Dive Brief:

• Recent delays in the "chaotic" global supply chain contributed to MSC Industrial raising costs last month in response to its suppliers' increases, the company said on a Q2 earnings call. 
• Port congestion, severe weather and COVID-19 disruptions have impacted product availability as demand has picked up, which contributed to shortages, MSC leadership explained. "What’s happening is there’s a lot of product scarcity and that’s beginning to lead to significant inflation," said MSC CEO Erik Gershwind. 
• Typically, the company would anticipate another price increase during the summer, based on suppliers marking their prices up. But if cost inflations go up quickly, MSC said it could foresee its prices going up again even sooner.

Dive Insight:

Nearly every importer and distributor is dealing with product-flow headaches.

Port congestion in Southern California has reached historic levels as massive numbers of containers have arrived, coinciding with staff reductions due to the pandemic. The effects have rippled across the country causing limited inventory for companies, such as Nike and Honda, and production-line disruptions. 

Winter weather in Texas mid-February brought another impediment to supply chains by halting production and trucks in the state. And when things eventually were up and running again, demand and prices shot up, affecting rates for businesses throughout the country. 

The need for labor has also been a challenge. as companies have tried to staff during the pandemic to keep production lines and supply chains running smoothly.   

Still, every supplier network is different, creating variations in how quickly suppliers are able to bounce back from myriad supply chain issues. 

"We have a faster than expected economic rebound that's left a lot of suppliers and manufacturers with insufficient inventory and capacity to handle the demand pick-up," Gershwind said. Compared to the 70% of the market, made up of local and regional distributors, MSC is positioned "very well," he said.

MSC, along with W.W. Grainger and Fastenal, is among the industrial suppliers that worked to procure and supply personal protective equipment during the pandemic. Before then, products like disposable face masks and nitrile gloves only represented a small share of their offerings. 

The gamble with quickly increasing PPE inventory was that if demand decreased, the company would be left with an oversupply of product. And that's exactly what happened to MSC and Fastenal as the initial surge for PPE lessened. 

"Pricing on these items has come down considerably and at the same time, demand slowed even through the winter months when the virus surged, and so we were left with the exposure," Gershwind said.