The Supply Chain is Only as Strong as the… | Shepley Wood Products
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The Supply Chain is Only as Strong as the Weakest Link

I recently saw an interview with current Secretary of the US Treasury and former Federal Reserve Chairman, Janet Yellen, that surprised me in two ways. First because she said we are not in a state of inflation and second because she actually admitted that she sees current supply chain challenges and resulting shortages stretching at least 12-18 months into the future.

I suspect Ms. Yellen has not bought a new car, appliances, home decorations, or a couple of cubic yards of concrete recently and that her opinion of inflation is based on an academic view rather than real life experience. At 75 years old, she isn’t likely up for the adventure of moving, so she may not have been in the market for a new house lately, but checking current housing prices might influence her opinion on inflation too. We are definitely in an inflationary state and we have a severely strained supply chain that is truly global. I completely agree with her that it will be every bit of 12-18 months before supply catches up with demand and we will therefore be living in a different world than we were used to. At least we agree on something!

As tempting as it is to blame one factor, this is a combination of many factors and any one item can influence the rest of the chain. To wit: one missing microprocessor can hold up an entire new vehicle for months and months. We just finally got a Ford van that was ordered close to a year ago!

The major factors are a critical shortage of labor to manufacture goods, a major shortage of drivers to transport raw materials and finished goods, a worldwide shortage of shipping containers, big backlogs of ships at our ports who can’t unload because of the aforementioned labor and driver shortages, and resulting run ups in cost of shipping that are making some products economically unviable. A 20 foot shipping container from China cost $2,000 door to door to the US prior to the pandemic. That same container now costs over $20,000 and even at the high price is still subject to unpredictable delivery times. Suppliers are air freighting components in just to make sure production lines can keep running, because even if you make the entire window or door, if you are short one critical piece of hardware, the production line goes down, you lose production and schedules are pushed out all the way down the supply chain. The manufacturing world has moved from “just in time” to “last minute” production and is literally victim to the unexpected snafus that turn perfect planning into a perfect nightmare.

If nothing else, we should have an appreciation for how smoothly most of this global supply chain process used to work during normal times. We have been so used to getting what we needed when we asked for it and to a high amount of elasticity in supply lines that we are now hit with not just a new rigidity but actual breakdowns in our ability to plan and procure.

The new “toilet paper” is cedar shingles. The Cape and Islands are the epicenter of cedar shingle use in the US. White cedar shingle mills have plenty of logs, they just don’t have the labor to saw the logs into shingles. The largest single producer of white cedar shingles, located outside of Quebec, typically runs three shifts per day with 20 sawyers on each shift. Currently, they are only running 1 shift per day with an average of 14 sawyers. They tell us they don’t even know who will show up for work each day. The story is exactly the same at every other white cedar mill. Canada still has serious COVID issues and is still paying workers to stay home as we were in the US, up through September. It takes several years to train a good sawyer so we can anticipate that there will be white cedar supply issues for quite a while to come. Red cedar shingle mills face the same labor challenges but also have a shortage of red cedar logs to further complicate and constrain their production.

The cure for all this? 1) time will heal these issues but not quickly 2) planning ahead will be key as many materials will be on allocation for quite some time to come 3) substitutions can help schedule. We will all have to consider alternatives and be creative in how we stay open to possibilities. What’s worse than having something that’s not having nothing at all!