A Shortage of Windshields... and other supply issues
Wait…what?!
It’s true. In this week’s edition of the Russell Report:
- Supply chain issues for windshields
- Economic Update
- Shipping Costs
- Where are the computer chips and why am I paying $250/day to rent a Prius?
- PPP – meh
So my Toyota pick-up has a large crack going across the windshield. Safelite’s website quotes $425 for a windshield for a 2006 Tacoma. Well, that seems pricey. Last one I had done was about $150. So I go to All Star Glass and get a web estimate of $235 (much better). I enter my contact information and get a call back… from Australia. That just irritated me enough to call a Pomona outfit that I had a business card for and Ricardo tells me he can’t get any windshields for Tacomas. It’s at least a two month wait. No wonder Safelite charges $425. I tell this story to highlight the supply chain issues we are having folks. If you are reliant on parts and there is a supplier concentration for you, your vendors, or your customers, or anyone else you do business with you need to explore other options as a back up. There will be more issues to come and of course, just in time for the holidays!
Kiplinger is forecasting a GDP of 7.2% for this year. That’s a big number and in theory your sales should be up 7.2% or greater. If it’s not, you are falling behind or your competitor is getting ahead at your expense. This demand for goods and services is impacting the supply chain – see windshields – and making things that much more expensive. I get asked all the time: how do I make more money? You either increase revenues (raise prices or sell more stuff) or cut expenses, and expenses are not going down. Which leads us to shipping costs.
Trucking rates will soon level off and be flat for the rest of the year, but only after showing a 16% increase over 2020. As long as rates remain high, that means there is a shipping shortage and if there is a shortage of shipping, that means too much demand and not enough supply which equals delays. And delays in the months before the holidays when retailers are stocking up for the end of the year means uncertainty. Throw in Covid shutting down the port of Yantian in China and you have 50 ships with 350,0000 containers waiting to dock. You read that right. A Chinese port is closed due to covid. I thought China had this thing licked!! Well, that’s what China said… This whole thing started in Wuhan in December 2019 and SinoVac (the Chinese vaccine maker) is still trying to get a decent product out. They either didn’t have enough Uighurs to test it on (that’s NOT a joke) or they weren’t able to hack Pfizer’s mainframe.
At the beginning of the pandemic, the rental car companies liquidated their inventories, putting a bunch of used cars on the market depressing the car market. At the same time, consumers bought everything they could think of for their home: TV’s, appliances etc. Now that the pandemic is easing up, we are heading back out on the road and what can’t we find? Rental cars. Odd. That’s because the car rental companies (the ones that are left) can’t build their inventory up fast enough. Why? Because the car manufacturers can’t keep up with demand because there is a shortage of computer chips. Why? Because they all got used up by the TV and appliance manufacturers. So what are the car rental companies doing? They are buying any car at the car auctions with less than 20,000 miles. And that’s why the price of used cars has jumped 16.8% or about $3,900 per car! And here is the result… half of the 0.9% monthly increase in consumer prices for June was driven solely by the increased prices of used cars.
PPP – well, no real news this week. Lenders and the SBA are finally making it through the pipeline and forgiveness packages are moving much smoother. Even the FinTech’s are getting up to speed – miracles will never cease.
