Supply Chain Update – 2/22/22
As this situation continues to evolve, I wanted to provide an update on the supply chain of our production partners.
Product Availability: Lead times and availability of raw materials continue to be a challenge for our production partners. The worldwide effects of COVID remains the major factor that has slowed the system. This includes the shut down of overseas factories and ports and the challenge of factories accessing raw materials. When the product is made, delivery to the United States is delayed with the continued backlog of container ships at major US ports and the limited overseas air freight cargo capacity.
Turnaround Times: When the product is in stock, overall we still seeing extended turnaround times on imprinted product delivery. The shortage of workers continues to be the biggest driver of this.
Talking to a number of production partners, we expect to see these challenges start to ease in the second half of 2022.
To be clear, this is not the case for all of the products we offer. We have an incredibly wide array of product solutions from a deep list of production partners and can turn some projects around very quickly. However it is still a good practice to provide as much lead time as possible on projects to allow for flexibility in the solutions that we recommend.
As always, our team is dedicated to finding solutions that are going to help you connect with your communities while providing world class service. We look forward to smoother days ahead.
Original Post – 10/28/21 Post
Magellan Promotions has been in business for 16 years and we have never faced challenges like this in the industry.
At the beginning of COVID, we were really worried that we would not be able to provide imprinted products as manufacturers became unsure how to safely staff and operate their plants. After a few tenuous months, the supply chain became more predictable, and while there were challenges, it was manageable. As the economy heated up in the spring of 2021 and into summer, the underlying challenges within the supply chain became exposed and now we sit in a different situation than normal.
Over the past decade, we have been accustomed to our production partners being able to turn swag projects around in shorter and shorter timeframes. However that pendulum has swung back hard the other way. We quickly went from being able to turn some products in a few days to now over four weeks. The reasons for this sudden change are numerous and similar to what other industries are facing across the US. The three main challenges we face are:
Worker shortages – As seen across seemingly all industries, workers are hard to come by right now. With product demand at all time highs and job openings in numerous departments across the production partners’ plants (production, order entry, customer service, warehouse…), this is a perfect storm that bottlenecks production and slows down all production projects.
Low inventory Levels– There are a number of unprecedented factors that contribute to the low availability of products. First, when the pandemic first hit, inventory levels were high, so replenishment stock orders were put on hold. Then when the economy heated up, the turnaround time to replenish stock went from 90 days to 180 days and longer. Reasons for this include the inability for manufacturers to access raw materials, COVID slowing production in overseas manufacturing plants, the shut down of major export shipping ports, the incredibly long delays to unload container ships in the US, and the limited availability to airfreight products. All of these factors have led to delays and stock shortages for our production partners.
Cost Pressures – In addition to the inability to source raw materials, when they are available, the manufacturers are often seeing increased costs. To make matters worse, the cost to deliver products has skyrocketed. For example, air and ocean freight costs are up over 300% from less than a year ago. In addition, to hire and keep workers, production partners are increasing wages. All of these factors are putting cost pressure on our goods. While we are doing everything we can to keep our pricing competitive, you may see increased pricing on projects compared to a year ago.
Delayed Delivery – With the sudden ride of increased packages for home delivery going through USPS, UPS and Fed/Ex, all the major carriers are struggling to deliver products to businesses and homes per their delivery schedule. We are expecting that this stress will be exasperated during the holiday season and be a challenge for the foreseeable future.
To exacerbate these challenges listed above, there has been a shortage of inks to imprint the goods, corrugated boxes to ship products and adhesive to put on labels and stickers. As one president of a large industry partner recently explained it, it has felt like they have been playing Whac-A-Mole with new holes appearing that you did not ever see coming.
So where does this leave us? Here are a few key takeaways:
It will get better – As an industry, our production partners are working together to get through this as quickly as possible as this situation is helpful to no one. This has even meant that they are helping each other out, sending supplies to one another when they are in a pinch.
But not right away – This is going to be a slow recovery unfortunately. The best of forecasts show that we will not be back to a “normal” operating level until the second or third quarter of 2022. We do expect to see a gradual improvement as we move into 2022.
Expect longer timelines – For the time being, it is difficult for our team to guarantee a delivery on many projects under four weeks. For example, many of our production partners are not guaranteeing delivery by Christmas for projects received after Thanksgiving.
Plan Ahead – It is really important, more than ever, to plan ahead. As planning starts for marketing initiatives and events for the rest of 2021 and into 2022, plan the integration of promotional products into the campaign at the start. The more lead time that we have, the more solutions we can provide.
We really appreciate patience in working through the challenges that the current situation is presenting to our industry. Our team is working hard everyday to understand and react to the changing landscape so we don’t overpromise and underdelivery. We will always communicate if timelines are doable or what to expect before a project goes into production. We are as committed as ever to use our expertise to help build community with targeted audiences through creative and memorable promotional product solutions.