US Supply Chains Have 10 Days Less Stock Due To COVID-19 Measures - White House

WASHINGTON (UrduPoint News / Sputnik - 18th June, 2021) US supply chains are struggling with near record-low inventories of homes and cars as complications caused by the coronavirus pandemic measures have left manufacturers with ten days less supply than a year ago for most goods, the White House said on Thursday.

"While retailers had 43 days of inventory in February 2020, today they have just 33 days," the White House said in a blog. "Inventories of cars and homes are also at or near record lows, sufficient for just one month of car sales and 4.4 months of home sales, as compared to pre-pandemic levels of about two months for cars and 5.5 months for homes."

Such shortages were also withholding business activity in some sectors, the White House said, citing the inventory deficit in framing lumber, wallboard and roofing materials and their impact on homebuilding.

Another impact of the shortages has been abrupt price increases, with commodities tracked within the Producer Price Index rising by 19 percent between May 2020 and May 2021, the largest year-over-year increase since 1974.

While the pandemic itself was mainly responsible for the breakdown in supply chains, the reaction of businesses to the crisis also contributed significantly to the inventory deficit and slowing of stocking and delivery.

"A key reason for the acute problems in motor vehicles is that automakers appear to have underestimated demand for their products after the start of the pandemic," the White House said. "Expecting weak demand, they canceled orders of semiconductors, an item with a long lead time and with a secular increase in demand from other industries.

This problem is compounded by the fragmentation in recent decades of the auto supply chain across many countries and many firms. This phenomenon has made it difficult for automakers to trace the root causes of bottlenecks, since for example a semiconductor may be designed by one firm, manufactured by a second firm, embedded into a component (such as an air bag) by a third supplier, and only then delivered to an automaker's assembly plant."

As a result, in most cases, neither the automaker nor the semiconductor manufacturers could trace what went on in these intermediate layers - or "tiers" - of the supply chain, due in part to lack of trust among parties in supply chains, who fear that the information might be used to replace them or to bargain for a price reduction, the White House said.

"While these problems are most acute in semiconductors, they are found in other parts of the auto supply chain as well," it added. "The auto sector is 'the industry of industries', so the price of cars is affected by the prices of the 30,000 parts in the car, from semiconductors to steel to plastic to rubber, and the logistics of transporting these parts across multiple national borders," it added.

In some cases, businesses were just not prepared for inordinate demand shocks that occurred during the pandemic, the White House said, citing the 40 percent boom in demand for toilet paper in the early days of the pandemic due to hoarding by Americans fearing they would run out on this.