Supply Chain Crisis Letter from Andrew Morris, National Sales Manager

April 12, 2021December 1, 2022

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Urgent Notification to Our Valued Customers from Andrew Morris, National Sales Manager:

Dear Valued Customer,

Due to unprecedented market conditions, we felt it necessary to provide you this notice about the current state of the global supply chain for specialty chemicals and for adhesives in particular. As part of our mission to be a true “partner” to our customers and not simply a “vendor”, we are sharing these updates with you in the hopes that they will assist you in making important decisions. Drastic and rapid changes in our industry are taking place that have the potential to impact your business and that of your customers. Because of this, we are advising customers to review their procurement processes, inventory planning, how you are approaching quotes, and communicating lead times to your customers. We will continue to share information as the situation evolves.

We are experiencing a global supply chain crisis in our industry that we have never seen in the nearly 60-year history of the company. The two main effects of this disruption are price increases and extended lead times. While Chemical Concepts does work closely with our vendor-partners to optimize our inventory, negotiate pricing, and manage logistics to the best of our ability, changes and increases are happening so rapidly, and without notice that we are unable to control these issues to the extent that we have in the past.

Causes of Current Supply Crisis:

Weather events in Texas – Much of the chemical industry’s infrastructure is based in Texas where some facilities were shut down for extended periods and some sustained long-term damage to their facilities that will take time to fully restore.
Strong global demand – The economic recovery has been much stronger than many expected and many manufacturers made long term planning decisions months ago regarding inventory and staffing levels based on a more pessimistic outlook which did not come to pass
Government and corporate response to COVID-19 crisis – Government stimulus has contributed to strong demand with $13 trillion committed globally. Corporations had laid off personnel and even shut down some facilities due to the looming COVID-19 crisis and many have struggled to return to pre-COVID levels due to loss of key talent and hiring challenges
Transportation costs and distributions – Ports are struggling with backlogs, crude oil prices have increased, container prices have increased, and delays and pricing are increasing rapidly for LTL, ocean freight, and small package services.
Labor shortages and challenges – The COVID crisis has caused many labor challenges that are ongoing as manufacturers are short-staffed, struggling with higher than normal absenteeism, and utilizing a newer, less experienced workforce

Almost daily we are receiving letters notifying us of price increases, force majeure declarations, and extended lead time notifications. The price increases we are receiving are mostly between 10-22%. Lead times are being extended to 4-8 weeks on many products and in some cases more. Our contacts are telling us that supply levels may not stabilize for months and that the best guess is the 3rd quarter of 2021 until things begin to ease. We will provide letters from specific suppliers upon request and we will post them on our website. I have no doubt we will continue to receive such notifications from other suppliers in the coming weeks.

Please be assured that we are doing everything we can to obtain the necessary inventory to keep our customers operational. Specifically, we are increasing inventory levels on core items, negotiating with suppliers and proactively contacting customers for forecasts, and arranging blanket orders and stocking agreements when possible. Please contact us if you have any information about your forecasts or if there are any other impending changes to your buying patterns that can help us be prepared. Until the price volatility changes, all quotations will be valid only for 24 hours as we are unable to guarantee pricing for longer periods. We appreciate your patience and collaboration as we work through these challenges together. If you have any specific questions or concerns, please do not hesitate to contact your sales or customer service representative.

Sincerely,