Product shortages and soaring prices show fragility of U.S. supply chain

Grocery shoppers may have noticed an empty shelf at home recently commodities such as baby formula or sunflower oil are usually shown. Many online shoppers are also empty of everything from packaged products to clothes and tools.

About 31% of grocery products consulted by consumers were sold out in the first week of April, according to Datasembly, a research company that tracks grocery and retail prices. This represents an 11% increase at the end of November 2021. Stock depletion warnings were even more frequent in Connecticut, Delaware, Montana, New Jersey, Rhode Island, Texas and Washington, where they exceeded 40%.

To aggravate the consumer challenge, Americans are also investing more money in many of the same goods they are used to buying. Grocery prices rose 9% in March from a year ago, according to Adobe. Egg prices up 56%according to the U.S. Department of Agriculture, driven by drought conditions, a bird flu epidemic and even war inside Ukraine.

Other items have also increased a lot. The cost of baby formula products has risen by as much as 18% over the last year amid a nationwide shortage. The supply of pets has increased by 7%. In general, inflation rose in March by 8.5% from a year ago highest since 1981.

What is behind the shortage?

In general, the availability and price of goods depend on three main components: raw materials, human labor, and logistics, such as shipping and transportation. If any of these links are weak or broken as they did during the pandemic, it can disrupt the entire supply chain.

“If any part of the supply chain is disrupted because crops do not arrive, parts are not in stock or trucks are not available, this leads to an interruption, which means that supply chains will be in short supply,” Achal Bassamboo , a professor of operations at Northwestern University’s Kellogg School of Management, told CBS MoneyWatch.

Ongoing supply problems due to COVID-19[feminine] and more recently, Russia’s war on Ukraine, which has limited the availability of certain crops, has kept the complex chain between suppliers, manufacturers, shippers and retailers with consumers still fragile.

Another key factor is causing product shortages and higher prices: rising consumer demand as the U.S. learns to live with the virus.

“It’s harder to get things done – there’s less raw material, but consumers also buy more because there’s a lot of money and people haven’t paid that much for services, ”said Joel Beal, CEO of Aloy, a technology platform that it helps companies track products and manage inventory. ”This leads to higher levels of product depletion than we have had in decades for many different products. “People want more than they ever have, and companies can’t make enough because they can’t get the raw materials to do it.”

“Every customer we talk to says we have a shortage of this, we have a shortage of it,” he added.

Given the limits of how much manufacturers can produce, retailers end up competing for the same products.

“When you have less inventory than people ask for, brands have to make decisions about who will get the limited inventory. Go to the allotment and certain retailers will be disproportionately affected,” Beal said.

Brands will sell to shoppers who are willing to pay the full price, which means shoppers can expect to find more exhaustion notices among discount retailers compared to other stores.

“Bigger retailers like Walmart, Amazon, Safeway and Kroger, because they have disproportionate power with suppliers, are buying larger quantities, so you’ll see that these players do better and have more complete shelves compared to payers. smaller ones that you sell when you sell them. They have an excess of inventory, “he said.