Article | What I learned in Supply Chain

June 7th, 2021

6 minute read

Every week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of an on-going series. Each article aims to share a little insight into what's going on that week, and to help foster discussion amongst industry professionals across levels, geographies, and companies.

By Rob Garrison, Mercado CEO

This is the latest post in a series about the #bullwhipeffect being felt throughout the import supply chain.

Like everyone else across the import supply chain, suppliers are struggling too. Their costs have increased dramatically, and they can’t pass all (or possibly even any) of the additional costs on to the buyer. This leaves them with the option of continuing to sell at a loss and hope the situation eventually subsides, or quit selling altogether.

Importers, already in a precarious situation themselves as you could see in my last blog post, face yet another challenge if their suppliers keep raising prices or stop selling to them.

This article from the Wall Street Journal details at length the myriad issues facing suppliers, from rising raw material costs to labor shortages. I highly encourage you to read the full article if you are able to (since it’s behind a paywall), however here are some relevant excerpts of how difficult things have become for many suppliers:

• Shaung Ding, a Standard Chartered economist, predicts that if input (aka raw material) cost pressures persist, then more manufacturers in China will either be forced to halt production or pass it on to consumers at home and abroad.
• According to the article, a recent survey by the Shanghai branch of the People’s Bank of China learned that about 47% of manufacturers plan to adjust prices in the near term. 37% said they will be cautious about accepting new orders. 38% of those surveyed expect prices for raw materials to continue climbing for another quarter on average.
• Xing Jialiang, the owner of a glass factory in Zhongshan, says his company is running out of good options. It has raised prices by about 5% so far this year, but that hasn’t been enough to keep up with a 10% increase in costs, he said. “It is possible that we may have to halt production in a month or so if raw material costs continue to rise,” Mr. Xing said.

An additional problem for many Chinese factories is that there hasn’t always been enough workers to keep up with the surge in global demand for their goods. Sound familiar?

We seem to be in the middle of a perfect storm where surging demand is rocking the cost curve at unprecedented levels across suppliers, containers, and more. How long will it take to ride out this storm? Any predictions?

About the author(s)

About the Series

Each week, Mercado CEO Rob Garrison pens his latest learnings from the supply chain industry as part of a series run for his LinkedIn followers. Each article aims to share a little insight into what's going on that week and to help foster discussion amongst industry professionals across levels, geographies, and companies.

You can connect with Rob on LinkedIn by following this link.