AAA Distributor, LLC is a local, Philadelphia home improvement store distributing kitchen cabinetry, shower doors, vanities, and flooring products from its 120,000 square foot warehouse in Philadelphia. Unfortunately, many retailers are faced with a new issue, a broken supply chain and no access to product. With increased tariffs, COVID shutdowns, and government mandates some retailers have reduced their operations. This is not the case for AAA Distributor – they have products in-stock and ready to ship.
The demand for home improvement projects is everywhere, but the products are simply not available in most stores and supply houses. Many manufacturers are discontinuing less popular products. Ships wait off the California coast, unable to dock to unload their cargo. Truck drivers are overwhelmed, often confronting long wait times. Rail yards are clogged, with trains backed up for miles outside key ports and distribution facilities.
The commercial supply chain that each year brings over $1 trillion worth of consumer goods from Asia to the United States is clogged. No one knows how to overcome this supply chain issue. The unfortunate result is a rapid increase to prices across all industries and product categories along with shortages of products.
The decision to place precautionary orders to avoid running out of goods was very difficult to make during the COVID crisis” said one of the executives of AAA Distributor. “Later, we struggled to find containers to haul our goods.
Luckily, the pre-orders paid off. AAA Distributor started to receive containers in early 2021 and accumulated over two-times (2x) the inventory that were brought to the United States the prior year. This in-stock inventory arrived just in time for the increased demand for the Summer home improvement season.
"At your typical kitchen and bath store, It is not unusual to wait for kitchen cabinets or vanities for 6 to 8 weeks, some times longer. Before 2020 if you told your customer that it will take over 6 weeks to get kitchen cabinets, they would have walked out the door of our showroom. In this current supply chain crisis, customers are excited just to be able to order products and want to leave a deposit to lock in the price" said one of the sales managers. This is not the case with AAA Distributor. With its 120,000 square foot warehouse, AAA Distributor is able to ship all the kitchen and bath products within 48 hours. AAA Distributor has the product in-stock. The company also launched a new website www.aaadistributor.com where all the products could be purchased and shipped directly to your home or your job site.
What caused the supply chain breakdown?
The COVID outbreak was just one of the first flakes in this complex snowball impacting the supply chain crisis. At the beginning, many factories were closed, and thousands of containers were stranded at ports. The pandemic has exacerbated staffing limitations, as some workers get sick and others are told to quarantine. Worker shortages have slowed down operations at warehouses, distribution centers, and freight hauling.
In addition to the COVID restrictions shuttering factories and preventing supplies of raw materials, today the main issue is with what used to be low-cost and readily available - shipping containers. Two years ago, a container cost less than $3,500 to transport goods from Asia to the U.S. Today the service fetches as much as $27,000. It is no longer about the price but about just having the ability to book a container.
The surging container rates have impacted higher charter rates for container vessels, which has forced shipping firms to prioritize service on the most lucrative routes. While prices increase, most shipping companies are posting record profits.
When will container prices go down?
This shipping mess has led to a cascade of delays and increased prices. All of these problems compound one another. But, just like any other industry, as it becomes increasingly profitable, new competitors will step in to take a piece of the pie.
Costco, Amazon, UPS, and others have leased several thousand shipping containers for use on cargo ships that they’ve chartered directly to ensure their own supply chain availability. AAA Distributor too has secured its supply lines to maintain its high inventory levels and ensure in-stock kitchen and bath products are available. Quietly and below the radar, Amazon has been ramping up its ocean shipping service. The containers, under the name Amazon Logistics or its wholly-owned subsidiary Beijing Century Joyo Courier Service Co., are sent from ports in China to either the Port of Long Beach in California or the Port of Seattle in Washington state and from there to Amazon distribution centers.
It is not yet clear whether the shipping container prices will drop in 2021, but at least we are starting to see prices stop increasing. With U.S. holiday shopping, the demand will not slow down. At the earliest, we may only start to feel the prices decline in 2022.
It’s a good thing AAA Distributor ordered and received all its inventory before this crisis and pass along with low-shipping rate, in-stock inventory as savings to customers!
What do you think will happen with container shipping prices in Spring of 2022? Leave us a comment on our Facebook page with your thoughts on this topic.