I work for the largest global packaging company (food & pharmaceutical) as a corporate engineering senior manager, which also happens to be one of the largest consumers of polymer based resins. Those resins are post-refining petroleum by-products, sourced via both domestic (CONUS) and global refining.
Covid was already hitting resin production hard due to workforce reductions that shut entire refinery complexes down. Logistics and trucking companies were hit in the same manner.
The plastics manufacturers suffered from lower available employees and plant shutdowns to disinfect, which included extruder runouts and product disposal. Anyone with any knowledge of layered resin and extrusion processes, whether co-ex, blown film, blowmilding, cast extrusion, or sheet thermoforming, also knows shutting down and starting up those lines is a labor intensive and time consuming process. And if not done right, whether due to poor resin quality or key employees out on Covid leave, requires that the line shutdowns, cleanups, and startups begin all over again.
Do a little critical thinking and root cause analysis, you will eventually ask the same question those in manufacturing already have - why would a slight disruption in the supply chain have such a drastic impact on society as a whole?
J.I.T. - "just in time" manufacturing. Based on government tax laws and regulations, companies are charged taxes for products in their plants, i.e. inventory (resins, raw materials, spare parts, etc), wip (partially completed products), and final assembly finished goods. Which led us to J.I.T. - minimizing the amount of raw materials, spare parts, and finished goods in the supply chain. This leads to higher profit margins and EBIT for companies, and forces them to "make to order", using sales forecasting and assumptions based on prior year seasonal changes. So they end up with smaller finished goods on the market.
So Covid impact was the first negative input to the manufacturing supply chain. And a significant one at that, I might add.
Then the hardest winter storm to hit Texas, Louisiana, and Oklahoma in the last 130 years, occurred when Covid was already hitting the raw material supply chain very hard. And where are the majority of the domestically produced resins originating? Yep, you guessed it - Texas refineries, Louisiana refineries, and Oklahoma refineries. Oklahoma and Louisiana were able to get back online relatively quickly due to more effective power grids. Texas on the other hand, combined with their un-regulated energy market and very poor decisions on the windmills, natural gas compressor pump purchases they've made over the years, ended up with power outages in excess of 2 weeks, followed by additional rolling blackouts. Some of our plants are running day by day because the resin producers can't keep up.
As I said before, we make food and pharmaceutical packaging. We swing a big hammer on the plastic resin market. A real big hammer. And these resin suppliers are telling us to pound sand and declaring 'Force Majeure'.
There is a basic hierarchy of needs that prioritizes what companies will be 'triaged' to keep online. In the grand scheme of things, food and medical supplies will take priority over TVs, appliances, automotive components, as well as chainsaws and outdoor power tools.
Is is stupid? Absolutely. We've voted for politicians who have legislated tax policies that have forced companies and manufacturers to avoid inventory tax penalties by keeping less stock on hand, or even worse, relocating that manufacturing outside the US and Europe.
So, just as most of our problems in life, this is self induced.
