Crain's Detroit Business: Hakan Yildiz on pandemic-related supply chain issues

The COVID-19 pandemic bore a warped economy. Federal stimulus checks and Americans stuck at home led to peak do-it-yourself projects and home repairs. Meanwhile, lumber mills remained offline for nearly two months in April and May. Lumber shortages and record-high prices were the result. Revenue in North America fell 1.6 percent in the quarter due to coronavirus-related supply constraints, despite a growing backlog. All of the COVID-19-related holdups demonstrate the precariousness of the global supply chain, said Hakan Yildiz, associate professor of global supply chain management at Wayne State University. "Most companies are not vertically integrated and source their components and parts from all over the world," Yildiz said. "There are many tiers to supply chains and specific lead times for how long it takes for all the necessary raw materials and components of a product to be assembled into a final product and get transported and delivered. In normal times, everything runs smoothly and it's all synchronized. When parts or all of the supply chain gets interrupted, especially at different times as the pandemic hit different parts of the world, supply gets disrupted." Logistics shipping capacity is expected to make the issue of shortages worse, at least in the near term, Yildiz said, as truckers become mercenaries of the road as demand continues to soar. Primary tender acceptance, the rate at which primary carriers accept previously bid contracts, is down in the U.S. to 78 percent last month, down from more than 90 percent in August, according to a recent report by Holland-based logistics software firm BluJay Solutions Ltd. That means more truckers are choosing more profitable contracts from shippers looking to spend a higher price to get their products to consumers quicker. "There is a trucking capacity tightness right now," Yildiz said. "Truckers are rejecting orders because spot rates are more lucrative."

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