September 2022

Far and away the busiest of the United States' 900+ shipping ports, San Pedro Bay (represented by the ports in Los Angeles and Long Beach) is typically rife with activity when the summer winds down and the holiday season ramps up. Yet despite improvements in the flow of container traffic, volume dropped precipitously in August, according to newly released figures from the port authority. But there's more to the decline than meets the eye. 

Loaded import container volumes in August were down across the board for San Pedro Bay, falling 6% on a year-over-year basis at the Port of Long Beach and approximately 17% at the Port of Los Angeles. Volume was also down annually in terms of physical containers (i.e. 20-foot equivalent units, or TEUs), by 15% in L.A. and 0.1% in Long Beach.

For the most part, August is among San Pedro Bay's busiest months on the calendar for overall container volume. Indeed, in 2020, Los Angeles handled 961,832 TEUs over the 31-day period (second only to October) and roughly 954,377 TEUs (behind March for first) in 2021. With just 805,314 TEUs this time around, August was the Port of Los Angeles' slowest month.

Several factors at play
Gene Seroka, executive director for the Port of Los Angeles, said in a news briefing that this year's unusually quiet August was a product of a combination of factors. One of them had to do with shippers being more proactive than they've been in the past,

"Some of the cargo that usually arrives in August for our fall and winter seasons is already here," Seroka said in the port's video news briefing that's available on YouTube. "Cargo owners who expected longer lead times shipped earlier in order to guarantee delivery schedules. This just-in-case strategy — versus the traditional just-in-time approach — has been widespread in the market."

Some cargo owners in August opted to use ports in other areas of the country, including Seattle.Some cargo owners in August opted to use ports in other areas of the country, including Seattle.

Shipping delays have been problematic for many port authorities since the pandemic first began. Staffing shortages — both for drivers as well as dock workers — and limited availability of containers have all contributed to shipments taking longer to arrive at their intended destinations.

Seroka cited several other influences on port volume, including retailers reducing their orders due to inflation and shippers using ports in other portions of the country to avoid the potential for bottlenecks at San Pedro Bay.

"All this to say that there are so many variables, and they continue to grow every day," Seroka added.

While some may contend August's low number is a sign of what's to come, year-to-date figures suggest it's more of a blip than a trend. As Supply Chain Dive points out, the Ports of Los Angeles and Long Beach have handled more TEUs through the first two-thirds of the year than they did over the same span before 2020. Additionally, when evaluating container traffic on a cargo volume basis, August was Long Beach's second busiest August in the port's history.

For the better part of two years now, product, part and piece shortages have been the norm for a broad variety of industries and throughout the supply chain. But one material that there is plenty of is steel. Because of the glut, some of the United States' largest steelmakers are poised to pull back on production to avoid cost overruns.

According to global markets firm CME Group, sheet prices dropped in August compared to July, continuing a month-over-month downward trend in what it costs to purchase steel. Driving the decline in prices is weak demand, as both the private and public sectors aren't using steel for their building and infrastructure needs to the extent that they have in the past.

CME Group noted that the drop off is nationwide and its bound to have an impact on steelmakers' production and the prices they charge.

This will also likely affect steel manufacturers' bottom lines in terms of their quarterly earnings. In a press release, the Nucor Corporation said it's forecasting third quarter earnings to be down from where they were in the second quarter and during the same period in 2021.

"We expect the steel mills segment earnings to be considerably lower in the third quarter of 2022 as compared to the second quarter of 2022," the Charlotte-based steel manufacturer said in a statement. "[This is] due to metal margin contraction and reduced shipping volumes particularly at our sheet and plate mills."

Growth in car production could trigger an uptick in demand for steel.Growth in car production could trigger an uptick in demand for steel.

The United States Steel Corporation appears to be in a similar predicament. Speaking to its third-quarter performance, U.S. Steel said it anticipated its earnings would be negatively impacted because of weaker demand and having to charge customers less to account for the surplus in supply.

From carbon to hot rolled to scrap and stainless, steel in its variety of forms is down in price. In the Institute for Supply Management's September report tracking nationwide manufacturing activity, steel was among the commodities listed as costing less. Others include aluminum, copper, gasoline, crude oil and corn products.

Pentup demand for cars may spur renewed interest in steel
While demand for steel has cooled, suppliers remain optimistic about what the future holds. This includes Cleveland-Cliffs, North America's largest flat-rolled steel producer that automakers turn to for their material needs. In an earnings call this past July, CEO Lourenco Goncalves said he expects demand for steel to intensify in the back half of 2022 from car makers like General Motors, Ford and other nameplates.

Citing the used car price index, Goncalves said the fact that this measure is approaching all-time highs is proof positive Americans are looking to buy. With pandemic restrictions lifted, automakers are primed to increase production to meet the needs of customers who are in the market. Dealers' supply of all-new cars is showing signs of improvement after the pandemic led to slim pickings for buyers perusing showrooms. In August, supply averaged 43% higher than the same month in 2021, according to Kelley Blue Book. However, new-vehicle inventory remains below where it was pre-COVID.

From truck driver shortages to shipping port volume problems, supply chains have had one issue after another for the better part of two years now. The looming possibility of the nation's railways being shutdown due to labor strike would only add insult to injury.

But it appears that at the 11th hour, the work stoppage has been averted after the two sides hashed out a deal.

Although the ink isn't dry quite yet, Class I freight railroads and labor unions have come to an agreement in principle regarding employee contracts, as announced by the National Railway Labor Conference in a press release. Railway employers have agreed to increase union members' pay by 24% by 2024 retroactive to 2020, in addition to $1,000 lump sum payments paid out over a five-year period. The brunt of that increase — approximately 14% — will go into effect right away.

Over the past several months, the unions representing the nation's tens of thousands of railroad employees — the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters; International Association of Sheet Metal, Air, Rail and Transportation Workers; and the Brotherhood of Railroad Signalmen — were in negotiations with their employers about increasing their wages with their contracts due for renewal. The two sides have been at loggerheads, however, which prompted the federal government to get involved, serving as a mediator. In August, the Presidential Emergency Board released its recommendations, which advised railroads to increase workers' compensation 24% incrementally. The last time union members received a raise was back in 2019.

But with the board's recommendations coming several weeks ago and railway providers limiting service just a few days before the contract deadline, many believed the strike was inevitable.

Mere hours before the deadline, though, the only thing that struck was a deal, albeit tentative.

The railroads are a major thoroughfare for the nation's freight transportation.The railroads are a major thoroughfare for the nation's freight transportation.

"The NCCC would like to thank the unions' leadership teams for their professionalism and efforts during the bargaining process," the organization representing railworkers said in a statement. "We also would like to thank the Biden administration – in particular Secretary of Labor Marty Walsh and his team, Secretary of Transportation Pete Buttigieg, Secretary of Agriculture Tom Vilsack, and the board members and staff at the National Mediation Board – for their assistance in reaching these settlements."

White House hails agreement as a victory for the country
In a statement of his own, President Biden applauded the fact that the two sides were able to find common ground, adding both parties stand to benefit.

"These rail workers will get better pay, improved working conditions, and peace of mind around their health care costs: all hard-earned," Biden said in an official White House press release. "The agreement is also a victory for railway companies who will be able to retain and recruit more workers for an industry that will continue to be part of the backbone of the American economy for decades to come."

Several organizations, businesses and industries that rely on the supply chain have released statements expressing their relief that a strike was averted. A shutdown had the potential to cost the economy $2 billion per day in lost work productivity, according to a report from the Association of American Railroads.

For food retailers, be they major supermarket grocery chains or one-location mom-and-pop shops, supply chain disruptions come with the territory. Unexpectedly elevated demand, weak harvests for berries and melons or unreliable wholesalers leave shelves spotty and customers disappointed from time to time. But rarely have so many food retailers encountered supply chain challenges all at once, despite being long removed from the worst of the pandemic. In fact, the problem is getting worse, not better. Indeed, in a poll from the Food Industry Association released in September, 7 in 10 retailers said the inconsistency of their supply chain performance was harming their business. That's up from 42% when a similar survey was conducted in 2021.

Here are a few reasons why supply chain pain persists for so many food locations:

1.  Growth in consumer demand
Depending on the season, certain items tend to be purchased at a higher rate, such as cabbage and corned beef in mid-March and Bell's seasoning and pumpkin filling in late November. Food retailers are aware of these spikes and adjust accordingly. But customers now have more channels for buying than ever before, and are taking advantage of the conveniences. Be it via curbside pickup or home delivery 6.5% of overall sales for retailers in 2021 were online, the report said. That's more than double what the figure was in 2019 (2.5%).

With wages up and unemployment at historical lows, Americans are clearly in buying mode, despite paying higher prices because of inflation.

A combination of factors continue to create supply-side problems for the food industry.A combination of factors continue to create supply-side problems for the food industry.

2. Inflation
When beef prices are higher or a gallon of milk is up 20% from a year ago, the knee-jerk reaction is how putting food on the table is affecting families. But food producers feel it as well — up and down the supply chain, including animal and dairy farmers. However, instead of dramatically raising prices on consumers, manufacturers often downsize, produce less or make smaller portions for foods than they did when prices were lower. This phenomenon is known as "shrinkflation." This winds up making supply even tighter.

3. Not enough people working
Even though the economy is technically in a recession due to two consecutive quarters of negative growth, the vast majority of the country has a job. Indeed, according to the most recent figures available from the Labor Department, less than 4% (3.7%) of Americans are out of work as of August.

However, this figure only takes into account those who are in the labor force, as opposed to Americans who have left it on their own accord or are no longer actively looking for a job. The participation rate has fallen sharply over the past two years. Based on figures compiled by Trading Economics, the current labor force participation rate is below 63%. Its lowest number on record is 58%.

Food retailers are feeling the effects of the labor shortage acutely, in part because the pay is low compared to other industries. The Great Resignation, which led to tens of millions of people opting to leave their present employers, was largely felt by restaurants, grocery stores and food processors among other low-wage employers.  

From a robust economy relative to other nations to a far weaker strain of COVID-19 than was present in previous years, Americans have a lot to be thankful for this coming Thanksgiving, as they do each holiday season. But a more affordable Thanksgiving main course won't be on families' gratitude lists this time around, as a deadly bird flu is forcing farmers to cull turkeys by the thousands.

At least 39 states around the country have at least one confirmed case of avian influenza affecting turkey flocks, according to estimates from the Department of Agriculture. For the most part, it isn't just one flock impacted in each of the over three dozen states — it's several, totaling at least 434 flocks, both commercial (204) as well as backyard (230). All told, at least 43.9 million turkeys nationwide may have the deadly strain, since that's the amount living on the premises of one or more infected fowl.

Jacinth Smily, chief financial officer for turkey processing giant Hormel Foods, said in a recent earnings call that the company is encountering supply issues because of the flu strain's impact on several of its farms, but she doesn't thing it will be for long. .

"Lower industry-wide turkey supplies are expected to keep prices higher near term," Smily said, as reported by Supply Chain Dive.

This isn't the first time this year that bird flu has mired turkey supply chains — neither for the U.S. nor Hormel, for that matter. In March, for example, Hormel subsidiary Jennie-O announced that the Avian strain known as HPAI decimated one of its flocks in Minnesota. At the time, there had been 77 reported incidents involving bird flu affecting backyard and commercial flocks in the country overall.

A deadly bird flu strain affecting turkeys will hit families' wallets this holiday season.A deadly bird flu strain affecting turkeys will hit families' wallets this holiday season.

Unusual time of year for bird flu to survive
What does make this most recent outbreak different from the ones earlier is the time of year it's taking place, a circumstance not lost on Hormel President Jim Snee, who also serves as the company's CEO.

"Historically, warm weather or heat has really tapped [avian flu] down," Snee said. "But you're starting to see cases in California where temperatures are higher."

Indeed, as of Sept. 9, USDA reports that at least 504,000 turkeys in the Golden State have either been infected by bird flu, culled or removed from the food supply chain because of the adverse health repercussions that could result, primarily impacting other turkeys. No state has felt the impact more than Iowa, which as it happens leads the United States in poultry production. The outbreak has affected over 13 million birds in the Hawkeye State.

Generally speaking, Avian flu does not pose serious harm to human beings, but it is highly contagious among bird populations, particularly poultry. And when a bird contracts the disease, that animal and others typically have to be killed to contain its spread. Between January and July, over 5.4 million turkeys were either slaughtered or died after becoming infected, according to USDA figures. That amounts to around 2.5% of all turkeys that were slaughtered last year solely for meat use.

Nations, states, businesses and institutions aren't the only ones "going green" nowadays — supply chain processes are as well. From eco-friendly warehouses to logistics entities investing in all-electric trucks to help with carbon emissions reduction, organizations aren't just advocating for sustainable supply chain practices, they're carrying them out by practicing what they support. They also see them as smart for business. In fact, according to a recent survey conducted by McKinsey, nearly 85% of C-suite executives (e.g. CEOs, COOs, etc.) are proponents of environmental, social and corporate governance (ESG) programs and believe they'll generate more shareholder value in the coming years than they do currently .

For this reason, circular supply chains may soon become the new normal, replacing linear models while improving business outcomes.

What is a circular supply chain?
A circular supply chain is a process wherein business owners reuse, recycle and repurpose products in the manufacture and distribution of goods. For the most part today, the products and resources organizations leverage to get their merchandise into the marketplace is unidirectional. Once merchandise has reached the end of its lifecycle, it's thrown away by either the manufacturer, the consumer or both. A circular supply chain reuses existing goods by incentivizing customers to recycle the merchandise they no longer have use for. This helps to minimize waste and makes the best use of the earth's natural resources.

What are the benefits of a circular supply chain?

Lowers costs
As the old saying goes, in order to make money, you also need to have it, and the most substantial costs organizations have originate in the manufacture of their products. Instead of being forced to buy all-new raw materials, the reuse of end products naturally lowers what a business spends on production and procurement. Additionally, the refurbishing of discarded products also helps to keep price volatility under control, especially in a hyperinflationary environment.

Circular supply chains can help to reduce waste by recycling end products.Circular supply chains can help to reduce waste by recycling end products.

Minimizes waste
Massive quantities of materials wind up in landfills every single year. According to the Environmental Protection Agency, of the estimated 292 million tons of trash Americans produce on average in a given year, 136 million tons of it — approximately 50% — goes to landfills. Aside from being unsightly and unpleasant to smell, landfills give off toxins that leach out into the atmosphere, worsening air quality and contributing to pollution.

Circular supply chains help to minimize waste by lengthening the lifespan of materials that are thrown out prematurely or unnecessarily in linear supply chains.

Creates jobs
A circular supply chain doesn't only make sense for the planet and for business owners' bottom lines, it also helps the bottom lines of the countries that use this approach to production and distribution. Indeed, according to Accenture in its book "Waste to Wealth," a circular economy has the potential to generate as much as $4.5 trillion in overall work productivity by 2030 from job creation and innovation alone.

If society continues to veer away from fossil fuels in favor of more renewable energy to power work and business processes, a circular supply chain may be a pathway to prosperity for companies — as well as for the planet.

Elevated inventory has retailers in discount mode with holidays nearing

With the back-to-school shopping season wrapping up for another year, the holiday shopping blitz is nearly underway. The weeks between Thanksgiving and Christmas are typically the busiest and most profitable for retailers of all kinds and sizes; stores are stocking up on must-have items now as consumers get their wish lists ready.

But with stores awash in inventory as it is, retailers are slashing prices with abandon so they can make as much room as possible for what they'll sell November and December.

From rising inflation to depleted consumer sentiment to the ongoing effects of COVID-19 on the supply chain and the broader economy, a combination of factors has led to retailers' inventory predicaments. Many just simply miscalculated the level of pent-up demand their customers had coming off of the pandemic and moving toward a return to normalcy. Throughout the lockdown, demand far outpaced supply. Now, it's the reverse, even though portions of the supply chain remain problematic.

Erika Marsillac, professor of supply chain management at Old Dominion University in Virginia, told Supply Chain Dive that businesses essentially got ahead of themselves with respect to buyer appetite.

"I think a lot of companies said, 'Oh there's a buying spree,' and forgot the spree part," Marsillac explained. "A spree ends, this is not something that continues forever."

High levels of inventory levels are taking a toll on retailers. High levels of inventory levels are taking a toll on retailers.

Retail sales are down from January 
Perhaps the best indication of buyers' newfound thriftiness is retail sales. Since January, month-over-month sales activity among shoppers has diminished fairly consistently, according to Trading Economics. And this past July, retail sales were unchanged from June, according to the U.S. Census Bureau. 

In an attempt to stop the slide, retailers are going to various lengths to spur buying activity as inventory piles up. These includes offering more BOGO (buy one, get one) discounts, placing more items into clearance and marking down prices, sometimes by as much as 50%. Brands like Walmart, Nordstrom, Kohl's and Gap are among the most well-known companies aggressively targeting discount shoppers.

Jie Zhang, who teaches marketing at the University of Maryland's Robert H. Smith School of Business, told Supply Chain Dive in an email that these tactics are undesirable for retailers since they typically wind up losing money in the long run.

"None of them is a perfect tool, but retailers have to resort to them for lack of better options," Zhang said.

Still, given the massive backlogs that retailers encountered during the pandemic due to elevated demand and massive drop-offs in production, sellers aren't necessarily remorseful about leaning into a "better safe than sorry" approach with regard to supply. For example, furniture manufacturer La-Z-Boy has invested $83 million to maximize output in the event the chain encounters bottlenecks like the ones the industry felt during the pandemic, Supply Chain Dive reported. Furniture store RH is taking similar measures. Speaking to analysts this past March, the company's CEO, Gary Freidman, said RH spent over $190 million in the fourth quarter of last year alone on bolstering its inventory capabilities.

CPI stays high in August

Despite cooling prices at the gas pump — with summer vacations effectively over and oil production ramped up — inflation remains white hot, as new data suggests the supply chain is still encountering the effects of demand outpacing the availability of goods.

The Consumer Price Index, which measures price changes for a wide variety of goods and services, rose a tenth of a percent in August compared to July, according to the latest figures released by the Department of Labor. The CPI was steady last month relative to June but rose on a year-over-year basis.

It did so again for August, this time by 8.3% compared to 12 months ago. The CPI has remained persistently high for almost the entirety of 2022 due to a variety of contributing factors, including the fallout of the pandemic, rampant government spending, rising wages and low unemployment. The last time the costs of goods and services were this elevated was back in the 1980s.

The rate at which prices rose in August came as a surprise to many economists. Indeed, experts polled by Reuters expected the CPI to slide 0.1%. Economists anticipated a dip primarily because the cost of gasoline has fallen sharply. As of the week of Sept. 12, a gallon of unleaded regular sells for a national average of $3.69, according to the U.S. Energy Information Administration. That's down from $3.74 a week earlier, $3.82 two weeks prior to that and north of $5.00 in the month of June.

President Joe Biden is confident the Inflation Reduction Act will help bring prices lower. President Joe Biden is confident the Inflation Reduction Act will help bring prices lower.

President pleas for patience on high prices
When asked about the latest CPI report, President Joe Biden urged Americans to be as patient as possible, saying it would "take more time and resolve to bring inflation down." In August, Congress passed the Inflation Reduction Act, a multi-billion dollar spending package supporters believe will help to lower prices by raising taxes and funding several alternative energy initiatives. Critics, however, say the measure will do just the opposite by injecting more money into an economy that already has too much as it is, thereby fueling demand.

One of the ways officials are trying to tamp down demand is by raising interest rates. The Federal Reserve has hiked key interest rates several times this year, with the current target range at between 2.25% and 2.50%. Those rate increases are expected to continue for the foreseeable future, with some believing the Fed will do so until interest rates align with the rate of inflation.

Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles, told Reuters that inflation will remain uncomfortably high into next year and perhaps beyond that.

"Wages and shelter costs will remain the primary drivers of future inflation," Sohn warned. "No significant respite in inflation is in sight."

While the U.S. is officially in a recession — defined by two consecutive quarters of negative growth — some economists believe the recession may need to be more severe in order to bring prices down to earth so supply and demand can get in a better state of balance. 

4 keys to effective inventory control

"Social distancing" and "flattening the curve" weren't the only words and phrases used with abandon during the pandemic. Another was "supply." While not new to the lexicon, supply was a major buzzword largely because there simply wasn't enough of it throughout the crisis, as grocers, big box retailers, furniture sellers and more struggled to keep up and restock on pace with the rate of buying among consumers.

Fast forward to today, supply has normalized, but inventory has piled up, as business owners overestimated the degree to which demand would remain elevated in a post-pandemic world.

Changing world, consumer and economic circumstances have forced product-based industries to restrategize and exercise proper inventory control. Here, we'll briefly discuss what inventory control is, how it differs from inventory management and tips for how you can improve your inventory control.

What is inventory control?
Inventory control is a business activity that involves accounting and tracking the inventory that currently exists in your back rooms, factories, warehouses or distribution centers. This means understanding every aspect of what's there, including how much exists, where it is (specifically), its overall condition and when it arrived.

How does inventory control differ from inventory management?
On the surface, it would seem that inventory control and inventory management are synonymous. While they are often used interchangeably, these two business processes are distinct from each other. The key difference is timeline. Whereas inventory control is all about the inventory you now have, inventory management keys in on what you will need. In other words, inventory management is more forward looking and predictive, while inventory management is in the moment.

Inventory control is pivotal to success in every product-based industry. Inventory control is pivotal to success in every product-based industry.

4 best practices for successful inventory control

1. Have a 'home' for merchandise
It isn't enough just to have inventory or know you have specific items in stock; you also need to know where it is so it's easily locatable. Having a home for merchandise applies both to inventory that has yet to be sold as well as what's available for purchase and out on the floor. If items aren't moving as quickly as you'd like, it may be wise to move them to an area where they're easy to spot or one that customers are guaranteed to walk by, such as an entrance or exit.

2.  Prioritize identification
No inventory control system can succeed without a way to identify what's in stock. But instead of using serial numbers, which can be easily misinterpreted and are prone to errors in recording, it may be wiser to use labels. Just ensure they're large, the descriptions are legible and the names used for each product are both logical and to the point.

3. Count carefully
In any pursuit, be it in business or life, how you finish often depends on how you start. That's certainly the case in inventory control. Make sure the physical count of your inventory is correct and accurately reflects what you actually have. Also, aim to use the same units and measuring system to ensure consistency and avoid misinterpretation (e.g. grams, gallons, kilograms, pounds, number of pieces, multiples of 10, 100, 1,000, etc.).  

4. Ensure goods are easily traceable
Inventory control also includes merchandise that is in the process of arrival or already in the pipeline but has yet to be delivered. Whatever stage items are in — in-transit, backordered, out for delivery, etc. — they need to be fully traceable. Product lifecycle management software and enterprise resource management software often feature location tracing solutions.

Wild price swings take hold for lumber

Home prices are influenced by numerous factors, including inventory, geography, demand and the materials that are used during the construction process. Chief among those materials is lumber, and for the better part of two years, lumber prices have see-sawed wildly, fueling frustration among developers as well as would-be homebuyers.

With the summer winding down, the cost of lumber is trending in the same direction, fueling speculation as to how the latest volatility will affect construction and what homes sell for once placed on the market.

Based on lumber price data from NASDAQ, lumber futures fell to $476 in late August. That's down from roughly $600 on Aug. 17 and an even higher figure a week before that. In January, meanwhile, lumber futures were north of $1,300.

Price volatility has encapsulated the real estate market this year. Such swings are unusual for lumber, specifically softwood lumber, a wood that is primarily used for aspects of home building like framing, interior moldings and window installation. In June, for example, the Producer Price Index for softwood dropped over 22% compared to May, Supply Chain Dive reported from data collected by the National Association of Home Builders. And for lumber overall, the PPI tumbled 35% comparing July to March.

Price volatility on a monthly basis has consistently hovered between 25% and 30% since 2020, an unprecedented degree. The NAHB says deviation has historically been no more than 10% tracing back to 1947.

Perhaps the most interesting aspect of the steep declines in the cost of lumber is the fact that they're happening in a hyperinflationary environment, when just about all products cost more to buy. For instance, during the second quarter, roofing materials cost 11% more than in the same three-month period in 2021, according to data from the National Multifamily Housing Council. Additionally, prices for electrical components were up 12%, appliances by 5% and insulation 10%. Lumber prices, meanwhile, dropped by 5%.

Lumber prices have been highly temperamental since 2020. Lumber prices have been highly temperamental since 2020.

COVID-19 fueling the price swings
As with so many other aspects of the economy, COVID-19 is contributing to the schizophrenic nature of the housing market as well as construction materials, noted David Logan, an economist at NAHB. Speaking to Multifamily Dive, he stated that when the pandemic led to sawmills closing, that affected production, and the repercussions on the supply chain lasted for much of 2020. Meanwhile, buyer demand rose, which came as a surprise to suppliers and led to price hikes.

"They didn't want to be sitting on huge inventories of lumber, so that's what initially caused the large upswing in prices in 2020," Logan explained.

Paul Cino, vice president of construction and development and land use policy for NMHC, opined that depressed lumber prices may be symptomatic of the impact inflation has had on businesses that rely on lumber.

It's possible that lumber prices could fall even further if home sales continue to dwindle, which some attribute to rising interest rates. In July, existing-home sales dropped for the sixth straight month, according to the National Association of Realtors. Whether lumber prices dwindle further depends on if builders shore up inventory amid the pull back in buying or decide to pull back themselves.

Retail sales are up, but not for everyone

With prices up for everything from fresh vegetables to desk tables, consumer buying tends to wane as households tighten their budget belts. While some retailers are witnessing that tightening, sales in general remain strong in the latest manifestation of a highly irregular, uneven economy.

Retail sales during the month of July rose over 10% nationwide on a year-over-year basis, according to the most recent figures released by the Census Bureau. Relative to June, sales were mostly unchanged.

Matthew Shay, president and CEO of the National Retail Federation, said the cost of gasoline is down considerably from where it was, which appears to have given families more breathing room and discretionary spending power.

"Retail sales grew in July, supported by declines in prices at the gas pump and moderately lower inflation," Shay explained in a statement. "Consumers are adapting to higher prices by prioritizing essentials like food and back-to-school items, and retailers are working hard to absorb the impact of higher costs and help customers stretch their hard-earned dollars."

The inflation-assessing Consumer Price Index has risen with each passing month for well over a year now. In June, it increased by over 9%, its highest annual growth rate since the 1980s. In July, the CPI growth eased slightly to 8.5%, suggesting to some that inflation may have reached its peak.

While stellar for some, sales are so slow for others that they're slashing prices. While stellar for some, sales are so slow for others that they're slashing prices.

Lower gas prices have contributed to the pullback. As of Aug. 22, a gallon of unleaded regular sells for an average of $3.88, according to the Energy Information Administration. That's down from over $5 per gallon earlier this summer and more than $4 from two weeks ago. Compared to the same time last year, though, the cost of gas remains quite high. The average then was $3.15, government data shows.

Sales sluggish for major brands
Despite the dip in gasoline price and overall uptick in retail sales, demand has been sluggish for a number of retailers, resulting in a glut of inventory. Department store Kohl's said in an earnings call that because customer activity has slowed, the company plans on slashing prices on lots of their merchandise before the year's out. Kohl's CEO Michelle Gass noted the move is necessary with 2023 around the corner and the holiday season even closer.

"We're clearing out the goods," Gass said. "We're cutting out receipts, and we are being more promotional."

She added that while no one can predict the future, she's confident that marking down prices will incentivize buyers to come to their stores and online checkouts.

Other major big box retailers have encountered similar inventory dilemmas, such as Target and Walmart. In addition to lowering their prices, Walmart is relying on technology to assist with inventory management. The strategies have worked so far, noted John David Rainey, Walmart's executive vice president and chief financial officer. As CIO Dive reported, Walmart is leveraging augmented reality technology to reduce its inventory and speed up fulfillment processes.

Port of LA urges shippers to return as operations return to normal

Of the United States' over 900 shipping ports, the Port of Los Angeles is the country's largest. In addition to being the entire continent's busiest, the LA authority has maintained this distinction for more than 20 years in a row, moving more shipping containers annually than any other at 9.2 million.

But for the better part of two years now, the Port of Los Angeles has been the most problematic port, beset by supply chain pinch points and bottlenecks that have beleaguered the business owners and logistics entities that rely on them.

With the ports in the East now encountering delays of their own amid approving conditions in the City of Angels, LA's port's director is urging former users and newcomers alike to head west.

In what might best be described as a reversal of fortunes, the Port of Los Angeles is running more efficiently than it has since prior to the pandemic. Indeed, the authority processed roughly 935,345 twenty-foot equivalent units (TEUs) in July alone. That sets a new record for the month, surpassing the previous all-time high for July by 2.5%.

Gene Seroka, executive director for the Port of Los Angeles, said the numbers don't lie — LA is back from the brink and as strong as ever. The same can't be said for other parts of the country where conditions have slowed to a crawl.

"Our terminals have [the] capacity," Seroka explained. "For cargo owners looking to re-chart their course, come to Los Angeles. We're ready to help."

The delays on the West Coast earlier this year are now playing out along the East Coast. The delays on the West Coast earlier this year are now playing out along the East Coast.

Delays mounting on East Coast
Some of the issues East Coast ports are encountering are related to carriers failing to remove containers after they've been emptied. The Port of New York and New Jersey announced in August that carriers failing to clear their containers will be hit with a container management fee. The $100 assessments will be levied on a quarterly basis in instances where their outbound container volume do not go beyond 110% of their inbound volume. The new policy is slated to go into effect on Sept. 1.

Kevin O'Toole, chairman of New York and New Jersey's shared port, said these punitive measures are necessary to incentivize shippers to be more cognizant of others' needs with space at a premium.

"We rely heavily on our port partners as the downstream links in a vast global supply chain that needs full cooperation in order for international commerce to function and deliver the essential goods that the region's residents need," O'Toole said.

As Supply Chain Dive points out, both the Ports of Los Angeles as well as Long Beach made similar threats regarding dwell fees in 2021 when they were encountering the same challenges as those of New York and New Jersey. However, the mere possibility of the fee proved to be enough, as carriers shaped up shortly after the the ports announced their intention. The fees remain postponed. 

So far in 2022, the Port of Los Angeles has been able to move 6.3 million TEUs, making the year poised to be the port's most efficient since it opened in 1907.

US semiconductor production poised to surge with CHIPS Act in place

Semiconductors are a ubiquitous component, found in everything from smartphones to cars and kitchen appliances. A surge in consumer demand, paired with compromised capacity, has led to shortages for a wide variety of products that require semiconductors to work. But a newly passed bill by legislators in Washington may be the shot in the arm manufacturers need to ramp up production.

On the South Lawn of the White House, President Joe Biden signed the CHIPS and Science Act into law. The $280 billion piece of legislation is rife with earmarks designed to address several issues impacting the supply chain, with nearly $53 billion of the total going toward semiconductor development.

During the ceremony, Biden said the CHIPS and Science Act will have historic consequences for the United States.

"The future of the chip industry is going to be made in America," Biden said, as reported by Supply Chain Dive.

While the United States does produce semiconductors, countries like China, Taiwan and several others in East Asia are the world's leaders. Others include Singapore, South Korea, Thailand and the Philippines.

Both lawmakers and semiconductor manufacturers believe this bill will help to even the playing field so businesses don't have to be as dependent on those other nations.

"Today marks a giant leap forward for American innovation and competitiveness and the launching point for re-asserting U.S. leadership in semiconductors," said Semiconductor Industry Association CEO John Neuffer in a prepared statement. "By enacting the CHIPS Act, President Biden and leaders in Congress have fortified domestic semiconductor manufacturing, design and research, thereby strengthening America's economy, national security and supply chains for decades to come."

Gaming consoles heavily rely on semiconductors to operate.Gaming consoles heavily rely on semiconductors to operate.

Private companies also investing billions
It isn't just the federal government that is increasing its investment with an eye toward enhancing capacity. Computer memory and data storage company Micron plans to spend $40 billion on memory chip manufacturing. If all goes according to plan, the investment will increase the U.S.' market share of global memory chip production to 10% within the next 10 years, according to a fact sheet from the White House. Currently, the U.S. accounts for roughly 2%.

Additionally, GlobalFoundries and Qualcomm — two other leading microchip processing firms — are coming together to forge a new partnership. Among other things, the alliance will include a $4.2 billion expansion to one of GlobalFoundries' manufacturing plants in New York.

"America invented the semiconductor ... and this law brings it back home," said Biden during the Aug. 9 ceremony outside the White House, as quoted by Supply Chain Dive. "It's in our economic interest and it's in our national security interest to do so."

Much of the world's semiconductors come from Asia, but the United States used to be a global leader. Indeed, the U.S. represented 37% of modern semiconductor manufacturing back in 1990, according to the Semiconductor Industry Association. That share has since slipped to 12%. The SIA attributes this dip to a combination of factors, including offshoring of jobs and foreign governments offering various incentives to chipmakers encouraging them to increase development. The SIA also noted Washington has neglected investing in semiconductor capacity to the same degree as in the past. The bill designed to address this imbalance includes over $79 billion in government spending over the next 10 years.

Ingredient shortages taking toll for food manufacturers

From cereal staples like Cheerios to snack treats like Ho-Hos and Ding Dongs, pantry staples are beloved by grocery buyers because they know what they're getting with each bowl or individually wrapped snack cake. And the companies that make them know exactly how much sugar, flour, grain and other ingredients these foods must have to churn out the packaged goods customers have eaten their entire lives.

But with many processing plants across the country lacking key ingredients these and other foods need to taste like they're supposed to taste, manufacturers are having to slow down production, resulting in shortages for stores and buyers.

As reported by Supply Chain Dive, Mondelez International, General Mills and Conagra are among the multinational brand-name food manufacturers that are feeling the effects of ongoing supply delays for foodstuffs like wheat, sunflower, grain and corn, among others.

In an earnings call, Travis Leonard of Hostess Brands said supply chain disruptions have forced the company to, in effect, operate with one arm tied behind its backs.

"Unfortunately, you can't make a Twinkie with only 95% of ingredients," Leonard, who serves as Hostess' chief financial officer, explained. "So when ingredients aren't there, you do experience production scheduling challenges as well as inefficiencies in transportation."

While snack cakes are primarily known for their sugar content, they contain dozens of ingredients beyond sugar. One of this is wheat. Russia and Ukraine are both major global exporters of this ubiquitous grain, accounting for nearly 30% of worldwide production as of 2021, based on the most recent estimates available from the U.S. Department of Agriculture. But with the region embroiled in war, wheat availability has diminished.

The run on wheat isn't just affecting the U.S., either. Since both combatant countries export the grain to many other nations, these markets have felt the impact as well, including Argentina, Canada, Australia, Kazakhstan and several other countries in Europe.

Nearly a third of the world's wheat comes from Russia and Ukraine. Nearly a third of the world's wheat comes from Russia and Ukraine.

Swapping out ingredients can be tough
Some food manufacturers have made do with alternative solutions. For example, potato product manufacturer LambWeston uses pea starch in lieu of other more common ingredients for batter, like wheat. Because pea starch has a similar consistency to wheat at the molecular level, LambWeston has been able to work around the wheat shortage.

But certain kinds of food containing wheat don't offer the same flexibility, preventing manufacturing plants from moving forward.

"If we're missing an ingredient, we can't produce," Conagra Brands CEO Dave Marberger said during an earnings call in July.

Another common ingredient that's in many packaged foods is sunflower oil. From spreads like hummus to Eastern Mediterranean favorites such as taboule, sunflower oil has many of the same properties as olive oil but costs substantially less, making it a go-to oil for mass production. But as with wheat, sunflower largely derives from Russia and Ukraine.

Even when food makers can swap out one ingredient for another, it's not as simple as that. Jon Nudi of General Mills said ingredient changes entail a lot of administrative work, such as relabeling and reformulating the original recipes.

Extreme weather has also made it challenging to use alternatives to sunflower. As Supply Chain Dive noted, countries like Brazil have seen very little rainfall this year. This part of the world is major producer of soybeans, which are used to produce soybean oil. According to S&P Global, Brazil is the global leader in soybean production.

What gross output gets about the economy that GDP doesn't

With indicators painting two very different pictures about how the United States' economy is performing at the moment and over the past few years, some have questioned whether the typical indicator of whether the country is experiencing a recession — gross domestic product — is an accurate measurement. Since the unemployment rate remains at record lows and many industries are still looking for more applicants to fill open roles, if the country is indeed ensconced in a recession, it's a highly unusual one.

But there's another fairly new measure that some experts believe is a more accurate barometer of how the economy is doing. It's called gross output, (GO) and it just may replace GDP as the go-to evaluative yardstick that offers a more comprehensive reflection of the nation's economic performance. And it takes the supply chain into account.

What is gross output?
As the Bureau of Economic Analysis defines it, GO assesses business owners' ability to mass produce over a given period (such as a three months). Such a definition — measuring businesses' output during a quarter — sounds a lot like gross domestic product: the total value of goods and services that industries churn out. But what makes GO different is it takes into account business owners' cost to produce those goods. GDP only measures the final product. GO factors in the labor and capital companies expend to sell their items. The BEA defines GO as "a measure of an industry's sales or receipts, which can include sales to final users in the economy (GDP) or sales to other industries."

The BEA also defines GO as the sum of an industry's "value added" — which represents the difference between gross production and intermediate production — combined with its intermediate inputs. "Intermediate inputs" refers to the resources that are used and expended to make the final product, which represent aspects of the supply chain.

Economists believe GO is a more reliable and telling indicator than GDP. Economists believe GO is a more reliable and telling indicator than GDP.

Why do some consider GO to be a better guidepost for the economy's health?
What lends the most credibility to its assessment is the supply chain element, according to Mark Skousen, an author and chair in free enterprise at Chapman University. In an opinion piece for The Wall Street Journal, Skousen noted that GDP doesn't take the supply chain into account, which makes it a less reliable indicator by discounting critical contextual information regarding what businesses spend on development. Additionally, by ignoring intermediate input, GDP winds up measuring less than half — 44% — of economic activity in any given period. This means every GDP report fails to account for the trillions of dollars dedicated to intermediate production in a reporting period. 

How much do business owners spend on the supply chain?
Last year, what companies invested in supply chain activity nearly doubled consumer spending. GO data shows the amount was $30 trillion in 2021, compared to the $16 trillion spent by consumers for those products, according to Skousen's website.

Fundamentally, Skousen and other GO adherents contend this measure offers a more well-rounded understanding and reflection of all that goes into product-based industries, and as a result, serves as a better portrayal of the economy's overall state — be it thriving or struggling.

7-Eleven expands delivery with acquisition of Skipcart

From DoorDash to UberEats to Instacart and a litany of other providers, the on-demand delivery service market is a crowded one, as more services jump into the fray seemingly every day. Aware of their popularity among consumers, parent companies are seizing the opportunity as well. Nationwide convenience store franchise 7-Eleven is the very latest to do so.

First reported by The Information, 7-Eleven is the new owner of Skipcart. A white-label delivery startup that offers same-day delivery for businesses beyond restaurants — such as grocery stores, e-commerce providers, pharmacies and electronics shops — Skipcart is similar to other on-demand delivery service companies in relying on everyday individuals to pick up and drop off the merchandise ordered by customers. The drivers make money via tips and delivery surcharges. 

Skipcart was valued at $65 million in 2020
In terms of the acquisition itself, very little is known at this point. For example, it's unclear how much 7-Eleven spent in order to acquire Skipcart. The terms and conditions of the deal haven't been made public by Skipcart or the convenience store chain either, but it's likely that the price was in the tens of millions of dollars at the bare minimum, since the San Antonio, Texas-based delivery platform provider had a valuation of $65 million in 2020, the source noted. The company was founded in 2018. Skipcart as a franchise has experienced substantial growth in its four years of operation, with over 2.3 million people providing delivery services for Skipcart, according to the Frequently Asked Questions section of its website. By comparison, DoorDash, which launched in 2013, had roughly 1 million drivers in 2020, based on figures from the Securities and Exchange Commission. Its breadth of drivers allows Skipcart to cover approximately 98% of the United States as well as parts of Canada.

7-Eleven is the largest convenience store franchise in America. 7-Eleven is the largest convenience store franchise in America.

Convenience store chains are taking convenience up a notch by either acquiring or partnering with on-demand delivery platforms. For example, Alimentation Couche-Tard, the Canada-based parent company of the franchise Circle K, collaborated with Food Rocket earlier this year, as Grocery Dive reported at the time. While Food Rocket has brick-and-mortar locations, it's primarily known for delivering buyers' grocery items within approximately 15 minutes of their orders. 7-Eleven and Circle K are competitors — Nos. 1 and 2 in the country, respectively, in terms of establishments — and the belief is this will enable the latter to further expand its influence in the convenience store sphere. However, prior to the acquisition, 7-Eleven had partnered with several other delivery service providers, including Grubhub, Uber Eats, DoorDash, Google and Favor, the latter of which is exclusive to Texas, according to Restaurant Dive. The partnership with DoorDash remains in place, although it's unclear at this point if the acquisition of Skipcart will lead to a parting of ways when the existing contract between the two companies ends.

Although they existed prior to the pandemic, delivery platforms proved to be a lifeline for restaurants during the COVID lockdown, when eateries were forced to close their dining rooms. Delivery enabled food establishments to maintain an ongoing revenue stream. Their success with delivery has led many companies to continue using them.