Supply Chain Woes: Where are we in the cycle and what are the impacts?

Prices continue to rise, and items seem hard to find. From vehicles to parts, to food and clothing, and of course oil prices have doubled in the last year. Global supply chain issues don’t appear to be abating and may be getting worse. The culprits are in labor, demand, and delivery from the beginning of the cycle to the end. According to a recent ISM Manufacturing Survey, the average lead time for materials used in production is 91 days, this is the highest since 1987. As of 10/4/21, the cost to ship a container from China to the US West Coast has risen from around $4,000 to over $20,000. On top of that, the wait time to port in Long Beach and Los Angeles is over 10 days, whereas the normal wait time is 2 days. There are currently over 60 ships waiting to port off the west coast. The U.S. trucking industry is currently at 100% utilization rate, while down 25,000 drivers compared to pre-pandemic levels. It is estimated the domestic trucking industry will need to add over a million drivers in the next decade just to meet existing demand. Add-in trucks not being repaired in a timely fashion due to parts shortages and you can quickly see a growing problem.

We believe this phenomenon may be shaping up to be an issue of concern in the near term. If companies can’t get their goods onto the shelves, revenue suffers. The low hanging fruit for managers is generally reducing payroll costs, aka, layoffs. In addition to limited availability of goods, the resulting price increases and inflation can be hard on retirees trying to stretch their savings. It may be a good time to pre-plan purchases and avoid large, non-critical expenditures. The duration of this issue is unknown but could likely take quite a while to resolve. So, plan accordingly and let us know if we need to discuss this, or any other issue, in conjunction with your retirement goals and needs. This, too, shall pass.