An expansion project at Air Products’ St. Louis, Missouri facility will support customers’ supply chain and create highly skilled jobs.
Air Products said it is increasing its production of hollow fiber membranes for on-site gas generation. The membranes allow for separation of gases for use in industrial settings.
“We’re excited to announce this investment in our production facility that will deliver substantial capacity and efficiency enhancements to support the growing membrane markets. This project will create additional highly skilled job opportunities for the market as well as enable us to better support our customers in this dynamic supply chain environment,” said Nick Sillitto, Air Products’ site manager of the St. Louis facility.
“With this investment, Membrane Solutions is well positioned to support its existing applications as well as emerging technologies, for the next 40 years,” Sillitto said.
The project is driven by customer demand in the biogas and hydrogen recovery applications, as well as customer needs for the use of nitrogen for the aerospace industry and dehydration products, Air Products said.
The capacity improvement effort will impact product lines such as the PRISM GreenDry membrane dryer and the PRISM GreenSep membrane separator, which provide customers in the biogas industry with dehydration and upgrading solutions that add design flexibility to a customer’s biogas system.
Air Products said the project also increases the production of PRISM N2Sep membranes, which are the foundation of Air Products’ recently announced PRISM InertPro Membrane System, a new nitrogen generator for the energy and gas industry that is optimized with a flexible modular design to focus on efficiency and lower energy nitrogen generation.
Amidst projected slow to flat growth in 2023, manufacturers are focused on long-term growth and restructuring.
Camp Hill-based Brown Schultz Sheridan & Fritz (BSSF), in partnership with LEA Global, published its 2022-2023 Manufacturing Outlook Survey and Insights report that showed 40% of participants are forecasting a 10% to 20% revenue growth for the year, while 19% expect revenue to remain unchanged through the second quarter.
The report also showed that manufacturers are looking for supplier relationships closer to home and are placing more trust in their regional economies.
More dollars are being invested in plant modernization, including new equipment, enterprise resource planning systems and robotics, and there has been an increase of investment in new technology tools, product and service development and business intelligence data, the report revealed.
“The manufacturing sector affects virtually every other industry and is a significant contributor to our economy, supply chain, job market and overall business community,” said Ken Wolfe, president and managing principal at BSSF. “With such an important role in society, it is critical for us to understand the general outlook for the manufacturing industry amidst the economic and labor market challenges we all are facing currently. We were honored to partner with LEA Global on the critical research we need to continue providing exceptional service to our highly valued manufacturing clients.”
According to BSSF, the report outlines research results surrounding the challenges, legislation and priorities affecting businesses within the manufacturing sector in 2023.
Survey data for the report was gathered from a concentrated sample of middle-market and large global manufacturers within a variety of industries.
The theme for this year’s report is “Foundations for Success,” as respondents communicated a strong focus on plant and capital investments that will support more automated and productive companies in the future.
The research results indicate that manufacturing leaders are focused on long-term growth and are restructuring their sourcing strategies while investing in new product and process research, BSSF said.
Pennsylvania hospitals, while facing financial challenges in the post-pandemic world, still support one in 10 jobs and contribute a fifth of the state’s gross domestic product.
Andy Carter, president and CEO of Hospital and Healthsystem Association of Pennsylvania (HAP) said Tuesday that a report conducted by HAP shows hospitals are facing financial stress due to increased costs of supplies and labor while facing stagnant payments from insurers, Medicare and Medicaid and stock market losses.
“Hospitals are critical to the health and future of Pennsylvania communities, both because of the essential care they provide and their role as job creators and economic engines,” Carter said. “Hospitals support family-sustaining jobs throughout all parts of the commonwealth and are often among—if not the—top employers and economic flagships in their communities.”
HAP’s analysis of fiscal year (FY) 2021 data reveals that Pennsylvania hospitals—both directly and through the ripple effects of their economic activity—benefitted their communities and the commonwealth by:
Contributing $168 billion to the state and local economies
Supporting 590,000 jobs throughout the entire commonwealth
Generating $38 billion in wages, salaries, and benefits
The analysis also highlights the strain hospitals are experiencing due to rising expenses, the continued COVID-19 pandemic, a historic workforce shortage, and a national behavioral health crisis and calls attention to the need for investments and policies to support hospitals long-term sustainability.
“In the face of financial stress there is a risk to access to health care,” Carter said. Since 2020, five hospitals have closed and others are facing cutbacks in services to keep the overall operation solvent, he said.
“No one has lived through a pandemic, economic turmoil from the pandemic, and international turmoil that we are seeing today,” Carter said. “Communities are proud of their hospitals and broadly speaking, most are not at risk of closure.”
That said, Carter emphasized that hospitals want to continue to reflect the quality of services offered before COVID-19 and not become a shadow of their former selves.
However, he said, the increased cost of labor, mainly due to a shortage of nurses and nursing support staff; supply cost increases from gauze to high tech equipment; and pharmaceutical increases, hospitals are feeling the squeeze.
Still they are vital to the communities they are in, he said.
Some of the key findings of the analysis include:
Pennsylvania hospital jobs pay, on average, nearly 6% higher than the statewide average wage for all sectors.
Hospitals rank fifth among all Pennsylvania industries for employment and fourth for total annual wages.
59 of Pennsylvania’s 67 counties have at least one hospital among their top 10 employers and in 18 of them, a hospital is the largest employer.
Hospitals are among the top 10 industries directly contributing to Pennsylvania’s economy, ranked ninth between construction and management of companies and enterprises.
Hospitals and universities with hospital-affiliated medical schools secured nearly $1.8 billion in highly competitive federal research funding to advance health care innovation.
Pennsylvania general acute care hospitals reported $866 million in foregone revenue due to uncompensated care.
According to the Pennsylvania Health Care Cost Containment Council, Carter said, 30% of the state’s hospitals reported losing money in 2021 and 15% reported modest earnings. No one, he said, invested in modernization and new offerings.
“There is no single answer to this,” Carter said, but “we have a range of ideas.”
Changes to Medicare and Medicaid payments are vital. Carter said the government needs to increase those payments, or at least stop the cuts. There was a 2% decrease in July. “Hospitals did get a one-time support from the federal government through American Rescue Plan money,” he said.
HAP has requested money from the state’s pandemic funds as well to offset the losses due to COVID, Carter said.
“We also need to improve the workforce,” he said. “We need to increase the numbers going into the pipeline. While this won’t have an immediate impact, it will help three to five years down the line.”
Carter explained that with the nursing shortage, hospitals are turning to temp agencies to hire nurses from across the country or internationally. That comes with a cost, he said.
A survey of HAP members last winter showed that since 2019:
Hourly rates paid to staffing agencies for registered nurses providing direct patient care in medical/surgical and other units have increased by 108% from $59 per hour to $123 per hour while the average number of shifts per day worked by temporary staff increased from five to eleven
Hourly rates paid to staffing agencies for registered nurses providing direct patient care in specialty units have increased by 82% from $66 per hour to $120 per hour while the average number of shifts per day worked by temporary staff increased from four to nine
Hourly rates paid to staffing agencies for nursing support staff (such as certified nurse assistants, patient care assistants, and nurse assistants) have increased by 444% from $9 per hour to $49 per hour while the average number of shifts per day worked by temporary nursing support staff increased from three to five
“Some of this need is abating as some health care workers are returning to the field,” he said.
Another area of concern is telehealth, Carter said. “We need to cut the red tape and make sure providers are paid for telehealth services.”
Carter explained that due to the pandemic, restrictions were lifted for telehealth. Now they are at risk of expiring. But more than that, he said, providers need to be paid for telehealth services, which is not always the case.
The importance of telehealth, he said, is that it makes care easily assessable and helps with staffing issues.
Finally, Carter said payments from insurers and Medicare and Medicaid payments must increase to match what hospitals pay to treat patients.
“We are calling on lawmakers and insurers to step up and join hands so as not to put hospitals at risk,” Carter said.
A study released Tuesday gives insight into the challenges and opportunities facing suppliers and third-party logistics (3PL) providers.
The 2023 Annual Third-Party Logistics study, released by Reading-based Penske Logistics, Dr. C. John Langley, Penn State supply chain professor, and NTT Data, examines back-to-basics principles for supply chain professionals, the ongoing talent crisis and the rise of reverse logistics.
“This year’s study findings present a robust view of the challenges and opportunities shippers, and logistics providers are facing in rebalancing the supply chain,” said Andy Moses, senior vice president sales and solutions, Penske Logistics.
“Attracting and retaining talent in the supply chain remains of central importance to shippers and logistics providers. There are talent needs industrywide from airline pilots, ship captains, truck drivers, and warehouse workers to engineers and technology professionals. People remain central to an efficient and functional supply chain to meet society’s needs,” he said.
Key findings include:
Getting Back-to-Basics: While innovative technologies, globalization and growing access to data have all helped transform the supply chain, they have also created complexity, disconnects and competing priorities. A return to the fundamental principles governing supply chains is underway.
Understanding the Talent Crisis: The supply chain industry has been hit hard by labor shortages, with 78% of shippers, and 56% of 3PLs, reported that labor shortages have impacted their supply chain operations. Hourly workers and licensed hourly workers continue to be the hardest roles for companies to hire and retain. Many see the talent shortage as a long-term issue, with 27% of shippers, and 29% of 3PLs, reporting they believe there has been a permanent shift.
Tapping into the Potential of Reverse Logistics: Often neglected as the back half of the supply chain equation, reverse logistics has since become an integral part of both the B2B and B2C buyer experience. Consumer-focused shippers rated the returns experience as being extremely important (75%) to consumer loyalty, and both consumer-focused shippers (65%) and business-focused shippers (60%) noted that return expectations are growing.
ESG Surges: Corporate Environmental, Social and Governance (ESG) continues to be a top priority for today’s supply chain. However, only 22% of shippers and 17% of 3PLs rated themselves as a trailblazer and a leader in ESG. Conversely, 45% of shippers and 41% of 3PLs rated themselves as average in their ESG targets. This discrepancy suggests that both shippers and 3PLs may be misaligned in implementing their ESG efforts.
“The Annual Third-Party Logistics Study identifies and provides insight into key issues and challenges facing 3PLs and shippers. Although these organizations are all dealing with unprecedented change and volatility in the global marketplace, they continue to improve and create value for their end-user customers and consumers. Hopefully, this year’s study topics and results inspire further efforts to improve our supply chains via the benefits of successful 3PL-customer relationships,” said Langley, director of development, Center for Supply Chain Research at Smeal College of Business, Penn State University.
Mid-sized companies, industry analysts say, prospered during the COVID-19 pandemic, but now face roadblocks that inhibit continued growth.
Mike Gigler, senior relations manager for Wells Fargo, said mid-sized companies entered 2022 with strong capital, but the impact of labor costs, supply chain issues and transportation woes have curtailed growth.
Wade Becker, partner in RKL’s Audit Services Group and Leader of its Manufacturing and Distribution Industry Group, agreed, saying a number of mid-sized manufacturing and distribution companies are well positioned with capital due to unprecedented demand for products during the pandemic.
“I’ve been impressed by the way they navigated the pandemic,” Gigler said. “They adapted to the new norms.”
Companies entered 2022 in good financial shape, Gigler said, and would continue to see sales growth if it wasn’t for a lack of materials. “There is a pent-up demand they can’t satisfy,” he said.
In addition to supply chain issues, Gigler said the biggest challenge companies face is the lack of workers and the increased price of hiring those they can get.
“There are a record number of unfilled jobs that impact production,” Becker said. “Many companies are looking at reskilling workers and offering incentives for new employees.”
Some, he said, are giving sign-on bonuses and then training them for the jobs needed.
Companies are also looking at automation to reduce the number of employees needed.
“If machines can do a task, companies can redirect workers to other jobs,” he said.
Becker used retail as an example. Stores have increased the number of self-scanning lanes to make up for unfilled jobs. That is being replicated in the manufacturing environment, he said.
“So many people exited the workforce and while it may calm down, it may not get back to normal as people thought so companies are hedging as they wait to see how it plays out,” he said.
Gigler said many of the machines needed are made overseas, so Wells Fargo has been working with them for the best possible financing.
“You need to understand the value of the dollar vs other currencies, so you don’t get hit with a decline in value when it comes time to pay for the automation,” he said.
Both agree that the availability of raw materials has also been a huge issue facing manufacturers.
“Many companies would be expanding operations now, but can’t get the materials,” Gigler said. In addition, he said, approvals for expansion are seeing delays.
Add inflation to the mix and those materials that are not available now will be more expensive when they are.
“Business owners need to be nimble,” Gigler said. “Money isn’t free anymore.”
The annual inflation rate for the United States is 8.3% for the 12 months ended April 2022 after rising 8.5% previously, according to U.S. Labor Department data published May 11.
Companies, Gigler said, are not pulling back from expansion, but they are being more diligent about their return on investment.
Becker said a new twist in costs for companies is cyber security.
“Companies are needing to invest in IT more now because information is becoming more vulnerable,” he said.
Before the pandemic, criminals were targeting financial institutions, but now “we are seeing them break into manufacturing and distribution facilities and holding their information for ransom.”
All of this adds up to uncertainty for growth through the remaining part of the year and into 2023, they said. Demand for products will continue, but whether companies can meet those demands and expand operations is the question.
“If (companies) could hire and find raw materials they would be doing fantastic,” Becker said.
Railroad infrastructure projects in Berks County and Adams and Cumberland counties will receive a total of $16.4 million in grant funding.
Gov. Tom Wolf announced this week that the Gettysburg & Northern Railroad Co. was awarded up to $1.84 million and the Redevelopment Authority of the County of Berks was awarded up to $14.6 million in Consolidated Rail Infrastructure and Safety Improvements (CRISI) grants.
The grants were made possible by President Joe Biden’s Bipartisan Infrastructure Law, signed last November. The law included $368 million in funding for CRISI grants for 46 projects in 32 states.
The funding is expected to strengthen supply chains and create good-paying jobs, according to the Wolf Administration.
“Rail infrastructure is critical to this commonwealth, as we rank first in the nation in the number of operating railroads and nearly top in total track mileage, so this funding will ensure that our infrastructure remains strong and reliable, while creating good-paying jobs,” said Wolf. “I’m grateful to the Biden-Harris Administration for its continued commitment to investing in our infrastructure through the landmark Bipartisan Infrastructure Law, which will make a significant difference for not only our physical infrastructure but also our economy and our workforce.”
Gettysburg & Northern Railroad Co. will use its grant funding for the Gettysburg State and Private Investments Driving Economic Recovery Project, which is expected to rehabilitate approximately 24 miles of the Gettysburg & Northern Railway mainline in Adams and Cumberland counties.
The Redevelopment Authority of the County of Berks will use its funding for its Colebrookdale Railroad Infrastructure, Safety & Capacity Upgrade. The proposed project will rehabilitate approximately 8.6 miles of track with 130-pound continuous welded rail to ensure compliance with class 2 track standards and the ability to able to handle 286,000-pound railcars between Boyertown and Pottstown. The project will also rehabilitate or replace 14 bridges that are deteriorating, construct two rail-served transload yards, and six new sidings.
The availability of beer at bars, taverns and restaurants in the southeast is becoming a slow flow as supply chain issues hit distributors.
According to the Pennsylvania Licensed Beverage and Tavern Association (PLBTA), distributors have been forced to limit deliveries due to a lack of drivers.
While reports have filtered in from various parts of the state including the southeast and northwest, the Pennsylvania Licensed Beverage and Tavern Association (PLBTA) says the epicenter appears to be in the southcentral section, where with little warning, Ace Beer Distributors (Universal Products, Inc.), Wrightsville, informed bars, taverns and clubs that they were cutting back deliveries to only twice per month.
On their website, Ace describes itself as representing “more than 350 brands (more than 2,000 products distributed!) from over 130 supplier partners and services over 1,400 direct retail partners across Lancaster, York, Adams, Franklin, Fulton, Cumberland, Dauphin, Lebanon, Perry, Mifflin, and Juniata counties.”
According to sources sharing information with the PLBTA, a labor crisis is to blame, specifically a lack of drivers.
In a recent letter to the Pennsylvania House Liquor Control Committee and the Pennsylvania Senate Law & Justice Committee, Chuck Moran, executive director of the PLBTA, told committee chairs that “the decision by Ace is quite problematic for small businesses that rely on the wholesaler.” Moran continued by writing, “Many family-owned taverns and bars do not have enough storage space to handle two or three weeks of malt beverage supplies.”
One club licensee recently wrote to the Pennsylvania Liquor Control Board with concerns about Ace’s delivery decision. The PLCB responded that the club could not pick up their own supplies, and they could not go out of a wholesaler’s territory to attempt to purchase supplies.
The only options offered were to attempt to get a delivery from a smaller distributor (if they would even do so) within the wholesaler’s territory or swap out popular more affordable national brands with local brands from breweries that deliver.
But delivery problems are not new. Before the pandemic, there were similar issues to a lesser degree; however, now those problems are being amplified.
A statewide membership survey conducted by the Pennsylvania Licensed Beverage and Tavern Association in 2019 showed that nearly 40% of PLBTA members surveyed had fewer delivery date options and nearly 20% had experienced delayed delivery of malt beverages from distributors. And more than one out of three members had run out of certain malt beverages and had to wait for a resupply.
Further complicating the issue are outdated liquor laws. By law, bar owners can only receive beer delivered from retail and importing distributors and can’t pick it up themselves, Moran said.
While licensed bars, taverns and clubs can purchase liquors at a state store and personally deliver the supply to their bar or tavern, current law does not allow them to pick up and personally deliver malt beverages to their own establishment.
“In late 2019, we suggested a reasonable business solution to this problem, proposing legislation that would allow R, H, E, and club licensees to pick up a limited ‘emergency’ supply of beverages from the wholesaler or distributor and then deliver that supply to their own establishment when the wholesaler was unable to make a timely delivery,” Moran wrote in his letter to the legislative committees that oversee industry-related matters.
For now, Moran says his association hopes the legislature as well as distributors will listen to these concerns and help build business solutions.
The continuing rising price of diesel fuel is having a major impact on the economy and the supply chain as independent truckers are finding it more expensive to haul freight than they are making on the load.
Pennsylvania has the ninth highest prices in the nation due to taxes, creating a greater impact locally on the availability of goods, according to Rebecca Oyler, president and CEO of the Pennsylvania Motor Truck Association.
“It’s a matter of math,” she said. “If you can’t make money, you’re not going to haul freight. Small companies are suffering the most.”
The price of diesel in Pennsylvania as of May 25 is $6.302 per gallon, a historic high, according to AAA. A year ago, diesel was selling for $3.46 per gallon.
“We are already seeing and continue to see the impact of the rising cost of crude oil on consumer goods as measured by the Consumer Price Index (CPI),” said Dr. John Kooti, dean of the John L. Grove College of Business, Shippensburg University. “Although large companies may be able to absorb the cost and eventually pass it to consumers, independent truckers may not have the ability to do so, thus, might well lead to bankruptcy among some independent truckers.”
Oyler said most companies can get fuel surcharges based on the past week’s prices, which they can add to their standard rates, but they are not getting the full rate because prices are rising almost daily.
“Large companies can absorb the increased costs,” she said. “Most companies don’t get the reimbursement for 30 days or more so smaller companies can’t manage the increase.”
“Generally speaking, the volatility of fuel prices increases uncertainty and decreases the ability for businesses to plan operations,” said Dr. Ian Langella, professor of Supply Chain Management and chair of Finance and Supply Chain Management Department at the John L. Grove College of Business, Shippensburg University.
In some cases, fuel surcharges are included in contracts and can result in basically a sharing of the risk between shipper and carrier, he said.
“Independent truckers do not have the same bargaining power as large companies, so it depends on the financial strength of independent truckers” whether they stay in business, Kooti said.
“I don’t see a short-term solution,” said Oyler. “This comes down to supply and demand.”
Olyer said the war in Ukraine is reducing supply of crude oil, but demand is still up because consumers are still spending. “It’s a hard issue to fix and it won’t be quick,” she said.
While consumers are still spending, Kooti said consumers are already being affected by the rising cost of goods and services. “Last month our inflation rate was up 8.3% compared to last year, the highest in decades” he said.
Langella added, “Consumers are also adversely impacted by the supply chain disruptions and shortages. While most of our demand for goods and services has been fulfilled as it was in the past, there are more examples of product shortages that were almost unheard of before the pandemic.”
Trucking companies are not the only ones being affected. Industries like lawn care services and contractors are feeling the pinch as well. “If there are no surcharges in their contracts, they are really going to suffer,” Oyler said.
“Most lawn services have annual contracts with fixed rates, so it is difficult to pass the rising fuel to consumers in the short term,” Kooti said. “Any future contract will reflect the forecasted cost of fuel, thus eventually will be passed to consumers. It all depends on how long the rising oil prices continue.”
There may be some ways to renegotiate based on the contract. Langella said. “After all, small businesses will find it incredibly difficult to absorb this and may seek to share the risk with customers through a post contractual negotiation.”
Oyler said the country needs to increase the supply of domestic energy as a long-term solution. “We need to think strategically about how to make that happen.”
The bottom line, she said, is the general public will pay the increased costs. “When you think about it, the supply chain is greatly affected because everything we use is transported and those vehicles use diesel,” she said.
Even when trucks are parked or companies streamline loads or haul less, there is an increased cost to transport goods, she said. “In the end, it comes back to the consumer.”
Oyler said she doesn’t see an end in sight, noting as summer approaches, demand for fuel goes up. “Hurricane season will affect the availability as well,” she said.
The trucking industry is vital to the supply chain across the nation.
As diesel prices rise, and they have been rising fast, the cost of moving goods is also increasing.
That increased cost is being passed along from shipper to hauler to receiver, and ultimately, to the consumer.
Rebecca Oyler, president and CEO of the Pennsylvania Motor Truck Association, said last week, diesel prices jumped 75 cents to the highest level ever. The price in Pennsylvania Wednesday averaged $5.43 a gallon.
“Fuel prices affect everything throughout the supply chain,” she said. “It contributes to inflation.”
Oyler said trucking companies are very competitive and vital to the economy, so instability leads to problems. She explained that companies charge a surcharge to shippers based on the price of fuel from the week before. “That creates a gap between real prices and surcharges,” she said.
Those surcharges, which Oyler said, are not keeping up with inflation, are passed on to the consumer, which is being felt at the store.
Brian Wanner, general manager of Peters Brothers Trucking Inc., Lenhartsville, Berks County, said his company buys a million gallons of fuel a year. “If the price goes up $1, that’s a $1 million a year. A lot of that goes to the customer, but not all of it,” he said.
Last week, Wanner said his company filled its on-site tank for $4.70 a gallon wholesale. “If we would have waited a day, the price would have been $5.73.”
Fueling at the yard saves the company money, but Wanner said half of the fueling is done on the road and prices are sky-high. “This is crazy unnecessary; it doesn’t need to go up that fast. The volatility is hard to adjust to that quickly.”
The 65 trucks the company operates deliver across the country and Wanner said the increase in costs ultimately lands on the consumer.
Dave Billing, president of Billing Trucking Inc., Allentown, said it is hard to keep his trucks moving. At last fill up, Billing said the price was $5.93 per gallon. “We cut our delivery in half so we could afford to pay for it.
“We have to pass it on to the shipper or we couldn’t operate,” he said.
“This is a big added expense and we are dealing with it. We either pass it along or absorb the cost,” he said.
The company, which is down to seven trucks from 30, has steady customers, so Billing said they must work with them or lose them to other carriers. “The little guys are hurting because we can’t compete with the big guys,” he said.
While the company has reliable drivers in this environment of a driver shortage, he said his other trucks are idled due to a lack of drivers, which is another major issue companies are facing.
Ahmed Rahman, research felllow at the Institute of Labor Economics at Lehigh University, Bethlehem, said the price of diesel is definitely skyrocketing, but the prices were artificially low because the economy ground to a halt during the pandemic.
“Part of the rise is from this,” he said. “We are looking at reflation, which is getting back to the normal trend.”
Recently though, he said, the alarming rise in prices is leading to inflation which may lead to stagflation, or a slowdown in movement of goods. “That trend is not good.”
Rahman said the country relies on trucks to move all goods and unless the Federal Reserve does something more dramatic than it is talking about now, the country could see double-digit inflation very soon.
“Products might not be available if prices keep rising,” he said.
The Fed is widely expected to raise rates by a quarter-point this week, the first hike since 2018, according to CNBC. Watchers are also expecting the central bank to offer a new quarterly forecast that could indicate five or six more hikes this year, the network said.
The slowdown of merchandise movement is something shippers don’t want to talk about. C&S Wholesale Grocers, one of the largest distributors in the Northeast, had no comment.
A few truckers, however, who asked to remain anonymous, said they are seeing less business at wholesale distribution centers. While the wait to get into a door is usually long, they said there are definitely fewer trucks waiting to load and unload.
Rahman, who said the country could be more fuel self-sufficient, said “we can’t turn on a dime.
“It takes time to establish the supply chain,” he said. In fact, it takes years to refigure when supply and demand change. There was no incentive to increase drilling over the past two years because of the slowdown.
“The prices will definitely be passed on (to the consumer), but I think we will also see a rationing of deliveries. We are seeing signs of that now.”
Supply chain issues top the list of concerns for small business owners over the last six months, but they see those pressures easing by mid-year.
In the meantime, inflation pressures are expected to continue to impact these business owners, with a majority planning to further raise their own prices in the near term, according to the latest PNC semi-annual Economic Outlook survey of small and mid-size business owners and executives.
“The events in Ukraine were not on the minds of business owners when the survey was conducted in January,” said Gus Faucher, PNC chief economist, “There was concern at that time about rising prices, and that worry has likely intensified now given the rapid increase in energy prices, among other factors.”
In January, a third (34%) of owners who rely on a supply chain said timeliness had worsened in the previous six months.
Concern about supply chain disruptions was highest in the manufacturing (56%), wholesale/retail (51%) and construction (38%) sectors.
More than a quarter (28%) of businesses that rely on inventory are faced with the challenge of not having enough supply to meet expected demand. However, six in 10 (57%) expect the timeliness of their supply chain issues to improve in the next six months.
“Supply chain problems have been a big contributor to the highest inflation the U.S. has seen in almost 40 years. But it is encouraging that most small businesses see supply chain problems easing in the months ahead, which would contribute to a slowing in inflation,” Faucher said. “The wild card now is how long high energy prices and other inflationary factors due to the Ukraine crisis last.”
Rising prices also are on the minds of business owners. Half (51%) of businesses expect to increase the prices they charge in the next six months, with 36% expecting hikes of 5% or more.
Nearly two in 10 (16%) of those expecting to increase prices plan to raise them by at least 10%, more than double those respondents who anticipated a similar move last fall (6%). One in three (34%) say their prices already have gone up in the past six months, with four in 10 hiking them by 5% or more.
Among the 51% expecting to increase their prices, nearly two-thirds (63%) are doing so because they are attempting to keep up with rising non-labor costs, a significant increase compared with 33% in the fall.
“Six months ago, businesses were raising prices because demand was strong enough that they could. Now it appears they’re raising prices because higher costs are forcing them to,” Faucher said.
The new chief financial officer at Lehigh Valley Restaurant Group didn’t start out looking to be in charge of a company’s finances. Nikki Bloom entered the business world with a bachelor’s degree in Psychology.
She started out as a credit counselor, but when an administrative position opened at the restaurant group 17 years ago, she saw a company she had a chance to grow with.
Eventually, she landed in the accounting department for the company, which runs 21 Red Robin franchises throughout the Lehigh Valley, Harrisburg, Northeast Pennsylvania and Southeast Pennsylvania regions.
Accounting wasn’t her specialty, so she went back to school and earned associate degrees in accounting and business management, and used those skills to build her career.
Her coworkers are glad she did.
Mike Axiotis, CEO of the restaurant group, gives Bloom a lot of credit for keeping the company going during the pandemic and the ongoing worker shortage, supply chain issues and increasing food prices.
The challenges of most of the last two years wasn’t something Bloom, or anyone, was really expecting. She said it has been a delicate dance keeping the company going through such trying times.
“Our goal was not just to survive, but to thrive through the pandemic,” she said.
She used Paycheck Protection Program (PPP) resources to keep as many people employed as she could and implemented cash preservation efforts to control costs as income declined.
“It was about looking at what do we need and what we don’t need and what can we start adding back when things started to come back,” she said.
Working with the other team members, Bloom helped the company improve efficiencies by limiting their menu, a technique many restaurants used to make things easier with a limited staff and a smaller customer base.
The company also brought in tents so they could offer outdoor seating when indoor seating was limited and put an emphasis on improving their takeout business, which they were able to offer through most of the shutdown.
“Any supplies that we could change to make it more cost effective, we changed,” she said. “We had to keep an eye on costs, but we also had to compete.”
The key was to find things they could trim without impacting the customer experience, so people would want to continue to come back.
But keeping customers coming back wasn’t the only challenge. The restaurant industry as a whole has faced massive staffing shortages, which impacted LVRG as well.
The company was trying to hire from the same smaller pool of interested workers as their competitors, and while offering more money was something everyone was doing, she tried wo work to offer other intangible benefits to workers so they would feel more engaged with the company and enjoy their work.
Even with the pandemic restrictions limited, challenges have continued throughout 2021 as the worker shortage lingered, and more recently food prices began to skyrocket.
While LVRG has had to raise prices like most restaurants, prices can only be raised so much before it’s too much for the consumer even if their costs continue to rise, she said. That’s where the company had to get creative.
“We have a great food and beverage guy who worked with our vendors to manage our supply chain to deal with those rising costs and not price ourselves out,” she said.
Depending on how long the supply chain issues last, she expects her job isn’t going to get easier any time soon, but she said she is up to the challenge of keeping those Red Robin franchises in the black.
And Axiotis said the company is lucky to have her.
“Nikki values integrity, ethical behavior, lifelong learning for her and her team, building relationships with team members and our vendor partners, and time with her family and friends,” he said. “She is a true brand ambassador of LVRG, and her many accomplishments are a great example of how passion, empathy, commitment, and continued education are a pathway to leadership and success. I am truly proud and honored to have her on our team.”
The COVID-19 pandemic that began in early 2020 disrupted and provided an extreme stress test to our manufacturing systems and global supply chains in numerous ways. The pandemic exposed old inefficiencies and new vulnerabilities.
Manufacturing worked very hard to pivot to address these challenges. New technologies certainly helped manufacturing systems adapt to some degree. However, the adaptation was not as efficient, rapid or complete as was hoped. And the disruption was severe.
The manufacturing industry faced a real collapse from the COVID-19 impact. Surviving that impact was difficult, but it gave a new outlook towards the existing problems and brought unprecedented solutions. The manufacturing industry learned to understand they can make a shift to the new normal while keeping intact its founding values and attain maximum benefits from the latest technology. The shock of the pandemic was a “wake up call” and an awesome opportunity to open the way for acceleration of innovation in manufacturing.
Opportunities for innovation
The combination of multiple disruptions and a global recession has created an even more competitive environment than ever before. The stakes for successful innovation have risen as high as life and death for many companies. Supply chains have been ripped apart, and the demands resulting from that have pushed poorer performing manufacturers out of business.
Conversely, the strongest and most innovative companies survive and thrive and are coming out leaner, meaner and with less competition. Strategic and anticipatory thinking by manufacturers in a world of rapid change will bring adaptability and flexibility to compete and stay one step ahead of everyone else.
The pandemic shock has been very painful and yet it has brought greater clarity of vision. The impressive will, creativity and capability of manufacturers exposed weaknesses in the way goods are made and the way supply chains are managed and accentuated the need to transform from the old ways of doing business to new approaches that are more agile and resilient.
COVID-19 has illuminated the importance and value of digitizing and automating factory operations. Digital transformation will both democratize and accelerate product innovation that will enable more localized and smaller-scale production. Digital innovation will use 5G technology as a crucial enabler, reducing latency and accelerating the deployment of remote control and monitoring systems and autonomous devices.
The future of supply chains lies in greater localization and flexibility. There has been a major movement to explore the possibility and value of sourcing closer to home and to the customer. This has the potential to reshape the global map of manufacturing. The COVID-19 induced dynamics of 2020 have led brands to think long and hard about where they make their products.
The bottom line is that the odds are stacked in favor of much faster, more focused and efficiency-enhancing innovation across the manufacturing ecosystem. This should be a strong positive sign for strong optimism. Right NOW, is one of the most opportune times for the future of innovative people developing innovative products, supported by an equally innovative digitally enabled local manufacturing industry. Innovation is what the world economy needs to boost living standards across the globe in the coming decade and beyond.
It is essential for manufacturers to access the support services and incentives and to acquire the latest advanced, patent technologies and affordable technology for improved productivity. Incentives will help existing facilities and customers increase their capacity. This will increase green field investments and accelerate capacity expansion across all industries.
People will be a very critical asset in the manufacturing industry. In the future, companies will need to have a multi-scaled workforce to gauge their single points of failure and eliminate them. Investing in people, empowering people and having empathy will be very important. In addition, it will be important to diversify both customer and industries served.
You can’t stop change
Agility is the first important thing needed. Adoption of new technologies and strategies is the second, and the third important thing is becoming more competitive. There is a need to shift the company focus internally to health & hygiene, making employees more agile, making monitoring/supervision more IT-enabled and increasing productivity with no failures/errors with competitive prices.
Change is inevitable and continues to arrive at an exponentially faster pace. The sense of urgency, agility, flexibility to respond, etc., will become even more important. COVID-19 has made management decision making very critical. Proper decisions can only be made with the relevant data. So, as long as one has connected systems, data-driven decision making will help in a very significant way. Strategizing and using the Human Resource approach must include a dynamic shift in the way the people are considered in terms of upgrading the skills and in human connections. And the approach, in terms of skills and the overall viewpoint, must be comprehensive from the top management to the people on the shop floor.
The changing role of manufacturing leadership today highlights the need for innovation. It is important for leaders to have empathy more than ever before. The pandemic has affected physical and mental health and innovation in leadership in manufacturing must have an empathetic way of leading that will achieve a positive effect on the employees.
The fact is that manufacturing plants, their leadership and their employees are not all alike. However, we can learn some valuable lessons from each plant’s leaders, employees and processes, even from plants that produce different products. The evolution of modern manufacturing has driven the path of the global economy for centuries. We continue to see innovation and creative ideas change the face of modern manufacturing, especially since the arrival of COVID-19 in 2020.
I leave you with this thought about innovation and this time in our history: “Never before in the history of mankind has the pace of innovation and technological acceleration been faster than it is today.”—Yannick Schilly, CEO, Altix Consulting
Longtime columnist Glenn Ebersole is a registered professional engineer and a Strategic Business Development/Marketing Executive and Leader in the AEC industry and related fields. He can be reached at [email protected] or 717-575-8572.
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