COVID, inflation and supply chain disruptions

This is an article for the blog that is only a little late and could shed some light on the near future of our industry, including why we're seeing inflation this year.

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With the arrival of COVID in 2020, the world almost came to a standstill for a few weeks.

First China stopped, then Europe and the rest of the world.

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The worst was expected in terms of consumption and many large companies cancelled orders to their suppliers in Asia, fearing a lack of demand from the markets. But people decided they weren't going to stop consuming and the world didn't stop.

In fact, there was a boom in ecommerce and as soon as the markets took off (around May) consumption also picked up. And this came as a surprise to many (including those of us who write this blog).

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As there is less job security in Asia (China, Bangladesh, etc.) than in Europe, many companies have chosen to lay off employees for fear of the results of the pandemic. When the market reopened and consumption returned to normal, these companies (which in reality supply the whole world) didn't have the staff to keep up with the boom in orders that arose and found it very difficult to rehire, for various reasons.

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This was the first step towards the lack of goods that the world is seeing.

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On the other hand, thanks to the e-commerce boom and the huge need for medical supplies, a lot of merchandise has left Asia for Europe and the United States.

This created a second problem, which was a huge shortage of shipping containers on the market, since they were "all" either already in the West or on their way to the West. At a certain point Asia simply didn't have any more containers to send here.

As the productive economy was still at a standstill in the West due to lockdowns and production shortages, there were no goods leaving for Asia, which means that the containers reached us but didn't return to the primary country.

This break in the chain created the now famous container problem and was the second step towards the breakdown of distribution chains.

Containers on a Ship
Containers on a Ship

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A third component of this problem was the pressure on certain markets and industries by mere coincidence. In the specific case of textiles, the lack of rain considerably reduced cotton production, to the point where there wasn't enough cotton on the market.

We know that it's a market rule that if demand is greater than supply, prices will always rise.

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Thus, we have the first three components that caused clothing prices to rise considerably and the start of inflation around the world.

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Labour shortage + Container shortage + Raw material shortage = Price increase

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I confess that I don't fully understand what is happening in 2022, two years after the start of the pandemic, but the reality is that these problems remain and some continue to worsen.

If in 2020 and 2021 we had problems with a lack of clothes on the market - due to the problems we've outlined above - in 2022 we're dealing with a generalised lack of merchandise, including detergents, paints and other material we urgently need to work, as well as considerable price increases.

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It's not surprising if at some point some companies that do T-shirt printing simply stop for lack of raw materials to work with.

In 2021 we were waiting four months to be able to do embroidery and it saved us the huge stock we had already made. Even so, we've seen a 40 per cent increase in the price of this essential embroidery component.

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Even in 2021 we found it difficult to buy screen printing ink. In fact, we spent almost a month inventing mixtures to make certain colours, as yellow was sold out all over Europe. This was after we had stocked up for several months.

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In 2022 we see the first signs of a shortage of inks for direct printing, with increasing difficulty in acquiring this material to work with.

Due to inflation it has been difficult to keep the company afloat

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In the field of clothing, the situation has been chaotic for several months. Brands such as Sol's and Kariban have had three-month breakages in most of their clothes, with successive delays in replacement and, although at the beginning of the year on a smaller scale, the problems of supplying promotional clothes continue.

In 2021 alone, we saw price increases in clothing four separate times. In January 2022, new increases have already been announced and tabled for some brands. Unfortunately, it looks like the figures will continue to rise.

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In 2021 we lost tens of thousands of euros in (previously confirmed) orders cancelled because we couldn't supply the clothes to complete them.

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All this causes inflation.

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In the last two years, we've seen the biggest (minimum) wage increases we've ever had in Portugal, totally in contradiction with the development of the economy, and we see that there are fewer companies working and those that are holding out have no choice but to increase prices to meet this extra cost (once again, inflation).

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In our case, we kept our prices as long as we could. Unfortunately, with the brutal increases in raw materials, wages, electricity and gas, we had no choice but to raise our prices considerably as well. In many situations we have even realised that if we maintained our 2020 prices we would be working at a loss.

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