Shortages throughout the supply chains on which corporate America depends are translating into widespread inflationary pressure, a string of US companies revealed this week, disrupting their operations and forcing them to raise prices for their customers.
Whirlpool on Friday blamed "inefficiencies across the supply chain" for "pretty brutal" increases in prices for steel, resin and other materials, saying these would add almost US$1 billion to the appliance manufacturer's costs this year.
"On any given day, something is out of stock in the store," said Vivek Sankaran, chief executive of Albertsons, likening the grocery chain's efforts to respond to successive challenges to a game of Whac-A-Mole.
Asked this week which ingredients and supplies Chipotle had found difficulty securing, Jack Hartung, the restaurant chain's chief financial officer replied: "All of them."
Pressure on every link in the supply chain, from factory closures triggered by Covid-19 outbreaks to trouble finding enough staff to unload trucks, is rippling across sectors, intensifying questions about the threat that inflation poses to robust consumer spending and rebounding corporate earnings.
In recent days the largest US airlines have all complained about the surging costs of jet fuel, toy manufacturer Mattel has spelt out the challenge of higher resin prices and Danaher has joined the list of manufacturers struggling to source electronic components.
On Wednesday the Federal Reserve's Beige Book summary of economic conditions reported that supply chain bottlenecks and labour shortages had slowed the pace of economic growth in much of the country.
"Most districts reported significantly elevated prices, fuelled by rising demand for goods and raw materials," it noted.
Overwhelmed ports, trucker shortages and record low warehouse vacancy rates have collided with strong demand from consumers and corporate customers alike to create "quiet chaos", said Ethan Karp, CEO of Magnet, a non-profit consultancy working with manufacturers.
"They're busier than they've ever been but they can't find the people to ship out what they've already produced," he said. Companies were suffering unpredictable delays and paying over the odds for supplies found on the grey market, he added, but "it's very topsy turvy and it's getting worse because . . . the ports are backed up and the orders keep coming".
Most companies said they were managing to offset these higher costs by raising their own prices or finding efficiencies elsewhere.
Procter & Gamble, the maker of Tide detergent and Charmin toilet paper, said this week that it would embark on another round of price increases after warning that supply chain costs would be higher than it previously anticipated.
Andre Schulten, P&G's chief financial officer, said it had announced price rises for nine of its 10 categories of products in the US, with mid single-digit increases across most of its portfolio.
Earlier this month, PepsiCo said its price increases could continue into the first quarter next year, while Tesla said it was also adjusting prices to compensate for rising commodity and labour costs.
Executives are planning for cost pressures to remain elevated into 2022 but wary of raising prices too far if inflation proves to be shortlived.
"I don't think inflation is going to go away in the next one, two or three quarters," said Hartung, adding that wage inflation was unlikely to be transitory even if commodity prices fell back.
"We know we've got pricing power," he said, but he added: "For some offerings out there, there's going to be a limit to what customers are willing to pay," he said.
Matt Puckett, CFO of VF Corp, said the company had reined in markdowns on its Vans sneakers and North Face jackets to expand margins despite factory closures in Asia and port congestion in the US.
"Over time, I think [inflation] will begin to moderate a bit, but we're planning as if we're going to continue to see pretty meaningful increases in freight moving forward," he said.
United Airlines chief commercial officer Andrew Nocella echoed that message on Wednesday, saying that congestion at US ports meant it was "transporting things by aeroplanes today that we traditionally have not", a situation the company expects to last well into 2022.