The Supply Chain Matters blog amplifies the growing list of component and material shortages that are becoming far more visible across the United States.

In a previously published Supply Chain Matters blog reflecting on April’s global wide production indices, we highlighted that the ongoing surge of global wide product demand is straining industry supply networks. The situation is compounded by elongated product lead times, component manufacturers’ ability to secure raw materials in a timely manner along with ongoing disruptions in global transportation. Adding to this list is incidents of ongoing cyber security threats. We during the heights of the COVID-19 pandemic, supply chains were viewed as the savior of the global economy and for the ability of businesses and consumers to receive essential goods. This year runs the real risk of the opposite, supply chains being blamed for sticking the pin into the post-pandemic recovery.

Here in the United States, all of this became quite visible across broad based media and online shopping channels in the time span of one rather trying week.

Supply Chains

Potential Gasoline and Fuel Shortages for the U.S. East Coast

Late last week, a cybersecurity ransomware attack forced the Colonial Pipeline Company, a major pipeline provider of gasoline and diesel fuel, to shut down its operations. This provider manages a 5,500-mile pipeline that transports fuel supply from the U.S. Gulf Coast ports near Houston to major U.S. East Coast storage destinations including New Jersey and New York. According to the company’s web site, Colonial transports upwards of 45 percent of the fuel consumed on the U.S. East Coast.

While no evidence has emerged that the cyber attackers penetrated actual pipeline control systems, the incident has led to a continued shutdown while information technology security experts attempt to restore the company’s operational systems in a safe manner. U.S. Federal regulators are now involved in investigating this incident and the White House provided a special briefing this morning during the daily press briefing.

What compounds this potential essential fuel supply disruption was the fact that there was already an ongoing shortage of licensed fuel tractor-trailer drivers brought about by the effects of the pandemic across the United States. According to industry trade group National Tank Truck Carriers, an estimated 20 to 25 percent of tanker trucks have been parked because of driver shortages. In response to the Colonial incident, yesterday the Federal Motor Carrier Safety Administration (FMCSA), issued a temporary Hours of Service (HOS) exemption for trucks transporting gasoline and other refined products that will remain in effect until June 8 or until the emergency is declared over. This exemption applies to 17 U.S. states and the District of Columbia.

Obviously, motor fuels are the lifeline of logistics and transportation and thus many U.S. East Coast businesses are hoping for a timely resolution of any fuel shortages that may occur as a result of this cyberattack.

 

Corrugated Packaging Supply

On Friday, the Bloomberg Supply Lines column reported that in a year of ongoing supply chain disruptions, add the categories of recycled paper and cardboard, as well as the food commodity corn, utilized for the glue that holds containers together.

Reported is that prices have spiked for both recycled paper, an important source of wood fiber for the packaging industry. Large paper companies have not been able to keep up with demand for paper boxes contributing to major supply backlogs. The shortages are not only impacting business and online retail and B2B shippers, but food producers as well. One large free-rang egg producer is reported as waiting upwards of 12 to 16 weeks for new corrugated egg cartons compared with a usual lead time of 4 to 6 weeks.

 

Food and Other Commodities

CNN Business reported this weekend that: “Chicken, lumber, microchips, gas, steel, metals, chlorine and ketchup packets: What do they all have in common? They’re all (nearly) impossible to find.”

In the food category, demand for fast food chicken in the form of chicken wings and chicken sandwiches is booming, but shortages of the chicken are more visible. Noted as one example is a problem for Kentucky Fried Chicken (KFC): Its revamped chicken sandwich is selling twice as well as its predecessor and becoming too popular to meet demand. According to Yum Brands CEO David Gibbs, interest in the product, along with tight chicken supply, has made keeping pace with customers’ orders the “main challenge” for KFC as it enters the second quarter.

With summer fast approaching, supplies of chlorine across the U.S. are reportedly running low due to the effects of a fire that occurred in a Louisiana chemical plant damaged by Hurricane Laura last year. Prices for tablets used in disinfecting pools have reportedly doubled while supplies are running low.

A shortage of ketchup packets utilized in restaurants and fast-food outlets remains ongoing. This shortage was compounded during the COVID-19 pandemic when U.S. restaurants were restricted in serving only take-out or pick-up orders, which spiked the demand for the packets. Ketchup producer Heinz, a major supplier to restaurants and food outlets is reportedly at the epicenter of the ongoing shortage and has subsequent announced a 25 percent increase in packet production totaling 12 billion annually. Talk about being caught flat footed.

A nationwide housing construction and renovation boom across the U.S. has driven up demand for lumber materials beyond existing supply, prompting major price hikes adding thousands of extra cost to house or renovation construction.

And finally, a day does not go by without added visibility to the ongoing shortage of semiconductor devices that are now visibly impacting the production supply of automobiles, trucks, certain machinery and equipment and now certain smartphones and mobile devices.

 

Indeed, when business and general media headlines constantly point to supply chain shortages impacting multiple industries, we know that supply chain management along with business sales and operations planning teams are doing all they can to try to stay ahead of the compounding effects to businesses and eventually to business performance.

 

Bob Ferrari

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