Very Impressive and Intimidating terminology. It also sounds fascinating and very specialized.
I kept hearing that on the news and reading about it and wondering: What Does that Mean Exactly?
I also kept asking myself, Do these People Really Know what they are Talking about? This is my industry after all. Actually, They Don’t.
I like simple things, supply chain is broke means some thing or things are not working properly from the sourcing point, your manufacturer or supplier overseas, to shipping, warehousing, distribution, sales, until the product is on the shelf.
Latest example was Taiwan Semiconductor Manufacturing Company (TSMC), that produces more than half of the World’s supply of chips, has been Unable for over a year now to operate their facilities in Taiwan at anything close to capacity.
The Auto industry in the U.S. is losing $ 110 Billion between June, 2021, and January, 2022.
And You are paying for it in Bailouts.
In the First Quarter of 2022, TSMC is expected to start producing at their normal rate and supply the industry again- Hopefully, Maybe and Who Knows.
What Did the Auto Industry Do for over a Year? NOTHING.
They rely on One Supplier for the survival of their business. Very Interesting.
Another Consequence- They halted production, and You- the consumers, are paying over list price for cars because of lack of inventory due to shortages of chips.
Supply Chain is Broke means You will be paying more money for Everything.
Another example that was not in the papers, Wahl USA, who makes Clippers and the sort, was not capable last year to offer 1 clipper on their website or to retailers on any of their items- No parts from China., No Products, No Sales, No Revenues
Losses to the industry, nothing published. Nine Months to a Year of Lost Sales.
And You are paying for it in Bailouts.
The common denominator in both scenarios is that both Industries did Nothing besides waiting for the problem to get resolved somehow and by itself. These are simple facts.
FYI, in March of 2021, Intel announced the construction of 2 Chips plants in Arizona, at a cost of $ 20 Billion for both- or $ 10 Billion a plant.
Do you think the auto industry could have invested $ 10 Billion to establish a plant for the chips and save $ 100 Billion of losses?
So going back to the Supply Chain is Broke, what that means is the following:
1- Numerous Plants Overseas (in the Thousands), the manufacturers of your products, in China and elsewhere, have gone Out of Business and/or only partially open, and can No longer supply you with your inventory or products.
Meaning Companies have to find another Source/Plant to make their Products.
Devastation to many Companies and their industries.
2- Governments Overseas in the majority of countries Are Not and Cannot Print their Currency as we have been, have No Bailouts for their Companies or Plants and so on. Meaning a lot of these companies are disappearing and impacting business in general.
Thus, Empty shelves in stores, lack of supply, higher prices, loss of business and —–.
3- Shipping Facts- The Freight Cost of a Container from China to the U.S. before the virus used to cost around $ 3,500, Now it is costing around $9,500, and for that price you have NO guarantee that your container will sail on time.
For a Premium Service, wonderful name, to Guarantee your container will sail on designated ship, you have to pay today $ 12,500, (not a typo) and higher.
FYI, This jump from $ 3,500 to $ 9,500 and Premium Service of $ 12,500+ took place
in 2021, or in the first half of the year.
The Core Question I have is: Where Are Our Agencies who Monitor such activities? Yes, DOT, Department of Transportation Maritime Administration!!! Working from Home?
The Second Question I have is: Is China in Bed with the Steamship Companies? Trying to generate additional Profits by Increasing Freight Cost? The answer is obvious.
Governments Globally are Sleeping, Doing Nothing and Do Not Care.
Consequence- You, the Consumers are paying the price.
4- Logistics- Supply chain is broke means your Logistics cost is out of control and so is your business. Logistics Costs have augmented drastically, thus increasing the costs of Products.
Most small and mid-size businesses cannot afford such an increase in fixed expenses, thus choosing Not to import Products, and scrambling to find other sources to supply them with goods.
Direct Result- Lots of the Empty Shelves + Price Increases ranging from 30% to 50% on Imported Products and Domestic Products as well.
5- Warehouse- Numerous Warehouses Globally have gone out of business. In Most Developing (or small countries), people were not getting paid while sitting at home, most governments globally do not employ a large percentage of their citizens, their online business was not booming and citizens were broke, and were not purchasing goods like before.
Logistics has been impacted globally and moving products across borders has been quite challenging and costly.
6- Fuel Cost has gone up Drastically, more than doubled impacting cost of production, cost of plastic packaging, cost of trucking, warehousing, electricity and the list goes on.
It had a negative effect on all aspects of doing business.
Consequence- Consumers are paying for this as well.
Home Remodeling Industry Today in the U.S. is suffering from Lack of Products, lead time is as high as 3 to 4 months to receive material, parts, products to complete jobs.
In reality, the Supply Chain is Not Broke, the CEO’s are Sleeping on the job,
they need to cut the umbilical cord from China and DIVERSIFY. This is Pure Incompetence.
Sourcing is hard work but not ingenious. Sourcing is finding a Manufacturer Overseas that will make your product, at the Quality you need, Quantity you require, Delivery time you want, basically act as your long term-partner.
Manufacturers Globally are waiting in line for such opportunities especially entering the U.S. market.
China has been the easy answer and the lazy way out, it is no longer the case.
Sourcing also means having LOCAL Suppliers and Overseas Suppliers at the same time, this is called a Diversification Strategy, however, CEO’s threw that concept away and relied on China as their main supplier.
Today they are paying the price for this Strategy and Unfortunately You, the Consumer, as well.
The Result: Supply Chain may be broke for the next 3 to 5 years and longer, with long-term problems with serious consequences looming in the horizon.
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