How to Avoid Supply-Chain Chaos

Fall 2024 has been a tumultuous one for the flooring industry. Hurricane Helene hit six states at the end of September—Florida, Georgia, North Carolina, South Carolina, Virginia, and Tennessee. The Southeast was devastated again by Hurricane Milton. Add to that the U.S. East and Gulf Coast ports shutting down in early October when the union representing 45,000 dockworkers went on strike for the first time since 1977. 

Thankfully, the union representing the U.S. dockworkers, the International Longshoremen’s Association, reached a short-term solution, suspending the strike until January to buy time to negotiate a new contract, thereby limiting the damage to the U.S. economy. A shutdown of many weeks could have led to rising prices and shortage of goods.

However, Mike Ragan, CEO of TranzAct, a transportation solutions provider based in Elmhurst, Illinois, suggests that the flooring industry needs to work many steps ahead of the next impending crisis.

Since the supply chain disruption of 2021, the flooring industry has had to adapt to supply chain disruptions. 

Flooring isn’t an immediate need after a hurricane, such as water, food and pharmaceuticals are, but as homeowners and businesses work on repairs, they need a steady supply of materials over six to 12 months to fulfill restoration projects.

Supply chain and weather disruptions can strongly impact distributors who have leaned out their inventory due to reducing interest expenses and the carrying costs of inventory. 

“Depending on where the flooring’s made, if it’s in one of the Asiatic countries, China, Vietnam, et cetera, that’s likely coming into the West Coast,” Ragan said. “If it’s coming from other places like Europe, Eurocentric, that would be headed to the East Coast. The problem that they’re going to have—and it’s something that a lot of people aren’t paying attention to—is what’s known as the tail effect.” 

Every day that a port is shut down, it takes three to five days to resume normal operations. A port strike of 10 days would take 30 to 50 days to resume normal operations. 

Understanding this tail effect, Ragan recommends that flooring distributors look closely at their key inventory levels and determine whether you can boost inventory from alternate sources. 

“Anyone who views this as a surprise should be arrested for negligence,” Ragan said. “If they need inventory when disaster strikes, they are up the proverbial creek with no visible means of locomotion.” 

The dockworkers issue surfaced year ago, so flooring businesses should have been planning for a potentially major disruption. 

“I understand the variability with interest rates being where they were at, and the economy being where it’s at, you’re looking to stretch the dollar, and so you assume that your normal flow of products is going to be your normal flow,” Ragan said. “Well, what happens when I turn off the spigot for three weeks?”