Kent businesses highlight supply chain struggle
SMYRNA — A few weeks ago, a crop duster flew over Willis Chevrolet Buick off U.S. Route 13. Shortly after, president Bill Willis got a phone call from the pilot that asked if he was going out of business.
“We don’t have any new cars. Half the ones he saw on the lot were used cars. It’s been almost two years we’ve been having low inventory,” Bill Willis told the Delaware Business Times. “There’s been a lot of crazy over the years [in car sales] but right now I think it’s a head game. We had to reassure our associates we’d take care of them through this, and we did. Now we have to reassure our clients.”
Before the recent supply chain issues, there would be 75 pre-owned cars and about 50 new cars on the Willis Chevrolet Buick lot. Today, there are about 40 pre-owned cars and about five new cars on the lot.
Supply chain issues are no secret to many of Delaware’s small business owners, and on Wednesday U.S. Rep. Lisa Blunt Rochester (D-Del.) spoke with some of them about how delays in overseas factories producing enough supply to meet the high consumer demand has been impacting the bottom line.
Rochester is on the team of representatives that are conferencing with the Senate to reconcile two bills, including the America COMPETES Act, to provide solutions for supply chain issues. The proposed America COMPETES Act aims to increase U.S. production of semiconductor chips, strengthen the supply chain to make more goods in America, and invest in scientific research and new technologies.
However, the Senate has passed the United States Innovation and Competition Act (USICA). A key difference between the two measures is that America COMPETES would allocate $45 billion in the next five fiscal years for a supply chain resilience program, by offering grants and loans to companies who can manufacture goods for industrial or commercial equipment in the United States.
“Small businesses are the backbone of this country, and many of them started before the COVID-19 pandemic, made it through with creativity, which is really the American story,” Rochester said during a Wednesday tour of Kent County businesses. “It’s important for us to come up with bipartisan provisions to America COMPETES so we don’t have to worry about supply chain disruptions in the future. Our goal is to look for gaps and make sure our businesses are resilient, and incentivize companies to build here or stay here. If we can make it in America, we should make it in America.”
For example, semiconductor chips are a major hold up for new cars. There’s about 20 to 30 needed per gas engine car, as the automotive industry is getting more high-tech. Semiconductor chips are used in blindspot detection systems, back-up cameras, collision sensors, radio touch screens, anti-lock brake systems, airbags and seat tensioners as well.
Semiconductor sales in cars are valued at $41 billion, and revenue grew about 30% in 2021 for that sector alone, according to a report from McKinsey & Company. But the lead times for chip production can exceed roughly four months.
The shortage is not just limited to semiconductor chips, Willis Chevrolet Buick Dealer Operator Isaac Willis said. The dealership has had five motors on order from General Motors since January, exacerbating the issues in repairing clients cars — including one police car from a nearby town.
The dealership typically has $225,000 worth of inventory repair parts stocked. Today, there’s about $150,000 stocked. Some shelves are still sitting empty in the stock room.
“We’re seeing the trickle down in the collision center. If your car’s not drivable, insurance will pay 30 days for a rental car. But we can’t get the rental cars right now, because of the same issues,” Isaac Willis said. “When your car’s down and we can’t get close to fix it, it’s going to cause issues with getting to work. It’s just a snowball going down the hill.”
Meanwhile, distilleries like the Painted Stave are facing the same problem in a more unique form: bottle shortages. The Smyrna distillery bottled spirits in bottles slightly different from its original packaging because the two manufacturers it used to contract with opened factories in India and China.
“Oftentimes, you try to negotiate with manufacturers to find the best value. But when you’re a big producer, you have contracts and enough volume so bottle manufacturers will bend over backward for you. Small businesses like us, we ended in a spt where our glass availability just
evaporated,” Painted Stave co-owner Mike Rassumen said.
Glass container shipping costs were raised to $20,000, which meant U.S. suppliers were less likely to import them. For Painted Stave, that meant bottle costs were raised between 30% and 80%. Lead time on bottles can be between eight to 12 months — last year, it was predicted to be a three- to four-month lead time.
“We’ve had to buy from new suppliers from all over the country, which means increased shipping costs. It can be anything from someone who happens to have six pallets of bottles, and we have to jump on that,” Rassumen said. “Fortunately, our product is pretty stable, and it can sit in a tank. But there’s times where we can’t sell bourbon because we don’t have the bottles available to do it — and we can’t take used ones we just sold to our customers.”
Securing boxes is also becoming a challenge, as not many suppliers will make six-bottle boxes these days. In the past, Painted Stave may have bought a pallet of boxes for $5,000 minimum. Today, order minimums are at $70,000, he added.
Rochester has been touring Delaware over the last few months, and has heard from constituents concerned about the skyrocketing price of food, and even town officials who are waiting six months on a single screw to complete a project at a sewer treatment plant. High schools in Delaware are also struggling to buy chicken nuggets, a staple on the lunch menu.
“The challenge is when there’s things you just can’t stop buying. It’s not just the luxuries, it’s the everyday needs and people everywhere are feeling the pinch,” the congresswoman said. “The challenging part [about negotiations] is there’s a lot of people at the table. But we all understand the sense of urgency — and what we don’t want to happen is for politics to destroy something that’s good for the American people.”
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