Supply-chain snarls are fading from the primary challenges facing some U.S. companies as freight congestion eases, shipping costs fall and Asian factories are freed from the Covid- 19 lockdowns.
The benefits are felt by many importers of finished goods, such as the game company Hasbro Inc.,
Sharpie pen maker Newell Brands Inc.
and sportswear manufacturer Under Armour Inc.,
whose executives in recent earnings calls pointed to the supply chain as a bright spot amid darker clouds from rising interest rates and a pullback in consumer spending.
But some manufacturers are still wary because shortages of key parts are holding up production lines and hurting productivity. Dave Regnery, the chief executive of air-conditioning maker Trane Technologies PLC, said in a call on February 2 that supply-chain issues have improved but it will be “several quarters before the supply chain can return to what I call normal.”
Retailers and manufacturers have struggled for more than two years as Covid-19 shutdowns, labor shortages and bottlenecks at ports, rail yards and warehouses delayed shipments and raised shipping costs. Some importers paid more than $20,000 last year to ship a box by sea from Asia to the US West Coast, up from less than $2,000 before the pandemic.
Rising costs and long travel times have pushed some companies to cut slow-selling products and raise prices.
Today, cargo congestion has cleared and ocean shipping costs have dropped to near prepandemic levels. The challenge for retailers is to maintain strong sales and get rid of bloated inventory.
Auto parts dealer O’Reilly Automotive Inc.
said in a call on February 9 that it saw relief in freight and transportation costs after two years of pressure.
Hasbro, which said in January it would lay off about 1,000 workers amid declining sales, said supply-chain delays shouldn’t be as much of an issue this year as in 2022. earnings call Thursday that the company last year pushed back two major game releases by two to six months due to such delays.
“We do not feel that we can return to that issue,” said Mr. Cocks. “We feel that we are very good at our supply-chain issues, and the capacity of our vendors is very good.”
Under Armor executives said in an earnings call on Feb. 8 that inventory levels grew nearly 50% between March and December last year. The athletic-apparel retailer’s chief financial officer, David Bergman, said gross margin declined 650 basis points, or 6.5 percentage points, in the most recent quarter, driven largely by higher promotions and discounts.
Mr. Bergman said that the reduction was “partially offset by 40 basis points of favorable supply-chain effects driven by lower freight costs, which more than offset product cost headwinds during the quarter. ”
Some companies say they still have a way to go before solving supply-chain challenges.
Kraft Heinz The Co.
Executives said they had difficulty obtaining packaging materials for some products. Airbus SE and Boeing The Co.
will continue to struggle with redundant supply chains. And Ford Motor The Co.
Chief Executive Jim Farley told a virtual town hall on February 9 that supply-chain problems continue to hamper the company’s growth.
Benno Dorer, interim president and chief executive of apparel maker VF corp.
said in a Feb. 7 call that logistics and distribution challenges are delaying deliveries to some wholesalers and online shoppers by the end of 2022. But he said he expects the challenges which will be lighter this year.
“Lead times are improving as expected, which leads to better on-time performance, and we’ve seen that with spring deliveries,” Mr. Dorer.
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