Below is a snapshot of the most important trends affecting supply chain, pricing and the PPE industry.
China Lockdowns
Due to increased reported cases of COVID-19, China imposed lockdowns in its two largest cities, Shanghai and Beijing. Cases began rising in March and have since spiraled into the worst flare-up the country has seen since the initial outbreak in Wuhan in early 2020.
Shanghai is at the epicenter of the latest outbreak, reporting upwards of 15,000 new cases per day. China enacted a strict zero COVID strategy. Authorities imposed daily compulsory testing and a lockdown of its nearly 25 million residents. Meanwhile, Beijing officials launched mass testing, school shutdowns and targeted lockdowns in places of reported infections.
Vanguard Safety’s factories are not impacted by the lockdowns and are currently running at full capacity. Transit times to the ports, though, have increased on an average of 1-3 weeks. The shutdowns have also caused extreme port congestion. The port is operating at half capacity, causing 600 ships to wait. This is almost 6 times the number of ships that were waiting outside the Los Angeles port at the height of the backlog in the United States.
Supply Chain & Lead Times
While congestion is still high at west coast ports, ocean freight booking rates decreased by 14% in April and are starting to come back down to normal levels. Lead times are still double pre-pandemic levels, averaging 100 days.
The current contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) will expire on June 30th. Negotiations between the two parties are set to begin this month. ILWU executives expressed optimism that they will reach a deal before the expiration of the current contract. The ILWU represents nearly 14,000 port workers in California, Oregon and Washington and handles an estimated 40% of U.S. incoming container volume. Work slowdowns are not expected due to the negotiations; however, Vanguard Safety is keeping a close eye on the situation and will share any pertinent news.
LTL Trends
High freight demand and supply chain disruption due to the COVID-19 pandemic lingers. Challenges such as inflation and rising diesel prices continue to plague shippers with prices still outpacing pre-pandemic levels. However, April data shows that truck capacity is up and load volume down, resulting in a 15% drop in freight rates over the past six weeks.
Due to the still high rates and supply chain disruptions, many companies are revising their just-in-time inventory strategies to a just-in-case model. This inventory padding means an increase in consolidated shipping, as well as an alignment between suppliers and customers to create more continuity in the supply chain.
Latex Raw Material
Latex pricing has stabilized after a slight increase due to raw material cost increases in rubber. Production capacity is adequate but is still at 90-120 day lead times on average. Vanguard Safety has stock in both our exam and industrial latex gloves. Contact your sales rep or email us at info@vanguardsafety.com for more information on how we can partner with you to meet your needs.
Malaysia Natural Gas Shortage
While there have not been COVID lockdowns, Malaysia is experiencing fossil fuel shortages due not only to the war in Ukraine, but to the rising volatility in the oil market. Natural gas, an essential element in making gloves and PPE, has seen price increases of up to 20%.
Acute labor shortages have also stretched production capacity thin. Starting this month, manufacturers now must pay workers 20% more due to new labor laws.
How is Vanguard Safety Working Through these Challenges?
We constantly monitor the ever-changing supply industry to mitigate the impact to our customers by:
- Increasing Safety Stock – We have adjusted our forecasting and planning to carry more safety stock, ensuring we can continue to be a reliable partner for our customers.
- New Distribution Centers – We are excited to announce that in June we will be opening our newest Vanguard Safety DC in New Jersey! Located at 45 Saw Mill Pond Road in Edison, NJ, this new DC will increase our stock levels and service our customers faster. We are also working on adding two more DCs this year, stay tuned for more information.
- Forecasting – We are planning ahead and working off of forecasts provided by our customers to ensure that we are able to consistently supply high quality PPE. We are 100% committed to providing support to our partners.
- Continued Growth – Vanguard Safety is growing fast! We continue to invest in our growing team to support you. Our company head count has doubled in the past four months, and we continue to hire integrally important people to our roster to better serve our customers.