b"Pa.,-based regional employers' group with more than The Supply Chain Challenge370membercompanies(mascpa.org).Withits Businesses Bolster Inventories, Woo Suppliers todiversemembershipinfoodprocessing,defense, Keep Customers Happyfabrication,andmachinerybuilding,Palisins association can be viewed as a proxy for American industry. Companies in just about all sectors have By Phillip M. Perryexperienced pauses and shutdowns. Some have even We thought the supply chain issues that arose in thegone out of business. aftermath of the COVID 19 pandemic would be Labor shortages are one of the most persistent causes resolved by now. No such luck. Businesses are grap- of distribution slowdowns. One banker told me that pling with recurring problems caused by labor short- his four manufacturing customers could each hire 50 ages, a new round of inflation-spurred over-buying,additional workers if enough applicants were to show and shipping disruptions caused by the Russia- up, says Conerly. When a company I work with in Ukraine wear.Faced with robust consumer andPortland was awaiting a shipment of brass from Los commercial demand, companies are beefing up Angeles, it turned out there was no driver for the costly inventories and wooing second level supplierstruck. to help close the gaps when shortages arise.The reasons for labor shortages are varied. Part of Product shortages and delaysand associated pricethe problem is that people are not yet willing to come hikeshave been no strangers to companies inback to work, says Conerly. But the fact is that recent years, thanks to international tariffs. What hadthere were not as many pandemic-related layoffs in been an exercise in efficient materials distribution,manufacturing as in, say, food service. A larger issue though, morphed into a full-scale crisis with theis demographics: Older people are retiring, andarrival of COVD-19 and its effect on labor shortages,younger people don't want to go into dirty, noisy bottlenecked ports, and shuttered production factories. And then you have government cash pay-facilities. The return of a vigorous economy only ments for people who get laid off. And finally, there increased pressure on an already thinly stretched are childcare issues.delivery structure as businesses and consumers accelerated their purchasing. Most recently, theThe labor shortage has caused an increase in arrival of inflation caused businesses to increase theirautomation as a way to produce goods with fewer buying of goods even more, in a move to beef upman hours. In recent months there's been a surge of inventories before anticipated price hikes kicked in.business orders for capital equipment, says Conerly. Finally, in early 2022 the Russia-Ukraine warThe fact that manufacturing production has not created shipping disruptions that fractured vitalreached all-time highs, though, indicates that the new sections of the global supply chain. equipment is not intended to boost capacity. So I think a lot of the business capital spending is All of these forces have come together to create aintended to replace empty positions with machines. challenging environment for businesses looking toThe idea is If I can't hire somebody to assemble this balance the dependable delivery of raw materialsproduct, maybe I can hire a robot to do it. And I with the need to keep inventory at manageablethink that's a good strategy. levels. Everyone in manufacturing and wholesale distribution sems to be dealing with supply chainA decline in the cost of automation has helped fuel disruptions, says Bill Conerly, Principal of his ownthis trend. The cost of labor has gone up while the consulting firm in Lake Oswego, Oregoncost of electronic equipment has gone down, says (conerlyconsulting.com). Many companies are Conerly. Something that did not pencil out a few telling me the problem seems to be getting worse asyears ago may well do so today. pent-up demand creates additional pressures. New strategies Broad effectsCompanies are responding to the supply chainThe supply chain imbroglio has engaged a broadchallenge by doing more with less, running spectrum of industries. For a number of years ourmachinery beyond its prime and collaborating with member companies have been dealing withvendors to predict shipping delays. Such moves disruptions caused by factors such as tariffs andstrike a familiar chord with Palisin at the manufac-higher energy costs, says Tom Palisin, Executiveturers association. The pandemic has reallyDirector of The Manufacturers' Association, a York,(continued on page16)11"