The headlines are everywhere and increasing in number. “Supply Chain Ready to Break,” “Global Supply Chains are Falling out of Fashion,” and “Cargo Ships Stuck Offshore for 16 Days.” There are real problems in global shipping, and the time is right to switch to domestic suppliers.
So, what is happening exactly? First off, we’re in the rubber business, so we’re going to give a high-level overview of the challenges global shipping is facing.
The global Coronavirus pandemic has left global supply chains in chaos for the last 18 months. COVID caused shutdowns across the global supply chain and China was one of the first areas where entire factories closed for weeks, and sometimes months. China’s export of parts and raw materials came to a standstill, which caused a ripple effect – closing factories everywhere that relied on China.
Not only did COVID cause issues in production facilities, but it also completely disrupted ocean freight. Ports shut down and many sailings were cancelled. Even when ports opened back up, only 50 – 70% of their workers were on-duty at any given time, which slowed things even more. Freight backed up because there were fewer people to move it.
Now, for the most part, production has caught up to pre-pandemic volume, but now there is a bigger problem: there is very little ocean shipping capacity.
There are simply not enough ships available to carry the backlog of waiting goods to their destinations. Which creates another problem: fewer ships leaving China means there are fewer ships sailing back to China with empty containers. This has caused a massive shipping container shortage in China.
But that’s not all. Remember that Economics 101 concept known as supply and demand? Low supply and high demand mean that ocean freight rates are at record highs. On some ocean freight routes, the shipping cost is ten times higher than it was pre-COVID.
What it all means is that companies sourcing from Asia, China in particular, are seeing much higher landed shipping costs, if their product ships at all. According to SME, 47 percent of small and medium-sized manufacturers are reevaluating their supply chains because of COVID. In addition, the Thomas 2021 State of North American Manufacturing report revealed that 83% of North American manufacturers are likely or extremely likely to reshore production, up from 54% in 2020.
Sperry & Rice sources all our materials from the U.S., and we’re extremely proud of that. We understand the need to always get better and more competitive, so on one level, we understand sourcing from Asia made sense at one time. But times have changed, and as the last year and a half has shown us, saving a few dimes here and there doesn’t mean anything if you can’t get the components you need.
If you’ve experienced production time lost to shipping issues, or skyrocketing component costs, let’s have a conversation. We’re confident we can get you what you need when you need it.
We say “we’ll be there from concept to completion,” and now we can say, “so will your components, because they’re sourced, and made, in the USA!”