Supply chain issues hurt local businesses, suppliers and consumers
At the start of 2021, Konrad Bouffard, owner of Konrad Christmas trees and wreaths, expected to have a normal year by opening his first Christmas tree stand.
However, he didn’t expect the climate for the global supply chain to be so bad that he made two of his biggest competitors come to him for help, he said.
Bouffard, whose tree lot at 1015 W. University Ave., Georgetown, is in its first year, also owns Round Rock Honey and Good Pickle Juice. Due to the difficulty of the global supply chain, the cost of a bundle of Christmas trees has increased to about three times more than a typical year, Bouffard said.
“One of [my competitors] even came to our lot yesterday and asked how much for everything, ”Bouffard said. “I spoke to three people today who want to buy all of our trees because they haven’t ordered a lot of trees and they are selling now.”
Bouffard is just one example of how consumers and business owners across the country are struggling to find what they need.
In local communities, recent supply chain bottlenecks driven by inflation and labor shortages put business owners, suppliers and consumers in increasingly more positions. difficult during the busiest buying season of the year. Experts say that at its core the problem is a simple mismatch between supply and demand that has been greatly exacerbated by the COVID-19 pandemic.
Sam Tenenbaum, chief analyst and central Texas economist for commercial real estate information company CoStar Group, said when pandemic restrictions were first put in place last year, both demand and supply of most goods have declined considerably.
However, as restrictions continue to lift and federal stimulus measures amplify demand for goods faster than expected, suppliers are struggling to keep up, according to Tenenbaum.
“We all expected the economy to weaken significantly [because of COVID-19 and] consumer spending has gone down… but it hasn’t really happened, ”Tenenbaum said. “A lot of large factory operations can’t shut down all at once, then turn around and restart operations at full capacity in a matter of weeks. This is not really how everything works.
Coping with Inflation Another problem businesses have been affected by is inflation, which Bouffard says has forced many potential customers not to buy Christmas trees this year.
“There are different types of buyers and a lot more buyers have pretty tight budgets,” Bouffard said. “A lot of people are on the edge and just trying to get out of it. They want a Christmas tree, but they come just to see and smell the trees.
Along with inflation, material costs are rising, Tenenbaum said.
Data from the United States Bureau of Labor Statistics shows that between April 2020 and September 2021, the Consumer Price Index, which measures the price of consumer goods, rose in Texas from 231.8 to 248, or about 6.99%. The increase is more than double the state’s year-over-year average jump over the previous five years.
Under real circumstances, US Department of Agriculture records show the average retail price of a gallon of conventional whole milk in Dallas as of April 2020 was $ 2.79. In October 2021, the average price was $ 3.29.
Before the pandemic, from April 2018 to October 2019, the average price of milk fell from $ 2.79 to $ 2.32.
Tenenbaum said COVID-19 has also changed the way consumers spend their money. Before the pandemic, services, not goods, made up the majority of consumer spending, but the pandemic has changed that, he said.
“COVID[-19] sort of made those personal interactions closer which are much more service-oriented and certainly more dangerous, ”Tenenbaum said.
He said the change had led consumers to spend more on goods than on services almost overnight, an increase in demand that contributed to inflation.
Widespread labor shortages are another contributing factor to supply chain disruptions, according to Jessica Garay, Data and Career Awareness Project Coordinator for Workforce Solutions Capital Area.
Among many skilled trades critical to supply chain operations, including shipping and manufacturing, the number of vacancies far exceeds the supply of skilled workers, according to data from Workforce Solutions.
WFSCA data shows that of the 10 occupational categories most in need of workers, two are directly related to the supply chain.
In the area of transportation and movement of materials, WFSCA reported 1,213 new jobs in the Austin metro in August and only 474 people trained without jobs.
BLS data shows that as of October, about 9,000 jobs in the trucking industry remained vacant from pre-pandemic levels nationwide.
“In particular, there was already a shortage before COVID[-19]Garay said. “We don’t know if it’s because the talent isn’t qualified for these positions in transportation, warehouse and manufacturing, or if it’s something else.”
However, some business owners have not been affected by the drought in the labor market. Cody Hirt, co-owner of Golden Rule and Mesquite Creek Outfitters in Georgetown, was able to keep many of his original employees, he said. Mesquite Creek Outfitters opened on November 16, 2016 and Golden Rule opened on June 23, 2020, a month after the start of the pandemic in the United States.
“At Mesquite Creek Outfitters, 8 of our original 14 employees have stayed with us from the start,” Hirt said. “The golden rule is a little different. We welcomed with us a large group of waiters who come and go according to the seasons, maintained three of our four managers and kept each person in our kitchen staff.
A consistent number of employees and his decision to source locally have kept him afloat, he said. To demonstrate the power of what local suppliers are able to achieve together, Hirt purchases all of its products for both companies from local suppliers across Texas. Golden Rule’s desserts are made in Georgetown at Lulu’s Pies, and the restaurant’s meat comes from Colinas Foods. Additionally, Mesquite Creek Outfitters has grown into a grocery supply company by partnering with Colinas Foods.
Going forward, Hirt saw a steady increase in the cost of its products, but refused to pass the increase on to its customers, he said.
“Just because we buy our supplies from the local population does not mean [our suppliers] source locally, ”Hirt said. “We still have to deal with their rising costs. But if everyone keeps raising their prices because of inflation, then the economy will stop working and there will be a crash. “
Tenenbaum said it expects manufacturers to make some changes in response to global supply chain issues so that they are better prepared to deal with future disruptions.
The most notable change predicted by Tenenbaum is the reduction of overseas manufacturing in favor of local manufacturing in order to reduce reliance on the global supply chain.
“Now that we sort of understand the difficulties of a global supply chain, I think what we’ll see is an offshoring or offshoring, where we take the manufacturing process back to the United States or we keep more of it. inventory of this item, ”Tenenbaum mentioned.
Some customers understand the rising prices of goods, but others think the problem is arbitrary, Bouffard said.
“This problem is not something that local businesses create and then react,” Bouffard said. “The global economy is affecting small local businesses to raise prices, reduce profits, raise operating costs and more.