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Back Afloat?

How supply chain disruption will impact this month’s shows and markets
Posted on March 11, 2015 by Warren Shoulberg

Container shipBy Warren Shoulberg

Getting from Point A to Point B has never been so difficult.

As the home business gears up for major trade shows this month in Chicago for housewares and New York for textiles, it finds itself struggling to fill the pipelines of a supply chain that stretches more than 6,000 miles from the factories of Asia to the shelves of America.

A process that has been honed and refined for the past two decades suddenly is in disarray, the result of factors both painfully obvious and inscrutably subtle:

-The situation at the West Coast ports is certainly the most immediately crippling aspect in the sourcing model today. While an agreement has been reached between the parties, the disruption in the supply chain has been substantial and most everyone involved agrees it will take months for things to return back to the way they ran before the slowdown.

-China, the mother load of manufacturing for home furnishings products for much of the past 25 years, continues to transition to an economy more focused on higher value goods and domestic needs. This is forcing importers to look to other places for their sourcing needs, often a slow and agonizing experience.

-Currency issues continue to fluctuate around the world. The surprising resurgence in the value of the U.S. dollar has been good news for importers who can buy more for less. But the flip side is a slowing export market, compounded by the ongoing recession in Europe, political issues in Russia and wildly gyrating exchange rates in South America.

-And finally, the physical act of moving goods remains a challenge. The Panama Canal is too small for today’s super container ships and the newly widened canal is still at least a year away. U.S. rail lines are overloaded with oil from the explosive boom in domestic production. Only the price of gasoline itself is alleviating the situation somewhat.

All of this is playing out against generally favorable business conditions. Retail sales of home furnishings products continue to climb and demand is strengthening based on the return of the housing market.

It’s why at the big shows this month, there will be as much talk about freight as frying pans and docks as duvets.

It is the slowdown at the ports of Los Angeles and Long Beach that is the most immediate concern and the one that seems to be causing the most consternation among suppliers and retailers.

A new analysis from industry consultant Kurt Salmon puts the short-term cost of the port congestion at as much as $7 billion already this year. No doubt there will be additional costs as the system gets back up to full operating capacity.

Combined with all the factors impacting the overall supply chain, it’s likely that retailers will be focused on the cost of getting goods as much as the price of the goods themselves.

And it’s only just begun, said Kurt Salmon. “Consumers are already seeing empty shelves. Retailers that are maintaining store stocks may be doing so by buying in advance and storing extra inventory, which will impact the bottom line and has already been cited as an issue in several retail earnings reports.”

Talk about throwing cold water on this month’s shows.