MANUFACTURING AFFECTED BY SUPPLY CHAIN ‘HANGOVER’

LABOR SHORTAGES, DELIVERY DELAYS CONTINUE TO HAMPER PRODUCTION

SAM EASTER

The pandemic is safely behind manufacturers, but the after-effects haven’t faded just yet. That’s especially true for Eureka Manufacturing Co., the swimming pool product and custom manufacturer. Manager Cathryn Binstock said the labor market is as tight as she’s seen it.

“I mean, people will contact you looking for a job,” she said. “You’ll set up an interview, and they just won’t show up.”

Right now the company’s manufacturing facility in Eureka, S.D., has an open welding and office manager position open. In a rural area, it’s always harder to come by work, but right now it seems especially hard to find help.

“We always are open to talk to anybody interested in working at any time, just because we know that it is hard to find someone,” Binstock said.

Though the labor market is cooling, it’s still one of the most marked reminders of a pandemic-era economy that’s only now giving way to a new economic cycle. Manufacturers around the upper Midwest note rising inflation and a few remaining snaggles in supply chains — all signs that, while the tumult of the last three years has subsided, it hasn’t disappeared completely.

Inflation is slowing, for instance, with June inflation figures showing a 3% year-over-year increase in prices – or a 4.8% increase, excluding energy and food. That’s a dramatic drop when overall rates were at about 9% last year.

But at Grand Forks’ PS Industries, Inc., Sales and Marketing Director Mark Haaland notes that some materials costs are still significantly higher than pre-pandemic. He noted that one kind of steel saw prices jump to more than double their pre-pandemic prices; that’s now faded back to about 50% higher, but it’s still nowhere close to 2019 levels.

“Everything has gone up,” he said. “just from material parts to labor costs, they’ve gone up.”

Perhaps the most famous issue of the pandemic-era economy was the supply chain, which became a tangled mess as supply and demand whipsawed global networks. Haaland said that PS Industries still sees some shortages.

“There are still items out there that are unreasonable ... .a lot of stainlesses are getting really hard to find, especially some of the higher-grade stainless,” he said, owing to a trace element used in production that’s become scarce.

Supply chain issues have persisted and shifted, Reuters reports, enough that Dean Croke, principal analyst for DAT Freight and Analytics, told the news service that supply chains are in the midst of a “long-term hangover.”

At DigiKey, the electronics components distributor headquartered in Thief River Falls, Minn., many of those supply chain tangles became apparent quickly. President Dave Doherty became intimately familiar with the “golden screw” effect — in which all the components for a product might be available save just a few, which were bottlenecked during the pandemic.

The company has grown its inventory significantly since then, Doherty said.

“We’d like to have in stock at any given time 95%-plus of what we advertise,” Doherty said. “And so you’re really trying to look at your rearview mirror to see what you’re going to need and project it forward. And there were times at the pandemic at its peak … the parts that were really popular to a high number of customers, the stock was down at the 60%-type of level.”

That’s rebounded back into just under 90%, Doherty said.

“So it’s still not at the 95%-plus, but we’re making gains each month to get some of those hard-to-get products back in stock,” he said.

The future, though, looks brighter. At Eureka, there’s a strong sense that things can’t continue the way they are — the labor market has to change for the better eventually.

“There needs to be change,” she said. “And I think it’s inevitable that it’s gotta happen.”