Amid a fresh rise in the number of coronavirus cases, Costco has reinstated the purchases limit on certain products. Not only Costco, but US sportswear giant Nike has also said that it is facing shortages of certain items because of global supply chain problems. These major companies warn of product shortages at a time when Delta variant continues to spread in several parts of the world. The products on which the purchase limits have been placed are toilet paper, paper towels or bottled water, and cleaning supplies. The US retail giant has limited the number of these items a customer can buy. The decision has been taken mainly because of the increase in demand for these products amid a surge in Covid-19 cases. But that is not the reason behind this decision. The company is also facing problems in finding trucks, shipping containers, and even drivers to get items transported from the warehouse to its stores. Costco CFO Richard Galanti said that there are several factors that are impacting our supply chains. “From port delays to facing shortages of containers and from Covid-19 disruptions to shortages of trucks and drivers, everything is impacting the supply chain. There are shortages of raw materials and components. The cost of labor is also a major issue. There are various brands that are left with no option but to request longer lead times.”
During the coronavirus pandemic last year, Costco and several other retailers had a tough time keeping those products on their shelves. This was mainly because of the panic buying among customers who were clueless about how long they will have to follow Covid-19 appropriate behavior. Manufacturers were also unable to keep pace with the surge in demand. The rise in the number of coronavirus cases may be causing an increase in demand for some other items. But the CFO, while speaking to investors after reporting quarterly results evening, mainly emphasized items that are facing issues in getting delivered to the stores. Galanti said that the supply chain issues have forced the company to order items much earlier than it would have done during normal days. But experts say that the policy adopted by Costco could prompt more shoppers to run behind these products. This is because shoppers have become conditioned to respond to panic buying whenever they face similar situations. Professor Steven Taylor of the University of British Columbia’s Psychiatry Department also emphasized that community leaders have failed to convince people and control incidents of panic buying. Galanti said that the situation is now completely different from what people faced last year. “When coronavirus pandemic started a year ago, there was a shortage of merchandise. But now we have plenty of merchandise and the shortage of products is mainly because of delivery delays. Short-terms changes to trucking, shortage of drivers, and some other factors are responsible for this,” he said. Galanti also said that Costco is trying to stay ahead of the curve by ordering goods in advance so that they are always available in stores.
Moreover, Costco has already hired three ocean vessels. The CFO told investors that these vessels would transport several thousand containers of the company between the United States, Canada, and Asia. According to officials of the company, each ship will be capable of carrying 800 to 1,000 containers at a time. Nike too is facing a similar problem and this is why the shoe brand has cut its sales outlook for the year. “We are not immune to these things,” said Matthew Friend, the chief financial officer of Nike. The time to get its products transported from Asia to North America has now doubled. The time taken has now increased to 80 days from the previous 40 days. The company is seeing a rise in transit time in other parts of the world. Moreover, the firm’s factories in Indonesia and Vietnam have been hit by the local lockdown. This has impacted the firm as these two firms make around three-quarters of the company’s shoes. Retailers have been facing widespread disruption since economies have reopened. This is mainly because of a surge in demand for imports. This has not only resulted in shortages of clothes, pet food, timber, and toys but also pushed up consumer prices. Sportswear giant Adidas and toymaker Hasbro have already warned of supply shortages ahead of the holiday season.