Shortages in the supply chains that U.S. businesses depend on translate into widespread inflationary pressure, a series of U.S. companies revealed this week, disrupting operations and forcing them to raise prices for their customers.
Whirlpool blamed “supply chain inefficiencies” on Friday for “quite steep” price increases for steel, resin and other materials, saying it would add nearly $ 1 billion to the costs of the device maker this year.
âEvery day something is out of stock in the store,â said Vivek Sankaran, CEO of Albertsons, comparing the grocery chain’s efforts to meet successive challenges to a game of Whac-A-Mole .
Asked this week what ingredients and supplies Chipotle had struggled to obtain, Jack Hartung, the restaurant chain’s chief financial officer replied, âAll of them. “
The pressure on every link in the supply chain, from plant closures triggered by the Covid-19 outbreaks to difficulties finding enough staff to unload trucks, spills over across sectors, escalating questions about the threat that inflation is weighing on robust consumer spending and rebounding corporate profits.
In recent days, America’s biggest airlines have all complained about skyrocketing jet fuel costs, toy maker Mattel has explained the challenge of rising resin prices, and Danaher has joined the list of manufacturers fighting for stock up on electronic components.
The Federal Reserve’s beige book summary on economic conditions on Wednesday indicated that supply chain bottlenecks and labor shortages had slowed the pace of economic growth to a large extent. from the country. âMost districts reported dramatically high prices, fueled by growing demand for goods and raw materials,â he noted.
Overwhelmed ports, trucker shortages and low warehouse vacancy rates have met strong demand from consumers and corporate clients to create “silent chaos,” said Ethan Karp, CEO of Magnet, a firm of non-profit consultancy working with manufacturers.
âThey’re busier than they’ve ever been, but they can’t find the people to ship what they’ve already produced,â he said. Businesses were suffering from unpredictable delays and overpaying for supplies found on the gray market, he added, but âit’s very upside down and it’s getting worse because. . . the ports are saved and the orders are pouring in â.
Most companies said they were able to offset these higher costs by raising their own prices or finding efficiency gains elsewhere.
Procter & Gamble, the maker of Tide detergent and Charmin toilet paper, said this week it would embark on a new round of price hikes after warning that supply chain costs would be higher than expected . Andre Schulten, chief financial officer of P&G, said he announced price increases for nine of its 10 product categories in the United States, with mid single-digit increases across most of his portfolio.
Earlier this month, PepsiCo said its price increases may continue into the first quarter of next year, while Tesla said it is also adjusting prices to offset rising costs for raw materials and Workforce.
Executives expect cost pressures to remain high until 2022, but fear that prices will rise too high if inflation turns out to be short-lived. âI don’t think inflation is going to go away in the next one, two or three quarters,â Hartung said, adding that wage inflation was unlikely to be transient even if commodity prices fell. .
âWe know we have pricing power,â he said, but added: âFor some offers there will be a limit to what customers are willing to pay,â he said. declared.
Matt Puckett, chief financial officer of VF Corp, said the company had limited markdowns on its Vans sneakers and North Face jackets to increase margins despite plant closures in Asia and port congestion in the United States.
âOver time, I think [inflation] will start to moderate a bit, but we expect as if we will continue to see some pretty significant increases in freight going forward, âhe said.
United Airlines’ commercial director Andrew Nocella echoed the post on Wednesday, saying congestion at US ports meant he was “carrying things by air today that we don’t traditionally have,” a situation that the company hopes to last until 2022.