First cars, now chairs and cabinets hit by supply chain squeeze

First cars, now chairs and cabinets hit by supply chain squeeze

Transport was a “nightmare” where even “a screw or small component from Asia can take three months”, said Temahome’s Moreau, who also heads France’s furniture trade body. “We had 16 containers being shipped to the US in June and July and they still hadn’t got through by August. Lead times to the US have doubled.” A record one in three EU furniture makers say they have been affected by supply shortages, according to a quarterly business survey by the European Commission. At a global level, high shipping costs and delivery delays because of bad weather and Covid-19 shutdowns in major Asian ports are key pinch points. Transport costs have soared. Between China and Europe, fees are now nearly seven times higher than in August last year, according to data provider Freightos.

Furniture, the latest sector to feel the supply chain pinch, encapsulates the broader problems. Even giant companies such as Ikea have been affected. The Swedish flat pack furniture maker, has said it “cannot predict” when normal supplies will resume because of a “perfect storm of issues” that includes a shortage of truck drivers in the UK. Combined with rising consumer demand as economies reopen, in Europe these shortages have led to inflation reaching a decade high — a factor that may lead the European Central Bank to scale back its €1.85tn pandemic stimulus program this week.

“We’re not naive to think that it’s over in the next weeks or even months,” Henrik Elm, Ikea’s global supply manager, said of the disruptions. Across the world, manufacturers of everything from cupboards to cars or computers are still grappling with a logistics crunch that has disrupted supplies of essential inputs, threatening the post-pandemic economic rebound and boosting inflation.

Nearly half of EU rubber, machinery and computer producers, and most electrical equipment makers, report supply shortages. Nearly 60 per cent of carmakers remain affected. In Germany, where car production is 30 per cent below pre-Covid levels, Volkswagen plans to add extra shifts to clear an order backlog. But new Asian outbreaks of the Delta variant have shuttered ports and key semiconductor manufacturing facilities there, stymying plans. It’s a common problem throughout the sector. Even so, global lumber prices have halved from the record high they reached in May, although they remain above pre-pandemic levels. Other sectors are less fortunate.

In the US, meanwhile, lumber supplies usually transported by truck through the southern states have been disrupted by Hurricane Ida, which pummeled the Gulf Coast last week. To work around that problem, Ikea says it is diverting some supplies on to trains. “We will use rail transport from China to Europe to free up container capacity that we can use to ship more to US,” the company said.

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