Supply Chains Have Difficulty Meeting Demand

It was a beautifully embossed envelope with an even fancier card inside. Was it a surprise birthday greeting? Not quite. The note said, “Thank you for your order with us. Sorry to tell you we have to delay the delivery of your goods.” I had patiently waited four weeks for the outdoor furniture to arrive. Now, the arrival date had been extended another three weeks. I’ll be lucky if I receive the order before the Fall.

Unlike most consumers, I realize that manufacturers and retailers are dealing with unprecedented circumstances beyond their control. The pandemic derailed the supply chain, and it continues to struggle to get back on track. According to Jonathan Gold, National Retail Federation (NRF) Vice President for Supply Chain and Customs Policy, “There’s no shortage of demand from consumers, but there continue to be shortages of labor, equipment and shipping capacity to meet that demand. Supply chain disruptions, port congestion, and rising shipping costs could continue to be challenges through the end of the year.”

Ben Hackett, the founder of Hackett Associates, agrees with Gold. “Supply chains are struggling to keep up with demand as shipping capacity struggles. A number of vessels taken out of service when volumes were low remain in drydock while others are delayed in congested ports, which face a lack of manpower both because of COVID-19 illnesses and the tight labor market. Many people remain hesitant about returning to work, affecting ports, rail, trucking, and distribution centers.”

Recovery is Faster than Expected

Due to the severity of the downturn, many experts were doubtful the economy could fully rebound in 2021. Most analysts were pessimistic at the beginning of the year and predicted a slow recovery. However, in April, the situation quickly began to change. The NRF reports that April was the busiest month on record for U.S. ports covered by Global Port Tracker. The 2.15 million TEU represented a 33.4 percent increase from the prior April. “Vaccine rates are increasing, shoppers are back in stores, and retail supply chains are working overtime, Gold says. “There’s no shortage of demand from consumers, but there continue to be shortages of labor, equipment, and shipping capacity to meet that demand. Supply chain disruptions, port congestion, and rising shipping costs could continue to be challenging through the end of the year.”

Double-Digit Sales Increases

Whereas the NRF initially projected retail sales to increase 6.5 percent and 8.2 percent in 2020. It now expects retail sales to grow to 10.5 ($4.44 trillion) and 13.5 percent ($4.56 trillion). Several factors contributed to the NRF’s decision to revise the forecast – a step the organization took after reviewing changing economic data. It has become clear that the U.S. economy and retail sales are growing far faster and more steadily than anyone could have expected just a few months ago, said 

Jack Kleinhenz, NRF Chief Economist. “We are seeing not just unprecedented growth from months of pent-up demand as the economy reopens but momentum as well.”• Sales have grown year-over-year since June• May sales were the second-highest level on record• Personal consumption expenditures are expected to grow 7.2 percent vs. 4.4 percent•  

Light at the End of the Tunnel

While the supply chain and the economy still face many hurdles, the outlook is much brighter than we expected just a few months ago. Consumers are surprisingly resilient and learn to adapt to situations based on the information they receive. Although the pandemic is far from over—for now, the future is decidedly brighter for manufacturers, retailers, and the country.

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