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New surveys of business owners, economists and supply chain managers paint a complicated picture for U.S. small businesses at the end of 2021. While retail giants like Walmart Inc. of Bentonville and Amazon.com Inc. of Seattle use size to their advantage, it’s tough out there for the little guy.
At issue: continued supply chain bottlenecks caused by increased demand and labor shortages. That’s making it difficult for businesses to purchase raw materials, supplies and inventory, and it’s making certain products and services more expensive and harder to come by for consumers.
Every month, Creighton University of Omaha, Nebraska, issues its Mid-America Business Conditions report, which surveys purchasing managers in nine states: Arkansas, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Oklahoma and South Dakota.
The latest report, issued Dec. 1 and covering November, said that about half the supply managers it surveyed expect supply chain disruptions to get worse for the first six months of 2022. Why? The biggest cause is the sheer bottleneck of trucking, air and rail amid a crush of orders. The second-biggest cause: labor shortages. We still can’t find enough workers to get this stuff moving.
The monthly report includes anonymous comments from supply chain managers. One pretty much sums it up: “Inventory is very low and orders are very high. Workforce is very hard to find. Where did all the people go?”
That supply chain backlog is making things more expensive. Eighty-seven percent of the 48 professional economic forecasters surveyed last month by the National Association for Business Economics identified the backlog as a major factor in rising prices. In all, the NABE panel expects consumer prices to rise 6% this quarter compared with a year ago. Last week, the government reported that consumer prices rose 6.8% for the 12 months ending in November — a 39-year high.
On Tuesday, the National Federation of Independent Business reported that small-business owners continue to remain “pessimistic” amid “rampant inflation and supply chain disruptions.” While its Small Business Optimism Index was up slightly in November, the monthly survey of its members found owners struggling to fill open positions, raising worker compensation and prices at record levels, and watching rising materials costs eat away at margins. When it came to reporting lower profits, 32% blamed the rise in the cost of materials, 25% blamed declining sales and 9% cited labor costs.
But some bigger businesses are weathering the storm. Walmart used its power to get imports earlier in the year and pay millions to charter its own vessels, bypassing backups. CEO Doug McMillon told President Joe Biden last month that despite supply chain woes, Walmart inventory levels were up 10% ahead of the holidays. And Meg Ham, president of the Food Lion grocery chain, said it had ample products on the shelves, according to The Wall Street Journal.
That same day, the newspaper reported something many of us missed as we’ve battled the pandemic: In the last two years, Amazon has nearly doubled its fulfillment network, adding more than 450 facilities across the country, betting big “on a logistics empire that aims to deliver items in one day or less, and increasingly to do so without the help of third-party shippers.”
While this supply chain/labor/inflation hydra is a tough monster for any business to tame, it’s clear that some businesses are handling it better than others.
You’re reading the final regular issue of Arkansas Business of 2021. Next week, subscribers will receive the Book of Lists, our freshly updated compilation of selected lists from the previous year. On Jan. 3, the Executive Q&A issue, containing some of our favorite conversations with business, nonprofit and political leaders from 2021, will land in mailboxes. Our next regular issue will return on Jan. 10.
While not as dire as 2020, this year has nevertheless been challenging as businesses navigate a post-pandemic world of worker shortages, rising costs, supply chain disruptions and vaccine politics. As always, we hope that Arkansas Business has been helpful to you in some way — by reporting important news you can’t get anywhere else, sharing new ideas or introducing you to key people — to make a meaningful difference in how you do business.
We appreciate you for reading and subscribing. Have a happy and safe holiday, and we’ll see you in 2022.
