Supply Chain Disruptions Force Costco’s Response
When the COVID-19 pandemic hit the United States in March 2020, consumers rushed to stock up on essential home products fearing potential quarantine periods and the need for increased disinfection. Items like toilet paper, hand sanitizer, and bottled water quickly disappeared from shelves, leading to some supermarkets having to enforce purchasing restrictions to prevent hoarding. Although the supply chain has since stabilized post-panic buying, a recent announcement from Costco indicates potential troubles ahead.
Costco has disclosed its decision to restrict the buying of toilet paper, paper towels, bottled water, and cleaning supplies. Unlike the initial surge in demand during the pandemic’s onset, this time the issue lies in the supply chain. Manufacturers worldwide are facing challenges such as delays, shortages of labor and materials, and disruptions caused by the delta variant of COVID-19.
Costco’s CFO Richard Galanti highlighted various factors contributing to supply chain pressures and inflation, including port congestion, container scarcities, COVID-related disruptions, component shortages, rising labor costs, and a deficit in truck drivers. Major brands are requesting extended lead times, and finding drivers and trucks on short notice has become problematic.
Costco to restrict purchases of essential items, such as toilet paper, paper towels, and bottled water due to supply chain difficulties exacerbated by the delta variant’s impact. https://t.co/g6VI2x4GwO
— USA TODAY (@USATODAY) September 24, 2021
As a measure to sustain the supply chain, Costco has arranged for multiple large freighter vessels to transport goods independently. These ships are scheduled to make up to ten trips across the Pacific Ocean per year. However, chartering these vessels comes at a cost, potentially leading to increased prices for customers. The scarcity of raw materials further complicates the situation, with Galanti mentioning price hikes of 4% to 8% on pulp and paper goods, as well as similar increases on plastic and metal items.
