If you’ve been asking yourself these questions (and maybe more), keep reading because this week, we’ll talk about the factors that have been affecting our customers since Covid-19 started and how it has progressed to what we’ve seen in the last weeks.
Material Shortages and High Prices
It all began with material shortages which in turn drove prices up across all industries. Products ended up sitting in locations with shipping restrictions, leading to manufacturing nightmares for our customers. It’s no secret that the pandemic made the industry shift and we needed to learn how to pivot to make it work for our customers. Major lumber mills cut back on their production and some even closed when Covid-19 started with the concern for the economy getting worse and the health and safety of their employees.
But as the demand for products increased and the available material decreased, manufacturers couldn’t assume the rising costs any longer and started to pass on the increases to the customer. And so created the new landscape of high prices and shortages of raw materials. With everything opening back up manufacturers have backlogs of orders, driving a new situation for everyone to learn and navigate.
To add to our new manufacturing landscape is the layer of a major and historical labor shortage. We would say in roughly 70% to 80% of our weekly conversations within the last few months, every one of them has dealt with an internal labor shortage. This has added to the supply chain debacle where, at first, it was that we couldn’t get enough products, or the prices were too high and now the situation is they can’t get raw materials because there’s no one to process them to the finish line.
Companies are coming up with new ways to get their workforce back to what it used to be. However, we believe that as we get into the end of the year with the holidays and with growing consumer demand, it could potentially get worse. With all that being said, our takeaway from the last couple of weeks and months is that everyone is being severely impacted by the labor shortage.
Shipping and Logistics Bottlenecks
Lastly, a factor that has been another pain point to the mid-size manufacturers that we service is the increase in the costs for shipping and logistics. It is very difficult for small to medium manufacturers to absorb increasing freight and shipping costs because they don’t have the capacity to partner with the larger carriers, leading to an increase in the overall high prices of goods.
In summary with all of the factors we discussed we feel the labor shortage is the biggest manufacturing pain point at this time. It’s a volatile situation and we are curious to see how this new landscape changes the way companies function and operate and ultimately succeed.
What’s your prediction? Do you think the labor shortage situation will improve over the next few months or will it take years? Will the lumber prices hopefully stay steady or even begin to trend down over the next 12 months? Let us know what you think!