the challenges they've encountered — from retention troubles to high operating costs — nearly 90% say the supply chain is their single largest struggle, according to a recent quarterly poll conducted by the National Association of Manufacturers.

While the supply chain will eventually course correct, it could be awhile before it returns to normal, given all the variables and global events that contributed to its disruption. Here are a few ways manufacturers can build a stronger, more resilient supply chain:

1. Partner with several suppliers
When you've maintained a stellar business relationship with an entity that has the materials you need for development — and they've always come through — using more than one supplier may seem superfluous. But if COVID-19 taught the business community anything, it's how quickly circumstances can change. In other words, nothing is a guarantee, even your most reliable suppliers.

Having a backup supplier can help guard against the unexpected. Ideally, it's best to partner with those companies that provide the most essential parts, fabrics or raw materials that you use during production. In other words, have standby suppliers for the materials you can't do without. 

2. Invest in technology that forecast outcomes
To a certain extent, manufacturing in all its forms is a guessing game; you can never be exactly sure what demand will be like for the goods you produce beyond past behavior. However, Internet of Things technology, automation, artificial intelligence and software that leverages those technologies — such as enterprise resource planning — provide more accurate insight on how much interest there will be for a given final product. These demand-prediction capabilities help to lower costs and improve efficiency as well as lead time so items are delivered to buyers or resellers when they're expected.

Business continuity planning and insurance can serve as a stop-gap measure to existential supply chain challenges.Business continuity planning and insurance can serve as stop-gap measures to existential supply chain challenges.

3. Guard against worst-case scenarios with financial instruments
Even when you've gone over all of the potential outcomes and how to diminish their risk, bad things can still happen that are entirely out of your control. But you may be able to soften the blow in terms of how supply chain disruption affects your company financially. Products like contingent business interruption insurance, cyber liability insurance for cyberattacks and other types of coverages can guard against serious hardships that threaten the survival of your operations.

4. Prioritize sustainability
Resources are so often finite, especially when your work processes are creating unnecessary waste. That's why it's important to weave sustainability into your supply chain management efforts wherever possible. Whether it's diminishing energy usage, deploying technologies that help you establish sustainable business practices or developing goals to make better use of natural resources, improved sustainability provides more predictability.

We use palm oil in nearly every facet of our lives, whether we are aware of it or not. From cooking oil, to hair products and biofuel, palm oil is pervasive at every level of society for many different purposes. The ubiquity of the oil cannot be overstated, with an article in The Guardian stating that over 70% of all personal care products contain it, as well as being the cooking oil for major fast food brands and an integral part of baked goods without trans-fats. With its low cost and high versatility, palm oil is here to stay for the foreseeable future.

Palm oil's use as a biofuel is also propelling the large demand for palm oil, with Europe having quickly become the world's second largest consumer of the product, in the wake of its growing shift toward biodiesel. The demand worldwide for palm oil will only keep growing, Vantage Market Research recently put out a press release stating their prediction that the market for palm oil will grow by $13 billion dollars by 2022.

Why the ban?
The ban comes on the heels of a butterfly effect of global supply chain crises that have affected food prices globally, with every sort of cooking oil being hit by separate disasters. Reuters reported recently that drought had taken its toll on the Canadian canola crop and Argentinean soy. At the same time, Russia's military action in Ukraine and NATO's reprisal sanctions on Russia have completely sidelined the region that exports 3/4ths of all raw sunflowers in the world.

With this in mind, Indonesia, the worlds' largest producer of palm oil by a significant margin, decided to ban export of refined cooking oil to protect their domestic food prices in the wake of global inflation. Shortages and price hikes on oil have led to protests and disturbances in the country and become a hot-button political issue. Sourced from Bloomberg, Indonesian President Joko Widodo was quoted as saying, "Once the local need is fulfilled, surely I will revoke the export ban because I understand how the government needs taxes, needs overseas earnings, and needs a trade surplus". He then went on to say, "The people's (Indonesian's) need is a more important priority."

Given the state of the market for edible oil, this may soon become more valuable than printer ink.Given the state of the market for edible oil, this may soon become more valuable than printer ink.

What are the potential worldwide consequences?
Due to its ubiquity, a sudden cut of the supply of palm oil could send many manufacturers and small businesses scrambling to find cheaper or more readily available alternatives. While many companies are saying that this measure is short term, changing which oils are used in a mass-produced recipe may cause short-term supply shortages and increased costs. The Associated Press has reported that Unilever has told their investors that palm oil and other edible oil costs may bite into their earnings in Q3 and Q4. End consumers who are already feeling the sting may have to deal with increased food prices in a period where food prices are already dramatically rising. If you're seeing an increase in food prices at your local grocery store, the state of the edible oil supply might be to blame.

One of the most difficult things in supply chain management is creating and maintaining strong relationships with your suppliers. Building the necessary level of trust, transparency and dedication going both ways is energy-intensive and emotionally draining. As difficult as it can be, the rewards make it incredibly worthwhile. As one writer from the University of North Carolina put it, a comprehensive strategic alliance between a company and their supplier is like a marriage — the more work you put into it, the more successful you will be.

The impact of building close relationships with suppliers can't be overstated. McKinsey research shows that companies that developed and maintained strong working relationships with their suppliers tended to beat industry trends in profitability, growth and lower operational costs at around two times the industry average.

What makes an ideal partnership?
As with most partnerships in life, the most important thing a company can develop with its supply partners is a healthy and trusting relationship. There are a few ways to accomplish this, the most important of which is implementing a set of policies for clear communication. Much like a marriage, if there isn't open communication, things begin to break down and trust erodes. In a field where there's so much potential for mishaps, whether it be a miscommunication, delayed shipments or misread orders, a clear communications plan developed between both parties can ease tensions and build trust in the face of adversity.

Another way to develop a strong relationship with your suppliers is to establish an atmosphere of transparency. This is achievable in many ways — one of the most important of which is being proactive about informing your suppliers of any changes or issues that might arise. Being consistently clear about your needs and expectations helps reduce the possibility of misunderstandings severely damaging the relationship between supplier and customer. To misquote an old adage, talking out your issues might hurt, but keeping them silent will kill.

Learning to prioritize
Creating a close relationship of trust, transparency and goodwill takes a lot of time and effort, which most teams won't have the bandwidth for across all suppliers. To develop strong strategic partnerships, organizations must be willing to prioritize their efforts by the importance of their suppliers to their overall goals. For example, a major coffee chain might prioritize their relationship with their largest bean suppliers while being less involved in their providers of cup sleeves or stir sticks. However, reducing bandwidth cost isn't always about prioritization. The U.K.-based Chartered Institute of Procurement & Supply recommends that one of the best ways to build trust is through using technology to develop an easy transparent relationship. The Institute goes on to state that using a procure-to-pay system that is well understood by both parties can make transactions smooth and remove chances for human error.

At the end of the day, what's most important in building a relationship with your suppliers is creating an atmosphere of trust and respect — like a good marriage. The more a company works closely with their suppliers in a transparent and direct manner, the better results they can expect.

Akin to a test drive with a new car or an open house before making an offer on a potential next home, furniture is the kind of merchandise that consumers like to try before they buy. But during the pandemic, when supply chain and shipping bottlenecks were pervasive and home furnishing shopping soared — largely due to people spending much more time at home — "try and buy" was more like "buy and wait." Due to unprecedented demand, the love seats, sofa chairs and bedroom bureaus that customers were used to getting the next day came next month —  if not later.

Numerous household name manufacturers, retailers and e-commerce giants were affected by these unusually long delays, including La-Z-Boy, Williams-Sonoma and The bulky, cumbersome nature of household, home office and bedroom furniture further exacerbated these issues; items take up a lot of space and can be challenging to move.

Given these realities — which continue to plague the industry — furniture suppliers and retailers have adjusted their supply chain planning processes as well as their customers' expectations. In short, they're trying to make the best out of a series of unfortunate events. 

Overstock is stocking up
One of those organizations is, a Utah-based e-commerce conglomerate that specializes in home decor and bedding products. Speaking to Retail Dive, CEO Jonathan Johnson said the company has prioritized advertising the items that it has readily available rather than those that need to be imported by sea. Indeed, Johnson noted that 99% of the goods that Overstock advertises on its website are in warehouses somewhere inside the continental U.S. This has enabled the company to avoid major shipping ports like those in Los Angeles and Long Beach, where massive volumes of inventory have idled, waiting to be offloaded.

"A lot of companies historically have been able to say, 'Well, once it's on the water, we know it's six weeks to your house,'" Johnson explained. "[But] when the Port of Long Beach in Los Angeles looks like the 405 freeway, backed up out into the ocean, that 'six weeks to home' doesn't happen."

More proactive inventory management has helped furniture suppliers deal with ongoing supply chain frustrations.More proactive inventory management has helped furniture suppliers deal with ongoing supply chain frustrations.

Another strategy retailers and suppliers have turned to is better inventory management. Prior to COVID, just-in-time inventory — having the bare minimum amount of merchandise available to satisfy demand — was considered best practice. Now, providers are shoring up their most in-demand products in anticipation of new disruptions that could lead to shortages. They've also built more lead time into their buyers' expectations.

Rick Jordon, senior managing director for FTI Consulting, told Supply Chain Dive that uncertainty has become the norm.

"It's pretty much normalized to something that's inconsistent, which means everyone just has to build a little more time into their supply chain," Jordon said.

Despite the higher warehousing costs — and lengthy wait times for customers — the supply chain pains don't seem to have impaired suppliers' sales goals. Williams-Sonoma, La-Z-Boy, Basset Furniture and Overstock have been on firm financial footing over the past year, according to RapidRatings data obtained by Retail Dive. La-Z-Boy saw sales rise 22% to $572 million in the third quarter of the 2022 fiscal year, the company announced.