From fire engines to snow throwers, Wisconsin companies such as Harley-Davidson and Oshkosh face 'daily battle' against shortages
Fyxation Bicycle Company, of Milwaukee, has been waiting since July for 700 bikes to arrive from Asia.
As summer slipped away, company co-founder Ben Ginster memorized the route the order has taken: from a factory in China, through South Korea, across the Pacific to a port in Long Beach, California; to a rail yard in Joliet, Illinois.
There, only about 120 miles from Milwaukee, the bikes have been stuck for nearly a month because of a shortage of delivery trucks and drivers.
“We truly have no idea when we’re going to get this product,” Ginster said, and because of rail yard policies, he can't pick up the bikes himself.
Ginster is far from alone in his predicament. A historic level of supply chain disruptions, triggered by the spread of COVID-19 and felt in nearly every industry, has left businesses and consumers waiting for products that previously would have been delivered in days or weeks rather than months or even a year.
"Everybody I talk to, and I talk to a lot of people, says this is the most challenging operational environment they've ever worked in," said Timothy Fiore, chairman of the Institute for Supply Management's manufacturing business survey committee, that’s widely recognized as an economic barometer.
The shortages have been fueled by a surge in consumer demand for everything from bicycles to building materials. They've been felt through the entire supply chain starting with essentials such as metal, plastics, and chemicals.
"We're in the middle of a triple play: increasing shortages, extended order lead times, and ever rising prices. That's not unusual by itself, but the fact that it's happening everywhere is very unusual," Fiore said.
The September business survey showed that companies struggled to fill jobs as their workers left for higher-paying positions elsewhere, and retirements took place at a faster clip than before the pandemic.
"We are still amazed by the labor market. We used to have 100 applicants for an opening. We are now seeing about 10, and often the applicant doesn't show up for the interview," the survey quoted an unnamed company in the paper industry as saying.
A mountain of new orders and a restocking of inventories could keep manufacturers busy well into 2022, provided they can overcome material and labor shortages and widespread transportation bottlenecks.
Ginster said he's ordering as many bicycles as he can, knowing they will eventually arrive.
"There's not much else you can do," he said.
More:How Wisconsin retail companies are responding to global supply chain challenges
Shortages could last into 2023
Demand for consumer products, fueled by families not spending as much on travel during the pandemic, remained high in September for the 15th consecutive month, the ISM survey indicated in its "new orders" index.
Manufacturers struggled to keep up in multiple areas of the economy including orders for commercial and industrial equipment.
Jane Dauffenbach, president of D&D Products in North Prairie, said it could take up to a year to get certain engines used in aquatic weed harvesters her company manufactures. Shortages of items such as pumps, valves, springs, even paint, can hold up production of the custom-built machines.
"There's no playbook for this," Dauffenbach said. "We don't have a roadmap that says 'here's what you do' in these circumstances."
But the orders keep coming anyway.
"It's nice not to be worrying about that, but now it's, 'how in the world are we going to get all this out?' That's the irony," Dauffenbach said.
Shortages of raw materials and components will likely persist well into next year, and in some cases could last much longer.
"In modern history, we have not experienced a disruption on this scale before," said Marco Bastl, associate professor of supply chain management at Marquette University.
Is there a risk to the overall economy?
"I am starting to have some concern about that now because you can only be constrained for so long until you kind of run out of gas," Fiore said.
Ariens: Economy is choked up
Dan Ariens, president and CEO of Ariens Co. a Brillion-based manufacturer of snow throwers and other outdoor power equipment, said he believes the problems are more serious than policy makers at the Federal Reserve realize.
"I have never seen the U.S. economy choked up as bad as it is right now," Ariens said.
"We are fighting a daily battle for every little component you can imagine," he said. "Every day brings a new challenge or problem. You can't find truck drivers. You can't get shipping containers from California, Chicago, or the East Coast."
Still, as consumers have focused on projects at home, including their lawn and garden, the company has been having a banner year in sales.
"We have an order board that carries us well into the end of 2023," Ariens said.
His company uses local suppliers as much as possible, but some of those businesses are struggling to find raw materials and parts.
"We have one small supplier that's hanging on by a thread," Ariens said.
Oshkosh Corp., one of the nation's largest manufacturers of military vehicles, fire trucks, and material handling equipment used in the construction industry, said supply chain disruptions had about a $100 million impact on sales in the three-month period that ended June 30th.
“The supply chain was definitely the headline for us...as the markets have rebounded really sharply,” John Pfeifer, president and CEO said in a call with analysts.
“Suppliers are really facing challenges in hiring employees across industries. Shipping itself has been a major challenge,” Pfeifer said.
Oshkosh Corp. had to temporarily shut down assembly lines a couple of times as a result of supply chain issues.
“We expect that this will subside,” Pfeifer said. “As we get into 2022, we believe we’ll start to see much more normalization.”
Friday, the company warned that supply chain disruptions will lower its revenue and profit for the recent quarter that ended Sept. 30. It now expects earnings in a range of $1.10 to $1.15 per share, considerably lower than analysts’ estimates.
“The unavailability of parts has impacted the company’s ability to produce and ship units,” Oshkosh said in a statement.
The company said it implemented price increases, in its non-defense business, over the past six to nine months in an effort to absorb higher raw material and freight costs.
“However, due to our backlogs, we do not believe this price catch-up will occur until the end of the second quarter of calendar-year 2022,” Pfeifer said in a statement.
Oct. 28, Oshkosh Corp. will release its numbers for the quarter.
In July, Harley-Davidson Inc. shares tumbled when the company warned of supply chain bottlenecks and tight motorcycle inventories, even as it reported a strong second quarter.
Harley and many other publicly traded companies will report quarterly earnings this month.
"I expect we are going to hear a lot about supply chain issues," said analyst Brian Yarbrough with Edward Jones Co.
Manufacturers like Harley have lengthy, complex supply chains with thousands of vendors in many countries.
"I think some companies are better positioned than others to weather the storm, but I don't know of any that are immune to it," Yarbrough said.
Shop for Christmas early
Generac, a Waukesha-based manufacturer of portable generators, has seen its sales soar from hurricanes and other weather disruptions. It has placed orders for electronics to fulfill product demand through the end of 2022.
“Doesn’t mean we’re getting that all at once. It just means we tried to secure our spot in line,” said Chief Operations Officer Tom Pettit.
In the past, some items that may have taken six to eight weeks to arrive at a Generac plant could now take upwards of nearly a year.
“Global freight has become less reliable,” Pettit said.
“Buy your Christmas presents early. There’s going to be a lot of disruption of inbound holiday goods,” he said.
An already severe shortage of computer chips used in cars and trucks was worsened by another surge in COVID-19 cases that shut down production in Asia. Tens of thousands of new vehicles have been parked in holding areas awaiting chips before they can be delivered to dealerships. Consumers have faced limited choices in buying a new vehicle, and prices have soared.
The chips are tiny transistors, made from silicon, that allow computers, smart phones, appliances and other electronics to operate. Cars and trucks use them in a variety of electronic systems and sensors. The shortage could result in about 1.3 million fewer vehicles being made in the U.S. this year, according to the Alliance for Auto Innovation, an industry trade group.
Product shortages have been felt in building materials as well. The waiting time for house windows, which used to be about three weeks, is now more than five months -- if they arrive at all, said Joel Fleischman, owner of Drexel Building Supply in Campbellsport.
"The struggle is definitely real. Back orders on top of shortages compound the issues," Fleischman said.
Manufacturers are running at full steam if they have enough materials and labor. But the frenzied pace comes at a cost as machines break down, people become worn out from working double shifts, and productivity suffers.
It's not sustainable, said Doug Fisher, who recently retired as an assistant professor of supply chain management at Marquette.
"The dilemma to me is how do you stop this thing? Either you build enough (factory) capacity so it levels out, or demand has to go all to heck," Fisher said.
The consumer side of the equation has been strong for quite a while, said economist Cliff Waldman with New World Economics in Arlington, Virginia.
"The problem has been extraordinary difficulties in the supply chains. It's been a generation since we thought about supply as a problem," Waldman said.
It could have been a banner year
The shortages have hurt small businesses that otherwise would be booming.
Tim Doberstein, who owns Spellman's Marina in Oshkosh, said he's been on a 54-week waiting list for a 300-horsepower Mercury Marine outboard engine. For most of the summer, he didn't even have a boat on his showroom floor as customer demand far outstripped the supply.
"I could have had a bang-up year if I could have gotten the products," Doberstein said.
Marine manufacturers, facing supply constraints, have limited the number of boats and engines that dealerships will receive in 2022. And there's no guarantee that products already ordered will arrive next spring.
Doberstein said he's lost sales because the price went up so much the buyers backed out of the deal.
"I have never seen anything close to this before," he said.
The crisis has dogged the recreational boating industry that's otherwise thrived during the pandemic. RV, snowmobile and all-terrain-vehicle manufacturers have felt the shortages as well, with products backordered for months.
"It's everything, from electronic components to windshields and rubber hoses. That would be a fair assessment," said Charles Plueddeman, a writer for Boating Magazine who lives in Oshkosh.
System slowly unclogging
Slowly, as factories reopen in China and Taiwan, bicycle manufacturers are getting more bikes in time for Christmas.
Eric Borgh, from Milwaukee, bought a bike from Fyxation because his girlfriend raved about it and he wanted to support a local company. He ordered Fyxation’s Pixel single-speed model for his daughter, who's a student at Rhode Island School of Design, but it was one of the 700 bikes stuck in Joliet.
“It started off with us loving, supporting local businesses, not to mention their products are tremendous,” Borgh said. “And two months later, yeah, my daughter still doesn’t have a bike.”
He's been patient with Fyxation.
“I empathize with everything they’re saying,” he said. “I can only imagine the frustration of having the actual product that they’re trying to deliver to customers and having no way of getting it to them. It’s just kind of a bad situation all the way around.”
His patience paid off when Fyxation upgraded his order to a bike which normally would have cost roughly $100 more, at no additional charge.
“I was a little hesitant at first," Borgh said, because the company was already being punished by shipping delays.
“It was an incredibly generous offer from them," he said.