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A Broken Supply Chain Isn’t A Problem For The Logistics Industry. It’s A Moneymaking Opportunity

Big companies have always had the advantage of scale, said Senthil Veeraraghavan, a professor of operations, information and decisions at the University of Pennsylvania’s Wharton business school. But now that capacity across the supply chain is stretched to the limit, “the first guys to get squeezed are people who put in small orders.”

The last 20 years have seen an explosion of online direct-to-consumer brands and small e-commerce businesses, such as Ross’ snow globe company, that rely on imports, while the back end of the supply chain has tended toward consolidation. “These aren’t centralized systems, there’s thousands of companies with millions of people doing their own things,” Veeraraghavan said, and it worked to a point, with small importers placing orders more than six months out to get deliveries in time for the holidays. “Then it all collapsed at the same time.”

“Year after year we talk about how a little bit of variation in the supply chain propagates all over the spectrum,” Veeraraghavan said, “and unlike financial volatility, where stocks move up and down almost instantaneously, this is like a ripple in molasses.”

As the demand for imports ebbs in early 2022, freight prices are likely to continue to fall. Companies that tried to expand to meet demand will find themselves with excess capacity on their hands and suffer the financial consequences. The companies that embraced the crunch, delivered goods late and charged high prices can settle into a soft landing at pre-crisis rates.

That’s little solace to Ross. She spent 20 years building up her snow globe company from a hobby to a $2.5-million-a-year business, making custom products for clients such as Yves St. Laurent and the Museum of Modern Art. She spent the last three months anxiously watching the bulk of her orders — and it was a strong year for orders — sit stranded a mile offshore.

“We’ll be here next year,” she said, hoping to break even on her inventory over the course of 2022. “But it’s a smack in the face.”

Distributed by Tribune Content Agency, LLC.

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