Salsa -maker Amy Lasley used to throw away the disposable gloves she wears during food preparation. But as the price of nitrile gloves skyrocketed in recent months, she’s started to disinfect them with bleach and reuse them for cleaning outside the kitchen.
Other items are more expensive, too: The glass jars she packs her salsa in cost 8.5 to 17 cents more each. A case of cream cheese used to make dips went up $10 in less than a month and a half. And the rising price per gallon of fuel has prompted her to try to make fewer van deliveries from her Fort Collins warehouse.
Her Rocky Mountain Salsa Company is one of dozens of Colorado businesses facing increasing costs and lengthy wait times to purchase items ranging from chicken wings to sheet metal as supply chain crunches disrupt markets across the globe. Experts forecast the disruptions will last for months, and that consumer prices will likely go up as businesses grapple with high expenses on top of labor shortages.
After a year of coronavirus-restrictions, the shortages are like a “hangover of this pandemic,” said Diane Schwenke, head of the Grand Junction Area Chamber of Commerce. “A year ago we were talking about a potential for a shortage of (personal protective equipment) and you know masks and gloves, hospital gowns. And now it’s expanded to just about every aspect of everyone’s life.”
Big international companies like Ford Motor Company and Sony Corp. have had to stall production due to lack of semiconductors and other parts. But independent businesses with thin margins — or those that saw anemic growth during the pandemic — may be particularly hard-pressed to weather the added costs.
“I know the Home Depots and the Lowe’s are thriving, but the local hardware store is still having a very difficult time,” said Tony Gagliardi, Colorado state director at the National Federation of Independent Business, an advocacy group for small businesses. They “are having a hard time getting back fully open. They can’t get employees. A lot of times they can’t get their product.”
Nearly 90% of small business owners surveyed by the NFIB in June reported that supply chain disruptions were impacting their operations at some level. More than half said the disruptions had gotten worse since the spring, and only 1% said they expect the problems to resolve within a month.
The recent closure of a vital highway — crippled in places by mud and rockslides — will likely add further strain to some industries, like agriculture and cattle, already affected by backups at meat-processing plants. Freight and passenger vehicles have been directed to take lengthy detour routes while Interstate 70 through Glenwood Canyon is cleared of debris.
Experts say three recent events shocked the usual supply chains: The coronavirus sent customers — directed to stay home — flocking to online retailers; a winter storm paralyzed Texas’ power system; and a large container ship in March got stuck in the Suez Canal, a crucial trade artery. The chaos has been compounded by a decadeslong shift toward just-in-time manufacturing, and shortage of workers — particularly truck drivers — who move products from boat docks to truck beds to warehouses and on to consumers.
“We skipped forward about three years in terms of our need for trucks for e-commerce, which put a huge strain on our truck fleets here,” said Zac Rogers, an assistant professor of operations and supply chain management at Colorado State University. “Maybe we’ve hit the bottom, but … the supply chain is going to remain stressed, and therefore very expensive for at least, I would say, through 2022.”
Truck and trucker shortages right now mean that one out of every four loads isn’t being moved or “keeps getting pushed back,” Rogers said.
Business owners say cleaning supplies were hard to buy during the first waves of the pandemic. But this year, they’ve been hit with nearly across-the-board cost increases and shortages — prompting some to raise their prices, yank products they can’t find, or spend hours looking for inventory and placing orders.
At Little Man Ice Cream Factory in Denver, chef and production manager Sarah Hegge said a paste needed to make a strawberry ice cream was out of stock for months, forcing her to substitute other fruit flavors. In June, a seasonal passion fruit and mango flavor had to be pulled when passion fruit puree became unavailable.
“We made 20 buckets or so and that’s all we could sell to the public and I had to completely come up with a new flavor so that was a huge bummer,” Hegge said. “It’s just been a consistent unknowing situation, which has really been difficult on our staff as well … when we’re having to constantly change everything that we’re doing.”
She has begun to stockpile supplies — not ideal because her facility doesn’t have enough storage space to keep it all — to give her a few extra days to come up with new flavors if necessary ingredients run out. Hegge is also trying to create flavors that are less labor-intensive since the factory production team is down to about 13 employees rather than the 30 they need.
It’s a similar story at Ace Eat Serve, a Denver eatery known for its Tiger Wings. Executive Chef Thach Tran used to pay a little over $2 for a pound of jumbo natural wings that now cost $6 a pound. The supplier, Shamrock Foodservice, used to have 60 cases of wings to distribute across the Denver area. Now, it’s 20. Chefs are “sitting and waiting until new cases are available” so that they can buy enough wings for the week, Tran said. Sometimes they pull dishes from the menu when they just can’t get the ingredients.
The restaurant has tried other types of wings but the quality is “inconsistent” or inferior, Tran said, and they’ve instead decided to pay the nearly tripled cost. Ace now charges $16 per plate, up from $14, though Tran said other restaurants charge $17 or $18 for a similar dish.
The price of other dishes has gone up, too. When the cost of lobster went from around $16 a pound to $23 or $24 earlier this year, Steuben’s — another restaurant under the same parent company — began selling it at market price. A $9 classic cheeseburger is now $11, reflecting “the cost of producing that quality burger from the food cost side, labor cost side has gone way up,” Tran said.
“We would love to drop our prices — that’s what we would love to do — and have affordable food again and not just continue to hike up our prices like everyone else,” he said.
Both he and Hegge said the cost to buy nitrile gloves — essential for food preparation — has also increased.
And Lasley, at Rocky Mountain Salsa, has seen supplies become more expensive and hard to buy. Facing difficulty finding glass jars earlier this year, she collected used vessels from customers, soaked off the labels and sterilized them for reuse — a recycling practice she does for quart- and gallon-size containers but that she says isn’t cost-efficient for the smaller 16-ounce jars.
A pallet and a half of 8-ounce glass jars is sitting unused in her warehouse because she can’t find lids.
She’ll likely have to raise the wholesale cost of her salsa.
“I was just thinking last night as I’m crunching numbers that I have no choice,” she said.
Rogers, the operations and supply chain management professor, said the pandemic hastened the ubiquity of e-commerce and revealed some businesses’ over-dependence on specific suppliers.
E-commerce sales increased 40% in 2020, accounting for almost 14% of all retail sales in the first quarter of 2021, compared with 11% in the same quarter of 2020. The rapid growth and the next-day or same-day delivery online shoppers expect has required trucks and warehouse space near metropolitan centers that the country didn’t have enough of, he said. That’s true in Colorado, where the population is concentrated along the Front Range urban corridor, and the state in 2020 saw a 91% annual increase in e-commerce spending compared with 2019, he said.
Small trucking companies also closed or sold off fleets to survive when the economy ground to a halt at the start of the pandemic. At the same time, ports went from having almost no ships to having more than usual, causing a logjam in international shipping.
“Supply chains are sort of like when you open up a clock or a watch and there’s all these perfect interlocking gears that move exactly where they need to when they need to. And it’s sort of like we’ve taken one of the gears out of the clock,” Rogers said. “When precision isn’t there, you have to turn to brute force, and a lot of times that brute force is, ‘well, we’ll place the double order.’”
Gregg Macaluso, a supply chain strategy instructor in the University of Colorado Leeds School of Business, said supply chains have become increasingly global, lean and responsive over the past four decades. Disruptions can be felt very quickly under those conditions, he said.
The supply chain issues go beyond the Front Range.
Heidi Matthews, in Montrose, has a goat farm and uses the milk to make lotions, soap and fudge and caramel candies. As soon as the pandemic caused a run on hand sanitizer in 2020, it became nearly impossible for her to buy bottles to package her products in — and stock didn’t come back for nine months. She had to turn customers away and estimates she lost thousands of dollars in business over the course of the year.
It was a “big financial strain on our household budget,” Matthews said.
Meanwhile, Masterworks Mechanical, a heating, refrigeration and air conditioning business in Craig, is stashing used parts in a warehouse basement to guard against possible shortages.
President Victor Updike hopes the components will be carted off to the scrapyard when the supply chain kinks pass. But with suppliers saying he can see some items in short supply in February, rather than in six to eight weeks, he wants a stockpile in case of emergencies — like if an air conditioner fails in the sweltering summer months.
“That’s never been something that … anybody in the industry would have ever been willing to do, but I’m just doing that as a stopgap in case this gets worse,” he said.
Customers can also expect delays and cost increases.
If the company orders a rooftop unit for a commercial building, it can take eight weeks for a truck to transport it from Texas to Colorado, or several weeks just from Pueblo to Craig, Updike said. In more normal times, the shipping would take three days to a week, he said.
Prices for everything from sheet metal to polymers used to make plastic water pipes have also been shooting up without warning. As a result, the cost to replace a furnace has increased $400 from a year ago, and installing a high-efficiency boiler will run homeowners an up-to $14,000 tab instead of the $9,000 or $10,000 it might have been in 2020.
The rate changes reflect the cost increases on the products, Updike said. Workers’ wages have gone up, but he hasn’t raised the labor rate charged to customers yet and feels “duty bound” to keep prices low in a smaller area like Craig.
“I didn’t feel like you could put two increases on a customer at once,” he said.