We know we are in unusual times when the teams from design firms, furnishing manufacturers, architectural studios, and construction companies are discussing supply chain challenges. There was a time when the subject was relegated to those who hold positions in logistics but as goods arrive late and lead times grow, the trickle-down effect requires that anyone communicating with clients about where products or projects stand must be better informed.
We thought we’d ask our President Brownlee Currey, who has a keen understanding of what has been happening in our industry during the Pandemic, to break it all down for us. It is quite a puzzle, as you will see when he lays it out in his own words. We’re illustrating the post with images that he and the design team took when they were able to travel to Asia where so many of our products are made. He says it will be a while before it will be possible to undertake product development in person again. We’ll have a post on that topic in a few weeks so be sure to stop back by.
Supply Chain Challenges During the Pandemic
Brownlee Currey on the supply chain challenges we are experiencing now:
You always confront your current crisis through the lens of your last one. Our previous predicament was the 2008-09 credit liquidity crunch that crippled the housing markets. Everybody’s playbook was built around that crisis. My opinion has always been that we’re not in that crisis any longer but the concentration on that has brought us the supply chain challenges we have now. The logic everyone was using was: consumer spending is going to drop, housing is going to suffer, and people are not going to have access to cash so companies began trimming inventory and reserving cash.
The situation has not worked out that way. I know a tremendous number of companies who canceled their open orders with Asia when the pandemic hit. They figured: my stores are closed so I’ll redo the purchase orders when I know I’m out of the woods. That’s what got this whole ball rolling, and that was a little over a year ago now. What we all found out at the same time was that this crisis wasn’t like the last one. Consumer spending and housing when up instead of down. In fact, we discovered by June and July of last year that consumer spending was going to hold up substantially better than anyone anticipated.
That’s when several of the most lasting supply chain challenges happened all at once. Anyone who had cancelled purchase orders immediately reissued huge orders. This meant the factories went from famine to feast. You notice we haven’t even actually talked about the virus yet so this is where COVID comes in. When the factory activity started to balloon, the virus’ effect on productivity started to take over. Much of Asia where people do their sourcing is still operating under some manner of COVID-based restrictions today.
A good example is our factory in the Philippines where only 30% of our people have been able to get vaccinated and they received the Sinovac vaccine, which is the only one that is available to them but is less effective. When you think about factories figuring out distancing guidelines and safety protocols that have to be put in place (and are still in place), it intensifies the challenge. Imagine wearing masks and face shields in the hottest part of the year. It is the same in India where we also source products, and likely in China, though news from there is limited.
So, our factories are operating with restrictions but consumer demand for products in our industry is really high—everybody is ordering as fast as they can at a time when the factory capacities are constrained. This can’t be overstated: when PO’s flooded the factories, it created a tsunami of orders. Factory foremen want to hire more employees but they can’t put them in place because of distance restrictions. And, in this atmosphere of high consumer demand, the fear over COVID is real.
The Wall Street Journal published an article titled Bullwhip Effect Ahead this past June. They presented an articulate look at the supply chain challenges that have continued since everybody said, “Oh crap, we’ve got our inventory wrong; nobody is having a liquidity crisis now.” The article credits the Feds for this, and it made the point that most businesses are not struggling with cash so the factories went from “I had no business” to huge racks of PO’s. They were trying to ramp up in order to catch up while having people get sick or forced into quarantine. Most consumers don’t realize that anything they’re going to order takes a lot longer to source than they think. They’re used to getting things in two days from Amazon, for instance, but it takes a great deal longer for things to be delivered to warehouses in the U.S. than that.
That’s the factory side of things: We haven’t talked about shipping yet. Once we bring this into the discussion, you can see there are these different components that are intertwined. Freight lines and ports have been vulnerable pieces of infrastructure in these supply chain challenges because they still rely on people to move goods around. They need them to operate cranes and drive trucks, for instance. These people have not had good vaccination rates and many are not able to distance or adhere to safety measures. This has put another weird constraint on capacity while imports are setting records this year.
So the ordering glut started last year. Shifting to this year, we have been seeing various shut-downs and closures at ports, and this has created havoc with the ocean-freight carriers. Earlier this year when the boat got stuck in the Suez Canal, it made for dramatic news but it actually wasn’t as big a deal as when one of the busiest ports in China closed for three weeks around the same time because of a virus outbreak in the port. This particular port is responsible for a high percentage of imports to America. What would normally be a well-oiled machine is now herky-jerky. If you manage to get products on a ship, sailing schedules are disrupted because captains and crews are necessary to navigate them, so things are sitting longer in containers.
We no longer have enough trains to transport things because we don’t have enough engineers and we don’t have enough drivers to move containers via the highways so we have a tremendous log-jam on our hands. In a typical July, we would be receiving containers constantly. This past July, I received about five containers on July 5th and didn’t receive another container until the middle of August because 40 of them were piled up in Los Angeles. This meant we received many weeks’ worth of products in one day. I have to give points to my team here because they rose beautifully to that occasion. They designed a new system to unload that much product. It was remarkable.
So you can see how the schedule reliability is shot: We don’t know if a shipment is going to arrive in 45 days or 150 days. Layer that on the issue of capacity in Asia, and it puts so many manufacturers and distributors under so much pressure. Next, add in the problems with inputs. For example, the casegoods factory we work with in Indonesia ran out of Canadian oak veneer earlier this year because of Canada’s extended shut down over the winter. The ripple effect was that this Indonesian factory that specializes in products made with white wood had to shut down because of the sawmill closures in Canada.
Challenges like this are flowing all through the supply chain at the moment. I’ve worked with the same freight porter for years so we know each other very well. In more unguarded moments, he says the global freight system is inches from being broken. He sends me trans-Pacific reports, and they are valuable tools. This is how we learn about the containers that are sitting in Los Angeles, the closing of ports in Asia, and the clogging of the Suez canal before these things make headlines. The freight system challenges are not due to any one single event, but are the result of everything that is happening, each facet the potential straw that breaks the camel’s back.
A Note to Frustrated Customers
I’d like to say to everyone who is frustrated due to delays and shortages: everybody at Currey & Company is absolutely doing their best. We are legitimately sorry. This is not the service that we want to provide to anyone but this is where we find our entire industry. We wanted to share this because it’s better to understand why. We hope that by hearing about the various challenges, your understanding can lessen your frustration and help you better manage your own clients’ expectations.
We don’t expect to see this improve until the middle of next year. We are seeing individual elements improve but the supply-chain game lately has been like whack-a-mole: you knock one problem down and another one pops up. This isn’t where anyone wants to be. We’re absolutely going to work our way back to pre-pandemic levels but it will take some time. In the meantime, it’s better to react early so if you as designers or retailers know you’re going to need something, ask for it as early as possible.
Given the supply chain challenges, accurate lead times are really tough. Your information is valid until the moment it’s not. This is not who we are in normal times. The crazy part is that we have the largest open set of orders we’ve every had. We’ve never had this many orders at any other time in our history. And it’s not that anyone is sitting ideally on your order; we are frantically working to fill them. We have record numbers of orders and shipments and will have a record number of deliveries when they start coming in, which is, unfortunately, the only piece we can’t fully control.
In closing, I’ll say that I believe we will recover faster than other businesses who didn’t build their own organization overseas. Today we’re relying on the organizations we have had in place for a while, and that is serving us well. We appreciate all of you who value our products and we will all get through this, just not likely in the immediate term. In the meantime, we encourage you to use the in-stock filter on our website to help you find products available immediately. We are still in stock on a large number of our designs, especially lamps and accessories; and, as always, those orders will ship within 48 hours.