As investor and equity markets digest the latest financial performance results from what are considered bellwether companies, the monetary and operational implications of the ongoing global supply chain disruptions are becoming quantified and more understood.

In this Supply Chain Matters global supply chain perspective we provide a sampling of such data, and we will do so from a tiered supply network perspective, starting from end product sales and distribution and then subsequent tiers.



The online retail platform provider reported what was headlined as lower than expected third-quarter revenues and profits with a warning that supply chain challenges would weigh in on results for the all-important holiday fulfillment quarter.

The provider reported total sales of upwards of $111 billion and profit of $3.3 billion, the latter down from the $6.3 billion earned in the year earlier period. Wall Street interests headlined the latest results as a significant miss in analyst and investor expectations.

Newly appointed CEO Andy Jassy provided comments on the existing holiday quarter, in essence warning of several billion dollars of additional costs to overcome increased labor and global supply chain shortages coupled with increased transportation costs.

Supply Chain Matters recently highlighted the overall preparations that were made along with the potential cost aspects to prepare for this year’s holiday surge quarter.

CFO Brian Olsavsky indicated to reporters that during the September ending quarter there were needs to reroute products and deal with labor and supply chain issues, all of which drove up spending levels. Regarding the existing holiday fulfillment quarter, he cited labor availability as the retailer’s primary capacity constraint and characterized the constraint as “new and not welcomed.” Noted was that during the recent quarter, $2 billion was spent on added payroll and worker incentives as well as constraints related to the company’s supply chain.

In the recently completed quarter, the company’s global shipping costs were noted as $18.1 billion, a 19.5 percent increase from the year-earlier period and a 2 percent increase from the prior quarter. Not but a very few enterprises can readily adsorb such cost increases.



In its reporting of fiscal Q4 financial results this week, consumer electronics icon Apple reported a miss on analyst expectations for third-quarter revenues and warned that supply network constraints and a tight labor market impacted the most recent quarter.

Executives noted that supply network issues are hindering both iPhone and other product manufacturing output and would provide added challenges for the holiday quarter. CFO Luca Maestri indicated that supply chain disruptions experienced during the most recent quarter were worse than expected. He quantified that supply constraints had impacted $6 billion in missed product related revenues and that number could worsen for the holiday quarter. Further acknowledged were that wait times for the company’s newly announced products are longer than desired. While executives fully expect that the December ending quarter will set a record for revenues, certain products will inevitably be constrained by supply constraints.

In a Supply Chain Matters posting in early October, we highlighted a Bloomberg report indicating that iPhone13 production targets would be trimmed by as many as 10 million devices for this holiday quarter because of prolonged semiconductor chip shortages. In our commentary, we opined that if semiconductor availability was indeed constraining Apple, it should be taken as a definitive reinforcement that the global chip shortage is indeed having a multi-industry impact, regardless of company size and influence.


Global Auto Makers

The two largest U.S. auto makers, General Motors and Ford Motor Company, reported considerable declines in third-quarter profitability which was mainly attributed to semiconductor processor shortages. GM reported a 40 percent drop in net profit while Ford reported a 23 percent drop in the midst of record high average sales pricing levels for the industry.

Executives of both U.S. companies indicated cost pressures related to rising raw material, component and transportation costs, along with needed ongoing investments in supply networks to support planned new models of electrically powered vehicles.

Regarding the semiconductor shortage, executives indicated that the third quarter was especially impacted by chip availability and that shortages would ease gradually next year. That stated, opportunities to build dealer inventories of available models were described as limited.

Meanwhile, Volkswagen and Stellantis pointed to a combined 1.4 million vehicles in lost production in the third quarter.

Volkswagen, the ranked number two global automaker reported lower than expected quarterly operating profit, while cutting its outlook for deliveries and sales expectations for the coming quarter. The company produced 800.000 fewer vehicles in the most recent quarter, 35 percent lower than the same quarter in 2020. Reuters reported that the European automaker’s finance chief indicated that the chip shortages made abundantly clear that the company is not resilient enough to fluctuations in capacity utilization.

Number four ranked Stellantis indicated that chip shortages resulted in a 30 percent reduction in planned production in the most recent quarter.


Semiconductor Supply Networks

The Wall Street Journal reported this week that the semiconductor shortage is far from over. (Paid subscription or metered view)

The report’s overall observation indicated: “The global semiconductor shortage is worsening, with wait times lengthening, buyers hoarding products and the potential end looking less likely to materialize by next year.

Reportedly shortages are cascading among lower tiers of the industry’s supply network to include supply of substrates, silicon metal, wafer production and other materials. A report by Accenture and the Global Semiconductor Alliance indicated that chip assembly alone requires that parts travel upwards of 25,000 miles before becoming finished products and current global transportation disruptions and capacity constraints have added to delays.

The result is noted as widespread confusion and frustrations among manufacturers and their procurement teams with delivery dates for some products extending into 2024. Reportedly, device lead times that were normally 9-12 weeks have extended to 22 weeks for controllers and 38 weeks for micro controllers that are required in today’s new automobile models. Cited is one distributor receiving delivery dates extending to 2024 for certain devices. Buyers also pointed to stockpiling tendencies creating inflated industry demand.


Samsung Electronics

Regarding the theme of semiconductor chip shortages, Samsung Electronics, a bellwether company for high-tech and consumer electronics supply networks reported record quarterly earnings this week that exceeded equity analyst expectations.

The provider is a products producer in the form of smartphones, consumer electronic devices and telecommunications equipment. It is further a major component supplier for company’s finished products as well as the broader industry.

The company reported a 10.5 percent increase in revenues and a 31 percent increase in net profits amid robust demand for the company’s DRAM and NAND memory chips along with semiconductor devices.

Financial results were primarily driven by robust sales of memory chips utilized in personal computers, data servers and mobile devices. Operating profit for the company’s semiconductor business unit reportedly rose 82 percent on a year-over-year basis. In contrast, sales for the company’s mobile division that produces smartphones declined by 7 percent while operating profit declined upwards of 25 percent as a result of other supply network component shortages.

In its reporting of Samsung Electronics results, The Wall Street Journal cites a memory division senior executive as indicating that component shortages could begin to ease in the second half of 2022 and have less to do with chip production shortfalls than with buyer behaviors that are creating mismatched inflated demand.


United Parcel Service

Global parcel and supply chain services provider UPS reported third quarter financial results that exceeded expectations and were headlined with a 9.2 percent increase in revenues, a 13 percent gain in revenue per package amid a 2 percent drop in shipping volumes.

The carrier continued to demonstrate results from its revised “Better, Not Bigger” strategy for focusing on customers and shipping contracts that generate higher revenue growth and added overall profitability, rather than seeking added shipping volume.

During the most recent quarter, costs for purchased transportation reportedly rose 18 percent while fuel costs rose 54 percent.

Executives indicated plans to again tightly control overall shipping volumes that occur in the upcoming holiday surge to avoid shipping network bottlenecks and disruptions. Similar actions occurred during last year’s holiday surge which led to some retail shippers encountering daily cutoffs and scrambling to secure other parcel carrier services in order to meet customer fulfillment commitments.

The carrier additionally announced 2022 shipping rate increases of 5.9 percent, matching previously announced similar increases announced by rival FedEx. These actions represent the highest annual rate increases by either carrier, and with the current steep increases in oil and fuel prices, shippers will likely have to anticipate added increases in fuel surcharges for parcel transport coupled with higher shipping costs in the coming year.


Additional Thoughts and Perspectives

We have provided this capsule of company reports to assist our readers and clients in the understanding that supply chain challenges are not short-term, but rather are exposing systemic product demand, supply network and transportation challenges that existed prior to the pandemic and have now been made worse.

C-Suite executives are garnering first-hand education that existing expectations in buyer needs and demands turning more time-sensitive, and that is exposing flaws in supply chain networks that were sourced and designed with other design criteria, which was primarily lowest cost.

Supply chain management teams are losing trust in prior supply network norms of sequential planning and just-in-time inventory practices and are now reverting to gaming the system in order to make product shipment commitments. At the same, the challenge is determining real product demand when hoarding and the bullwhip effect of panic ordering is evident in order flows.

The quantification of monetary and volume impacts are concerning and are indeed impacting various industries and associated companies in their business and operations planning. It is further providing added evidence of foundational shifts in labor markets and in employee retention need. Further, there is a growing sense that supply network resiliency and agility practices will need to be reevaluated. They reflect foundational elements of people, processes and technology building blocks.

As for timing, for some industries and businesses, it will be sooner rather than later.


Bob Ferrari


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