Tire economics

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by Emily Atkins

Supply chain challenges have affected my hobbies this summer. In my spare time I race an old car. And although I don’t have a big tire budget – usually one new set for the whole summer – when you are slithering and sliding through the corners, you know it’s time for new ones.

And that’s where I’ve seen the lingering effects of supply chain delays. The tires I use are not made in North America, so they’ve been held up by shipping delays. Enterprising vendors have managed to get some shipped over, but in limited sizes and quantities and for sky-high prices. Fortunately I was able to get my hands on an off-brand set just in time to complete my racing season. But ouch, it hurt the pocketbook!

The situation is the same, but much, much worse for businesses. Either they cannot find the basics they need, or they face insanely inflated prices for materials that arrive late, or they are forced to accept a compromise product, not their first choice.

This has been hitting trucking operators particularly hard. New truck orders are taking up to years to fill, forcing operators to keep units on the road that have passed their useful lifespan. That means increased maintenance costs and growing demand for technicians. With the continuing labour shortage, people with those skills are in short supply.

As a result, trucks are idled waiting for items as basic as tires and brake pads, while service bays are backed up waiting for technicians’ time. It’s a costly predicament.

And with inflation continuing to impact all areas of the economy, it’s not likely to stop soon. However, the chill of recession is upon us, which might even be worse.

At an event I recently attended a pair of CEOs, each with a massive trucking fleet, said a recession couldn’t come fast enough to alleviate the price inflation and supply challenges that are pushing their costs through the roof. And while they are in a reasonably recession-proof business, it’s definitely a double-edge sword for the rest of us.

Costs continue to climb, but the economy is slowing down. Purchasing power has fallen behind the growth in costs for many. And with rising interest rates, the cost of housing and debt is climbing.

What’s interesting in the Canadian context is that thanks to the pandemic, savings have increased, and consumers are less likely to stop buying. The challenge is, as noted above, is whether businesses are able to meet the demand for goods.

Originally published in the October 2022 print edition of Inside Logistics