Global Supply Chain
As we move into 2022 it’s helpful to reflect on the past year to get an understanding of where we’re going and what has changed. 2021 brought many challenges in the business world, including global supply chain issues caused by the ongoing pandemic. We have seen labor and product shortages, price hikes, and shipping delays. All these issues have impacted businesses everywhere. We sought out to understand what is going on and what is to come to provide some insight within our business.
Our Supply Chain
City has a unique supply chain that can be simplified by the image above.
Raw materials like cotton, rubber, chemicals, and other materials are obtained by manufacturers and transformed into a useable product like garments, linen, gloves, and facility products. Then at City we procure items from manufacturers and use our delivery system to distribute those products to our customers. And because we’re a rental service we take back and launder garments and linens from our customers creating a circular supply chain.
Understanding the supply chain is important that way we can see how changes will impact each process. Looking at the chart above we can get the idea that breaks in the supply chain cause a ripple effect across all channels.
Price Analysis
Important commodities in our industry have suffered price increases. Cotton saw a 90% price increase from September 2020 to November 2021. And products like gloves with nitrile latex have seen increases by 70% in costs to produce (theedgemarkets.com). City analyzed the price adjustments made to products we receive from our suppliers and those changes are documented below.
Looking at the graph above we can see that prices from our manufacturers are on the rise. All products we receive have seen at least one form of price adjustment in the past year. The past six months have seen the most significant price increases. We’ve also seen our cost of labor increase by 29% in the past year due to trying to meet market demand and fight the labor shortages. Overall, we’ve seen our products price increase on average of 30% over the course of the year. All of these changes can be related to supply chain problems that are occurring at the global level.
Other price increases that have affected our business include gasoline. Gasoline has started increasing by 20-40% in march of 2021 (NY Times). That increase drives up our logistics costs as we rely on our trucks to get products out to our customers.
Future Business Practice
The most important thing we can do right now is be willing to accept changes and adapt and overcome. Maintaining inventory and finding worthwhile substitutes can help offset the harsher impacts of the supply chain issues. At City we’re trying to be prepared for anything that is thrown our way. We hope that this can provide some clarity on what we’re experiencing in our industry and help prepare everyone for a successful 2022!
