When Will the Supply-Chain Strains Finally Ease?

Companies that have been scrambling to get goods into stores and distribution centers by the end-of-year holidays are now starting to take a longer view on when the gridlock that has tied up their supply chains might finally end.

It is a crucial question for retailers and manufacturers planning out capital spending, purchasing and production strategies for next year. Comments from corporate executives on recent quarterly earnings calls and interviews with logistics experts suggest expectations for relief increasingly are being pushed deep into 2022 and even beyond.

Large numbers of companies pointed to supply-chain constraints as a drag on earnings. There are growing signs that issues like port congestion, the difficulty in getting truck drivers, slowing supplier deliveries and rising costs for raw materials and components such as semiconductors are affecting the broader economy.

Companies including Clorox Co. , Majestic Steel USA, water heater manufacturer A.O. Smith Corp. and apparel retailer Under Armour Inc. are undertaking changes in operations and sourcing that will last past the current bottlenecks, signaling that stopgap measures responding to raw materials shortfalls and transportation logjams are being embedded into ongoing operations.

“We feel that the supply chain constraints will continue to be in the market all the way to the second half of calendar year 2022 before we see them abating,” Tarek A. Robbiati, finance chief at information technology company Hewlett Packard Enterprise Co., said at an Oct. 28 analyst meeting.

Under Armour says it has narrowed its spring and summer 2022 order book. “We are taking precautions to navigate some of the volatility and anticipated business disruptions in the first half of 2022,” David Bergman, chief financial officer of Under Armour, said during an earnings call Tuesday.

Consumer-goods suppliers have trimmed product lines to simplify manufacturing and keep goods moving and are expanding their sources of raw materials. Larger industrial manufacturers are resetting assembly lines to make them more resistant to the sort of outages that have hit the automotive sector, where several companies say they now expect the semiconductor shortage to affect their production into 2022.

Ford Motor Co. is “designing for much more interchangeability, fungibility,” and ensuring it has multiple sources for components, said Hau Thai-Tang, its chief product platform and operations officer, during a Monday investor meeting.

Logistics experts say the interconnected nature of supply chains means there is no quick fix to resume the steady flow of goods through the global economy.

“We’ve been looking at no relief coming until the end of the 2022 calendar year,” said Sarah Banks, global lead for freight and logistics at consulting firm Accenture PLC. “But the continuing issues in supply chains raise the question of whether that is still possible. There are some positive signs, but it’s still a guess how long we will be in this situation.”

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She said unwinding the supply-chain snarls will depend at least in part on addressing the impact of Covid-19 on the economy and on operations from factories to port docks.

“There are bigger economic questions that dictate supply and demand,” Ms. Banks said. “Only until it becomes clear how we live our lives with Covid will we know what it looks like for supply chains,” she said.

Lisa Ellram, a professor of supply chain management at the Miami University Farmer School of Business in Oxford, Ohio, said supply chain operations could be closer to normal by the fall of next year. But because of the continuing potential for shutdowns and other pandemic impacts, she said, “I do think Covid is the big wild card.”

Operators in supply chains say the congestion will remain until there are enough workers for trucking, port and warehouse operations.

“I won’t try to prognosticate when and how this ends, but I do believe that it’s going to extend for quite some time,” Bob Biesterfeld, chief executive officer of C.H. Robinson Worldwide Inc., the largest U.S. freight broker, said on the company’s third-quarter earnings call last week.

The trucking industry has long been dealing with a shortage of drivers and high job turnover, but supply-chain bottlenecks have underscored the need for new recruits. Here’s how some companies are trying to get them behind the wheel. Photo: Robyn Beck/AFP via Getty Images

Write to Lydia O’Neal at lydia.oneal@wsj.com

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