By R. Steven Tungate
We are experiencing a perfect storm. Major media outlets are reporting significant shortfalls and supply chain disruptions across all industries.
At Toshiba, the most significant challenge is the availability of new machines, accessories and parts that we primarily get from our manufacturing plants in Asia. Demand is outpacing supply.
Currently, our order backlog is at pre-pandemic levels, and our supply line is struggling to keep up. As a result, we have instructed our local Toshiba teams to openly communicate the supply challenges to our customers.
With our toner and supplies manufactured in Mitchell, South Dakota, production schedule and supply chain have had minimal disruptions. This is great for our existing customers. We are not immune to these issues that are impacting our ability to supply product.
Be assured, we are doing everything under our power to eliminate, reduce or create counter measures to reduce the impact of these issues on our customers.
From an operational perspective, we can summarize this into production challenges and supply chain challenges.
• Production in components such as harnesses, motors, switches, and LED’s have been below our demand for most of 2021.
• Note that many of these components recover at different times, we anticipate all to recover until the middle of 2022. We are getting some components to keep production going, just not enough to meet our overall demand.
• Internally, we are optimizing our production to meet the current backlog of customer orders. We are flexing on our labor based on the supply and timing of components.
• Currently, we are estimating the middle of 2022 for a return to production flow unless other disruptions surface.
Supply Chain Challenges:
• The challenge starts with a global container shortage which is driven by the extended time a container is in the chain. At Toshiba, the total time our product is in the pipeline is well over double what it was prior to the pandemic. The pipeline now has double the number of containers in route compared to a typical business route. This lack of containers impacts all industries and in turn, delays scheduling.
• Once our product gets on a container, we are experiencing delays in booking these containers on ocean vessels. Ocean carriers are not getting unloaded on a timely basis, reducing the availability of vessels available to be loaded. Although we use alternative ports, our primary route from Asia are the ports of Long Beach and Los Angeles. These ports are a large share of the Asian container traffic, U.S. Vessel wait times have gone from a few days to many weeks. Most of us have seen the overhead shots of vessels near offshore California waiting for a port berth. We have seen this situation play throughout ports across the U.S. and Canada.
• Once through the ports, shortages of truckers, chassis and rail yard capacity has caused additional domestic delays. Inconsistency within the pipeline has decreased our ability to provide definitive commitments reducing the confidence we have in the information about when product will be arriving. We use the best info we have available to address customer requests for information.
Toshiba is paying significant supply chain premiums to do what we can to move product without passing these costs to our customers. Often that means paying four-or five-times previous ocean pricing. In very urgent situations, we are paying 45 to 50 times the price of normal shipments from Asia at a significant loss to the business. We do this to protect our contractual obligations and our customers.
In order to help the Toshiba operational and supply chain organization, we ask that our customers share as much as possible about required customer installation dates. We want to move product directly from the supply chain into customer service. This allows us to manage this situation and our customer needs as quickly as possible. The better we communicate, the better we can serve our mutual customers.
Although this paints a bleak picture, the good news is that demand has significantly recovered. Our year over year shipments are up significantly and will continue to exceed the previous year each month. The production and supply chain issues are understood, and bottlenecks are being addressed by counter measures with our suppliers and supply chain partners.
We have developed many new communication processes to make the most of the product we have and are managing the costs of these disruptions the best we can.
As always, we at Toshiba appreciate your business. While the global market continues to dissipate, our team continues to develop processes and key partnerships in preparation for the future.