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Small businesses left vulnerable to broken supply chain

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Posted at 3:47 PM, Sep 24, 2021
and last updated 2021-09-24 16:10:11-04

SAN DIEGO, Calif. — While they won't play Christmas music until after Thanksgiving, the Southern California business City Lights celebrates all year round.

"They have everything you think you want: cars, foods, snowman, and toilet paper!" said longtime customer Maureen Downey, pointing to an ornament.

Located in San Diego, City Lights Year Round Collectibles Emporium has built a cult following over three decades.

"Its toys for adults," said owner Brian Young. "It started off in a very small space, but it hit a niche and has been growing ever since."

A destination for customers like Downey, who come for collectibles and nostalgia.

"This type of place is getting harder to find, which means the item itself harder to find," said Young.

But nearly two years into the pandemic, Young isn't expecting a Christmas miracle this season.

"The cost of shipping and the cost of labor is making business very, very difficult."

He's among retailers nationwide gripped by a broken supply chain. Goods we rely on are stuck at sea as container ships wait in record numbers to deliver products to U.S. ports.

"There were 72 ships offshore waiting to be offloaded. Some of those have merchandise we're waiting for, unfortunately," said Young.

The Southern California ports of Los Angeles and Long Beach are together the nation's busiest container port complex. The primary gateway for waterborne trade between the U.S. and Asia, they handle more than one-third of U.S. goods.

The backlog has grown at a record pace in recent weeks.

"Going into the holiday season, this thing is going to get worse. We haven't fixed our supply chain problems yet," said Hitendra Chaturvedi, an expert in supply chain management and professor of practice at the W.P. Carey School of Business at Arizona State University.

Teaching the next generation of supply chain leaders, Chaturvedi says the once-obscure profession is now under a global microscope.

"One of the feedback I got was, now, I don't have to tell my grandma what supply chain management is. When I tell her that I'm going to be getting a degree in supply chain, she knows what I'm talking about," said Chaturvedi.

With the delta variant spreading, toilet paper, cleaning supplies, and paper towels are once again in high demand. So much so that Costco is reinstating limits on how much you can buy. And with shipping delays, experts urge consumers to get their holiday shopping done now.

"I talk to a lot of CEOs of large transportation and logistics companies. They don't see this thing improving till the end of 2022," said Chaturvedi.

The system has been crippled by high demand and wide-scale labor shortages.

"And then the third, I call it the dark unbalance of supply chain. When there is an imbalance of supply and demand, you have hoarders, who've got nothing to do with this business; they would start to buy out capacity," said Chaturvedi. "There were people who started buying out shipping capacity, sit on it, jack up the prices and then sell."

To curb demand, Chaturvedi says interest rates could go up. He says some of the standards used to teach supply chain are being thrown out the window.

"An example, this whole idea of extremely lean operation, where there's no inventory storage, is something that is being questioned. The whole idea of risk management across supply chain has taken a new meaning altogether."

More vulnerable to volatility, Chaturvedi encourages consumers to support small businesses.

"We're a long way from out of the woods," said Young.

But with loyal customers in-store and online, the supply chain isn't stealing their holiday cheer.

"There's an old saying if you can't change it do the best you can and live with it," said Young. "We'll muddle through."