With cycling’s popularity surging during the COVID-19 pandemic, demand has been sky high at Providence-based outerwear company Cleverhood LLC.
That’s because the company designs and produces stylish rain capes that are popular among bike riders, particularly in places such as New York City and in Europe. But while Cleverhood founder and owner Susan Mocarski says demand has swung in her favor, it’s the supply side of the economic equation that’s causing her big headaches right now.
Nearly every step of getting rain capes made and into the hands of customers has been slowed by kinks in Cleverhood’s supply chain – a chain that winds its way through China and Vietnam and then halfway around the world to the U.S. The delays and additional costs are preventing Cleverhood from capitalizing on its popularity.
“Something we could produce in three months maybe with a lot of hustle [before the pandemic] is now looking like a year,” Mocarski said recently from her downtown office. “And then on top of that, all of the pricing has gone up two-fold.”
Plenty of others feel her pain. While many companies are seeing customers clamoring for their products and services, delayed shipments and skyrocketing expenses for goods have hampered the ability of companies to keep up with that demand, particularly during the busy holiday shopping season.
Few sectors have been left unaffected. Supply chain disruptions have hit businesses from big manufacturers and retailers to independent shops and restaurants. Even service industries such as lodging have had issues. In one case, the furniture for the new 175-room Aloft Providence Hotel was trapped at a port in California as the grand opening date loomed, the hotel manager told a gathering of hospitality leaders at Johnson & Wales University in October. The furniture eventually arrived and Aloft Providence opened earlier this month.
Such supply problems cause ripple effects.
For example, automakers that had throttled back production at the start of the pandemic are struggling to churn out cars because of shortages in components such as computer chips. Fewer new cars mean declining activity at places such as Quonset Point in North Kingstown, one of the largest car ports on the East Coast.
Meanwhile, the lack of new cars on dealership lots has sent prices soaring, forcing many customers to turn to the used market, where reasonable prices have become harder to find.
The supply chain challenges mean consumers are seeing higher prices for a variety of goods.
At Cleverhood, shipping troubles have been compounded by higher tariffs and duties adding 60% to 100% to an item’s original price for customers overseas, where about 40% of the company’s business comes from.
For one popular item listed at $99, a buyer in France would need to pay nearly double that to cover duties and tariffs, according to Mocarski.
“I’m grateful that people are still willing to pay that,” she said, “but it clearly has to hurt our [sales].”
[caption id="attachment_391249" align="aligncenter" width="1024"]
BOLD MOVE: Susan Mocarski, owner of outerwear company Cleverhood LLC in Providence, says the company took a big risk early on in the COVID-19 pandemic when it decided to buy a bulk load of inventory, but the move is now paying off as it has allowed the business to keep up with demand for its rain capes despite disruptions in the supply chain. / PBN PHTO/ELIZABETH GRAHAM[/caption]
‘GOT COMPLACENT’
The supply chain problems can be blamed in part on a shift in consumer behavior that was touched off by the COVID-19 pandemic in March 2020, according to Michael Gravier, a marketing professor at Bryant University.
Most notably, people stopped going out to shop and eat and instead turned to their smartphones and computers to place orders, which put increased pressure on the shipping and delivery services.
At the same time, “many governments around the world did a good job with putting extra money into people’s pockets, supporting industries to keep employment up and investing in infrastructure,” Gravier said. As lockdown measures eased globally, people with the means to spend more were eager to do so.
“We have all this extra money, and we had months, over a year of demand that wasn’t satisfied,” he said. “A lot of middle America and above has pent-up savings. They’re spending them, and our supply chain systems were pretty much optimized for the world before the explosion of demand.”
A shortage in shipping containers – simple but essential components that allow goods to be easily transferred between ships, trains and trucks – is playing a major role in supply disruptions, Gravier said.
Beginning in the 1950s, modifications to shipping containers vastly improved the shipping process, allowing workers to move large amounts of goods more cheaply and efficiently. Over the decades, companies became overly reliant on this ease in shipments from the most inexpensive sources they could find, Gravier said.
“Businesses got complacent about worrying about the risks they assumed there,” he said. “They assumed there would always be a steady, safe demand that was always growing and that they could plan for.”
But most businesses didn’t factor in pandemic-related spikes in demand, and they are now overwhelmed. Not only are there not enough shipping containers, but the escalating need for more has also driven up prices. A $3,000 order of containers from China now costs $9,000 or more, Gravier said.
Meanwhile, this surge in shipments is overwhelming places where goods are transported, Gravier said. While ports are most impacted, warehouses are also feeling the strain, and a shortage of truck drivers further slows deliveries.
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THINKING AHEAD: Scott McCullough, co-owner of Symposium Books Inc. in Providence, says he placed bigger orders for popular books early this holiday shopping season as a way to counteract shipping slowdowns. / PBN PHOTO/ELIZABETH GRAHAM[/caption]
DIFFICULT DECISIONS
For restaurants, supply shortages are driving up expenses on everything from flour to takeout boxes – if they can secure these orders at all.
Sarah Bratko, senior vice president of advocacy and general counsel at the Rhode Island Hospitality Association, has heard it all lately. One restaurant is considering measures such as selling chicken at market price as if it were seafood. Another is expecting to spend an additional $40,000 on French fries this year.
“It’s food, it’s materials, it’s liquor, and it’s sometimes all three at a time,” she said.
And problem areas shift without warning. One week, restaurants are hard-pressed to find pickles. The next week, it’s cups. And when these items are eventually tracked down, they often come with a hefty price tag.
For Ronald Koller, owner and president of The Malted Barley Brewing Co. in downtown Providence, the situation is beyond frustrating.
“Every week there’s new surprises,” Koller said. “There was a period where we literally couldn’t find napkins anywhere for two or three weeks.”
Meanwhile, even basic but essential staples such as flour can add to financial strain, Koller said. A 50-pound order used to cost him $14. Now it’s $22.
The growing expenses come at a time when business is booming, despite new variants of COVID-19 raising public health concerns. The event schedule at the craft beer pub is booked through December 2022.
Still, that popularity hasn’t allowed The Malted Barley to avoid the impact of supply chain shortages. The restaurant has made menu changes to work around unavailable foods, Koller said. Sometimes, the financial decisions are more difficult.
“You have to think, do I raise my prices, reduce the portion size?” Koller said. “How do I make it work?”
In hospitality-dependent Newport, the pandemic has been “the hit that keeps on coming,” said Erin Donovan-Boyle, executive director of the Greater Newport Chamber of Commerce. There have been capacity limits, labor shortages and now supply chain problems.
About 40% of local businesses reported significant challenges caused by a lack of supplies, according to a recent Chamber survey. Many businesses have developed strategies to lessen their troubles.
The owners of the French Confection bakery in Middletown have resorted to ordering the same materials from several suppliers in the hopes that at least one vendor can deliver on time. The downside: the bakery is short on some products and overstocked on others. It’s all costly for the business, which pays for its orders in cash.
“There are times we can’t get the ingredients we need, but then there are other times we order it and one person doesn’t have it, the next supplier doesn’t have it, we order it again from the third supplier, and then the other ones come through,” said owner Karen Mauprivez.
While the French Confection had mostly dodged passing the costs to their customers, the bakery had to draw the line at the Yule logs.
The traditional Christmas cakes require specialized, long boxes for packing, which have gone up about $5 a box. Mauprivez was forced to respond with an 8% price hike.
The boxes have caused issues beyond pricing. The bakery ordered them in August and was told last month to expect delays. Then a few weeks later, there was more bad news: the supplier only had the cardboard boxes in the wrong sizes. With no other option, the French Confection has been packing the cakes into awkwardly oversized boxes.
The holiday shopping season has been a mixed blessing for retailers. Consumers are still in the buying spirit, but many store owners are struggling to keep shelves stocked.
At Symposium Books Inc. in Providence, shipments have been “a little choppy, but not a killer,” said owner Scott McCullough. For most book orders, shipments that would normally arrive in one to three days now take about a week.
That hasn’t caused significant issues, McCullough said, but he’s still on alert for potential troubles because the situation has been so unpredictable.
During a typical holiday season, Symposium would stock five to 15 copies of certain popular titles. This year, McCullough nearly doubled those numbers so he could deal with unexpected rushes without having to place orders that would likely not be fulfilled until after Christmas.
“I’d say it will get a little more complicated as the holiday season gets going,” he said earlier this month.
‘PUSHED BACK’
Long before goods are hitting the shelves, the supply chain shockwaves are being felt in factories, including those in Rhode Island.
Many manufacturers are struggling to balance supply levels with fluctuating demand. As the troubles drag on, some are redesigning their supply chain by broadening their supplier base and adding suppliers closer to home.
In fact, Michael Woody says what’s happening now could benefit the American manufacturing sector in the long run – giving more momentum to the “reshoring” movement that’s been underway for years.
Woody, CEO of Trans-Tex LLC, a Cranston company that produces printed narrow fabrics, says he’s already on the hunt for suppliers nearby and also getting calls for prospective customers doing the same.
“[The U.S. will] never get 100% of [the overseas manufacturing] back, but if we could get 10% of it back, that would be a huge amount of business,” he said.
For now, however, the supply chain problems are a huge hassle.
Woody says the company has plenty of fabric to make lanyards, but it is struggling to find metal clips that are attached to the end of the lanyards. Those clips come from China but are unavailable right now.
If Trans-Tex received an order for 500,000 lanyards, it would have to turn it down. “We don’t inventory that number of parts,” Woody said.
David M. Chenevert, executive director of the Rhode Island Manufacturers Association, says some companies have also been slowed by equipment failures because materials needed for repairs are scarce.
In those scenarios, “we’re not going to be able to get certain products to our customers,” Chenevert said. “So it’s going to be delayed to a consumer down the road. Everything is pushed back.”
The consequence of reduced production is playing out on the docks at Quonset Point. Due to the limitations facing carmakers, shipments have dropped dramatically at the Port of Davisville, Rhode Island’s largest port.
Automobile shipments from foreign companies make up about 95% of the imports at Davisville, but they’ve slowed dramatically since the start of the pandemic because carmakers at first cut production because they were unsure of the consumer appetite to make big-ticket purchases in a crisis.
When those companies realized that Americans were in the mood to buy, other factors such as computer chip shortages made it difficult to ramp up quickly.
Consumers in need of a new car have paid the prices, and so have companies that rely on a steady stream of incoming vehicles, such as North Kingstown-based importer North Atlantic Distribution Inc., which unloads the cars, then outfits them with upgrades before sending them to dealerships.
The port’s inbound traffic decreased by more than 25% from 2019 to 2020, according to Steven J. King, general manager of Quonset Development Corp., which oversees the port.
As of November, the port was on track for an even sharper drop-off in 2021: NORAD unloaded 338,447 cars at Davisville in 2019, 247,324 cars in 2020, and 143,600 through September of this year.
THE ROAD AHEAD
When will the situation return to normal?
Many businesses are buckling down for what they anticipate will be persistent problems.
Gravier expects that government efforts, such as the White House’s Supply Chain Disruptions Task Force, will help to create long-term change in supply chain management, as will cybersecurity improvements. Companies are already looking to reduce the number of countries they get their components from, he said.
For now, however, Gravier anticipates congestion at ports will continue. Shipping container shortages, a lack of workers and even inflation won’t make things easier at least until late next spring.
Afterward, knots in the supply chain “will start to unravel,” Gravier said, “but then I think it will sort of linger on through next fall or so.”
While Gravier doesn’t see immediate relief on the horizon, he expects that in a year’s time, companies and world governments will have come up with more fixes to mitigate the severity of shortages and disruptions in the supply chain.
In the meantime, Mocarski at Cleverhood continues to feel her way through the crisis.
The company sources materials from China and has them delivered to a factory in Vietnam where the rain capes are made. What was a weekslong process now takes months, not including the additional months it takes to ship the product to the U.S. And the rising costs have been a burden, too.
Cleverhood made a decision early in the pandemic that turned out to be the right one. The company committed to buying a bulk load of inventory – a gamble that paid off because it allowed Cleverhood to better keep up with demand.
That said, Mocarski admits now that the big financial commitment in a time of crisis and uncertainty was “terrifying.”
Jacquelyn Voghel is a PBN staff writer. Contact her at Voghel@PBN.com.
