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Supply Chain Woes

Posted by Advocate Debt Relief Team

2 years ago / June 10, 2022

Baby formula, select hygiene products, and more have not been as accessible as they once were. For nearly a year, grocery store shelves have been emptier, and the cost of goods has sharply risen. No one can see a clear end, and many are left wondering what to do.

Before stocking up on food and prepping for the apocalypse, please take a moment to reflect on what triggered the supply chain issues. Given your unique situation, this will help you see a more straightforward path forward.

Supply Chain Defined

Every item we purchase, online or at the store, is part of a supply chain. Before taking possession of an item, it passes many hands and often comes from far-off lands to get here. Defined, supply chains are networks between companies and their suppliers needed to turn raw materials into the products they sell and ship them to their end-user. Global supply chains have been significantly disrupted since the government imposed lockdowns due to the pandemic.

Why the Holdup

A chain of events due to the pandemic created a massive ripple effect. The reactionary government policies that shut down businesses during the pandemic triggered the fallout. Manufacturing and production nearly slowed to a halt as consumers kept purchasing goods. Because many were required to stay home from work, the US government created a stimulus that allowed consumers a certain income level. When buying power remained relatively steady, the high demand with low production of goods made an inflationary economy. As people returned to the workforce, raw materials were backed up, and manufacturers needed weeks or months to restart production. Pre-pandemic levels have still not been reached.

As the ramp-up to pre-pandemic levels resumed, transportation and logistics labor waned. Shipping ports barely kept up with growth before the pandemic. Today, there is a lack of dock workers, truck drivers, and warehouse workers to meet the increased demand. Since last year, the cost of shipping has gone up four times. To give further context, pre-pandemic shipping has risen more than ten times.

Product Ripple Effect

Slow to recover production, high shipping costs, and the backup of raw materials create a ripple effect up and down the supply chain. Take semiconductors, for example. Tech companies had struggled to keep up with demand when workers shifted to working from home. A semiconductor is a silicone-based chip that conducts electricity to meet the needs of specific electronic components. The hardest hit among suppliers were mobile phones, car manufacturing, and even light bulbs. All of them require semiconductors that create a backlog of backorders.

The Shrinkflation Effect

Shrinkflation is when companies slowly shrink the contents of goods while charging the same price. This concept is genuine if you’ve ever bought a bag of chips. How often have you opened the bag and more than half is air? Avid fast-food consumers have noticed the shrinking size of burger patties over the years too. It’s not a new concept but inevitably an emerging one. 

Pre-packaged goods aren’t the only culprit either. Watch for restaurants providing smaller portion sizes for meals. A closer look might notice more ice than usual in drinks alongside eliminating free refills. Be on the lookout for smaller cups or larger sizes that look bigger, but contain the same amount of liquid. There are many ways to get crafty with shrinkflation, and a keen eye can catch these subtitles.

Practical Solutions

Instead of raising Kane at retailers for long back orders or your local fast-food chain for a smaller quarter pounder, a handful of practical solutions will save you a buck. When you’re shopping, look for generic brands. They tend to be the last to downsize their product, and their unit prices don’t shift as much. Also, buy fruits and veggies that are in season for the best deals on produce.

Given the Federal Reserve interest hike in May, borrowing from any lender is more expensive. Although a car purchase isn’t ideal, a lease-end purchase could be perfect. Over a year ago, used cars and trucks increased by nearly 35 percent. Inventory levels are down everywhere, keeping prices high. A lease-end price was set when you began the lease before inflation worsened. An almost new vehicle for a pre-inflation price is golden. Take it!

Become a proactive deal hunter. Actively look for deals on reoccurring items and upcoming expenses. Expected costs like back-to-school clothes, supplies, home improvement projects, and any non-perishables that you can feasibly store, buy them on sale.

Pay down your high interest or variable interest debt. The most significant liability you have in economic downtimes is unsecured debt. As the economy continues to dive, interest rates on these debts will inevitably rise, making it harder to make the minimum payments. Develop a plan to expedite paying off these debts. Although easier said than done, this is likely the most challenging task to complete. Suppose you don’t see a feasible path forward, partner with Advocate Debt Relief. You deserve a win, and we’ll help you achieve it.

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Filed Under: Budgeting