Product shortages and soaring prices reveal the fragility of the US supply chain

Grocery shoppers have probably noticed an empty shelf recently where housekeeping staples like formula milk or sunflower oil are normally exposed. Many online shoppers are also empty of everything from packaged goods to clothing and tools.

About 31% of grocery items consumers viewed were out of stock in the first week of April, according to Datasembly, a research firm that tracks grocery and retail prices. That’s up from 11% at the end of November 2021. Out-of-stock notices were even more frequent in Connecticut, Delaware, Montana, New Jersey, Rhode Island, Texas and Washington, where they topped the 40%.

Complicating the challenge for consumers, Americans are also shelling out more money for many of the same products they are used to buying. Grocery prices rose 9% in March from a year ago, according to Adobe. The price of eggs has increased by 56%according to the Department of Agriculture, pushed by drought conditions in the United States, a bird flu epidemic and even the war in Ukraine.

Other positions are also up sharply. The cost of infant formula has jumped 18% over the past year amid nationwide shortages. Pet supplies increased 7%. Overall inflation in March was up 8.5% from a year ago – the highest since 1981.

What’s behind the shortages?

Generally, the availability and price of goods depends on three main elements: raw materials, human labor and logistics, such as shipping and transportation. If one of these links is weak or breaks down as it has during the pandemic, it can disrupt the entire supply chain.

“If any part of the supply chain is disrupted because crops are not coming through, parts are not in stock or trucks are not available, that causes disruption, which means supply chains will experience shortages,” Achal Bassamboo, a professor of operations at Northwestern University’s Kellogg School of Management, told CBS MoneyWatch.

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

Another fundamental factor driving product shortages and higher prices: the rebound in consumer demand as the United States learns to live with the virus.

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It’s harder to get things – there are less raw materials, but consumers are also buying more because there’s a lot of money and people haven’t paid as much for the services,” he said. said Joel Beal, CEO of Alloy, a technology company. platform that helps businesses track products and manage inventory. “This is leading to higher levels of out-of-stock than we’ve seen in decades for many different products. People want more than they’ve ever had, and companies can’t manufacture enough because ‘they can’t get the raw materials to do it.’

“Every client we talk to says we miss this, we miss that,” he added.

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

“When you have less inventory than people are asking for, brands have to decide who gets the limited inventory. You go into allocation, and some retailers will be disproportionately affected,” Beal said.

Brands will sell to shoppers who are willing to pay full price, which means shoppers can expect to find more out-of-stock notices at discount retailers than at other stores.

“Big retailers like Walmart, Amazon, Safeway and Kroger, because they have disproportionate power with suppliers, they buy larger quantities, so you’ll see those players doing better and having fuller shelves compared to smaller payers. you sell to when you have excess inventory,” he said.

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