Fixing the Broken Supply Chain
In early October there were 62 cargo ships waiting to dock at the ports of Los Angeles and Long Beach, which account for 40% of all the containers that come in to the US. The time it takes to get a shipment from China to the US has more than doubled from 35 days to around 78 days. Ships sit in port waiting to unload for an average of eight days. Cargo space on vessels is going to the highest bidder, with companies relying on supplier relationships, charter deals and non-traditional contracts with rail and truck shippers.
In mid-October President Biden announced a broad-ranging agreement that would allow the Ports of Los Angeles and Long Beach to work 24/7. That means the ports will be operating an additional sixty hours every week trying to unclog the supply chain and get goods moving. Reaching consensus required weeks of negotiations and cooperation from the Port Authority, the longshoreman’s union and several of the country’s largest retail and shipping companies. The hope is that nighttime operations will help break the logjam. Major retailers, including Walmart, Home Depot, Target, FedEx, UPS and Samsung committed to unloading during off-peak hours.
Walmart, Home Depot, Costco and Target all chartered exclusive cargo ships to bypass supply chain problems and help assure they would get goods in time to keep shelves stocked for the all-important holiday selling season. Mid-size retailers and brands don’t have that option; the cost of leasing a ship runs between $1 million and $2 million per month plus operating costs. Big retailers use between 500 and 1,500 containers every month; each container costs hundreds of dollars to rent.
Shippers have also been trying to divert to ports that are not as busy, such as Tacoma, Seattle and the East Coast, but there are bottlenecks everywhere. Normally companies pay a fraction of the cost and share ships with other clients. A chronic shortage of both long-haul truck drivers and containers is also contributing to the problem. There are now 22,000 fewer truck drivers now than there were in 2019, and many more needed to actually meet demand.
Record Job Openings in Warehousing and Transportation
The warehouse and transportation industry had a record 490,000 job openings in July, a gap that experts predict will only grow wider. Warehouse jobs were once thought to be the future of retail, offering opportunities for displaced workers and reshaping the workplace. Instead, today there is a dearth of workers willing to take on the physically and mentally demanding work, according to a recent article in the Washington Post. Industry watchers say the number of seasonal postings advertising urgent and immediate vacancies has gone up tenfold over the past year, with many more employers offering incentives such as signing bonuses, higher wages, bigger discounts, flexible schedules and even free college tuition and textbooks or other types of training. Many of the workers who have left the industry cited long hours and grueling and demanding work.
Insiders from some of the biggest employers in the country told the Post that many people find the jobs so challenging they quit after their first day. Long-time employees say after years in the industry they just can’t keep pace anymore.
Lumber Prices Cool Down
After soaring for months, lumber prices fell sharply in the third quarter and are expected to decline about 29% next year, according to Engineering News Record. Industry experts say the changes are due to supply and demand corrections. CV19 restrictions kept supplies very depressed and prices very elevated. Capacity has come back due to fewer restrictions and a pull-back in demand as the housing market in the US softened somewhat and buyers put off home renovation projects and buying a home.
Payment and Entry by Palm Technology
Amazon says their Amazon One palm technology allows registered users to have their palms scanned for entry and for making purchases at some venues. Amazon One reads the tiny, distinct features on and below the surface of the user’s hand. When customers enroll in the program, imaging and computer vision algorithms capture and encrypt someone’s palm image and create a palm signature that the system analyzes whenever the enrollee places their hand over a reader. In essence, Amazon is not capturing a palm print, but actually doing palm vein scans, which gives them many more data points and a much higher level of security. Palm scans read an average of 5 million reference points and remain relatively stable throughout a person’s life. Amazon uses palm-based payment at some of their retail locations and has made the technology available at no cost to other companies. Digital ticketing company AXS installed ticketing pedestals called Amazon One at Red Rocks Amphitheater in Denver and plans to add more venues, including the T-Mobile Center in Kansas City and the Target Center in Minneapolis. In addition, the new Climate Pledge Arena in Seattle will be implementing Amazon’s Just Walk Out technology with Amazon One at four of their food and beverage locations. The technology will allow fans to grab what they want and leave without taking the time to check out.
Mobile Tech Changes Shopping
More than 70% of respondents want to use technology to get through their store visits more quickly and find more of what they are looking for, according to the ChaseDesign Tech at Retail survey of 1,000 consumers ages 16 to 54. Consumers are using mobile apps and other tools for things like contactless checkout, scanning QR codes for product information, looking up discounts/promos and downloading digital coupons. More than 60% of shoppers reported that self-checkout makes them more likely to shop at a retailer. The top ten apps that customers found most useful included Walmart, Target, Kroger, Costco, Whole Foods, Sam’s Club, Walgreens, CVS, Albertsons and Publix.
Remodeling Industry More Confident
Remodeling Confidence rose five points to 87 in the third quarter, as compared to the third quarter of 2020, according to the NAHB/Royal Building Products Remodeling Market Index (RMI). NAHB said that demand for remodeling remains strong but remodelers are dealing with material and labor shortages that curtail their ability to take on projects. Remodelers report that most customers are willing to put up with delays and extra costs in order to be able to move ahead with their projects.
The Current Conditions Index rose to 90, a four-point increase from the third quarter of 2020. All components also posted increases compared to the third quarter of last year. Large remodeling projects ($50,000 or more) rose six points to 86, moderately-sized remodeling projects (at least $20,000 but less than $50,000) increased five points to 91 and small remodeling projects (under $20,000) inched up one point to 91.
The Future Indicator Index rose seven points to 84. Both components increased as well. The current rate at which leads and inquiries are coming in rose five points to 83 and the backlog of remodeling jobs climbed eight points to 85.
Well over 90% of remodelers in the third quarter RMI survey reported a shortage of carpenters, according to NAHB Chief Economist Robert Dietz. And 57% of remodelers reported having slightly raised prices for projects over the last six months, with another 28% indicating a significant increase in price, due in part to higher material costs and ongoing strong demand. Half of these remodelers reported some projects did not move forward due to higher prices. The RMI was redesigned in 2020 to make it more accurate and easier to respond to. Therefore, current data cannot really be compared to previous survey results. The RMI asks remodelers to compare market conditions to the previous three months on a “better,” about the same and worse scale. More than three-quarters of respondents said that the current market was about the same as it was three months earlier.
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