PPB October 2021

contingent upon vaccinations, more people entering the workforce globally and freight channels opening up,” she adds. The labor shortage, specifically, has been a huge contributing factor to this situation. Without skilled workers, the entire system breaks down. “The decrease in labor has minimized the capability of the supply chain—it starts frommanufacturing and trickles all the way down to distributors,” says Bakar. “Without workers, capacity has to be capped and decreased; the volume as we knew it ceases to exist.” Garment Gear’s Strickland says he’s heard most wholesalers are only about 75-percent staffed as of early summer, a figure that mirrors his own facility, and with a lean team even when 100-percent staffed, his company is forced to run at a slower pace. As a result, he says apparel warehouses are only holding about a third of their normal inventory now, as well. Tom Clouser, MAS, national account manager for Bel Promo in Medley, Florida, says rather than having a person who unpacks, a printer and a packer on each machine, suppliers are facing having only one person do all three tasks, which is causing production delays. “Not having enough people to run multiple shifts is also delaying orders,” he adds. However, not all supplier companies are dealing with the effects of a labor shortage. Isaac Presburger, CAS, sales director at Houston, Texas-based supplier Preslow, which manufactures apparel in Mexico, says labor is not an issue and because he has a lot of fabric in inventory, his lead times are not being affected. For another company at the beginning of the supply chain, Redwood Classics Apparel in Toronto, inventory wasn’t an issue until just recently. President Kathy Cheng says the company began to see a slow-down in inventory in August. “We bring in yarn by the container and 70 percent of raw material at the factory level is knitted within a 100-mile radius of us,” she says, adding that the company has always maintained a deep inventory of raw materials and stocks certain styles—t-shirts, for example—made up and ready to be pulled for garment dying. The fallout from this spiraling situation has also caused price increases, particularly for raw materials. Cheng says her raw materials costs have gone up about 70 percent to date and every few weeks she gets notifications of price increases. Then there’s the cost of shipping a container of goods (which skyrocketed from $5,000 in March 2021 to $18,500 in August 2021, according to The Freightos Baltic Index), but wages are also on the rise, so suppliers are forced to increase their prices to distributors. “We use a fairly large yarn supplier—they have five plants in the U.S. and, on average, they are 100 people short on labor per plant,” says Cheng. “That’s just one component per supplier in one product category.” “Many suppliers are already running on pretty tight margins and labor is almost always the largest component of costs,” says Strickland. “So, with domestic labor increasing to produce stateside, along with the raw cost of goods increasing, plus the tremendous shipping cost increases, how can suppliers [prices] not go up?” What’s The Solution? “Now Hiring” signs have become a familiar site on small businesses from restaurants to retail, factories and warehouses as companies struggle to find enough workers to resume full shifts, regular hours and daily output. In August, CNBC reported more than 10 million open jobs in the U.S. and over a million more jobs than unemployed people; almost a third of small-business owners have positions that have been open for at least three months. The short-term solution to relieve the promo industry’s woes is to get people back to work—which is easier said than done. Government paycheck assistance combined with COVID-19 infection concerns and changing quality of life priorities have made many people rethink the jobs they held prior to the pandemic. In addition, 2.5 million people retired during the pandemic compared to just about half that number in 2019. In China, factories are having difficulty filling jobs because migrant workers are staying home amid COVID-19 fears, and many young workers are rejecting factory jobs in favor of higher pay in the service industry, The Wall Street Journal reported in August. In general, these trends are indicative of a shrinking labor pool, and the trickle- down effect means fewer people to get products on warehouse shelves. Suppliers are also warehousing stock in larger quantities as much as possible to accommodate the demand and learning to plan ahead. “Stock up on inventory to hold you over for a couple of months and give yourself plenty of time,” advises Jason Scaduto, executive vice president of Paterson, New Jersey-based LBU, Inc., a manufacturer of custom cut-and- sew products. Many industry practitioners see the current situation changing the industry in numerous and significant ways, particularly extending lead times industry-wide and requiring suppliers to stock more inventory and opening up Tom Clouser, MAS Issac Presburger, CAS Kathy Cheng Jordan Scaduto The Supply Chain Crisis | FEATURE | OCTOBER 2021 | 43