“Nothing Goes to Heck in a Straight Line,” except supply chains.
By Wolf Richter for WOLF STREET.
The shortages that have hit the WOLF STREET beer and iced-tea mug are great examples of how screwed up supply chains are, how widespread the shortages are, how they hit some things, but not similar things, until they too suddenly disappear, how the uncertainty about pricing when stuff finally does become available can leave you high and dry, and how surging freight costs are eating everyone’s lunch.
First things first: The mug is not for sale. I send it out as thank-you gift to people who donated $100 or more to WOLF STREET and who specifically say that they want this mug (quite a few don’t). So there is no retail price but only my costs, which includes shipping the mug to the recipient.
90% of the final costs of the mug are provided in the US by US companies and US labor. Services account for roughly 65% of the total costs of the mugs, mainly transportation costs all around. The costs of printing the three-color art on the blank mug accounts for about 25% of the total costs.
The blank glass mug and the packaging materials account for about 10% of the total costs. They may or may not have been produced in the US. I could not confirm their origin.
Here is problem number one.
It’s not any old glass mug but the 16 oz. “Koblenz Beer Stein.” I could shift production to a different model of glass mug, but this mug has become iconic and cannot be changed, ever. This will become important in a moment.
The mug has to be precision printed with wrap-around three-color art that was created by Kitten Lopez, a San Francisco artist and author. Most mug purveyors can only put simple designs, such as logos, on mugs. We contacted a few of them, and they refused to touch this job. We had to find a specialty mug printer, and they’ve done awesome work.
The mug is imprinted with the WOLF STREET dictum, “Nothing Goes to Heck in a Straight Line.” This dictum, however, has now been proven wrong by supply chains.
This is the mug from the front. There is obviously a funny looking wolf on the other side that is howling out the speech bubble:
Here is problem number two.
Back in late May, I did my inventory analysis and determined that I would run out of mugs in mid-November, based on historical mug flow data. So on May 31, I contacted my distributor, Design-a-Shirt, a company in Arizona, to reorder the mugs.
Last time, it took six weeks to get the mugs. So I figured that it might be slower this time, given all the supply chain issues, and I doubled my estimate to 12 weeks. And I’d surely have those mugs by the end of August, hahahahahha.
The mug’s supply chain: Design A Shirt orders the mugs from the mug printer, PyroGraphics, in West Des Moines, Iowa. PyroGraphics orders the blank mugs from its undisclosed supplier in Ohio. That supplier orders the blank mugs from the manufacturer Arc Group. Arc has its own supply chain for materials and equipment.
Arc, which manufactures glassware, mirrors, doors, etc. under various brands, is headquartered in France with manufacturing plants and sales operations in the US – among its entities is “ARC Glass and Mirror Company” in Houston – Europe, and China. I’m not sure where it makes the Koblenz Beer Stein.
So on June 1, in an email, Sarah at Design A Shirt said:
“It looks like there’s some bad news from the glass world, as many industries are facing currently. Glassware stock is a big issue right now.
“Arc has announced that they are ONLY making stock of their Top 50 SKUs [“stock-keeping unit,” a unique code for every product, such as a barcode] to try to keep up with demand.
“The stein #G8664 [the Koblenz model] is NOT on that list, so they will not be making any more blank items until after Oct. 1, 2021 at the earliest.”
Sarah at Design A Shirt then quoted the reply by PyroGraphics to her:
“If the customer [that would be me] wants to wait: We need a PO [purchase order] to get in line for back orders of the stock. Once stock is produced and sold to my supplier in Ohio, I can then buy it from them to come to Iowa for printing.”
PyroGraphics then offered an alternate mug:
“The only in stock glass stein, as of today, is the 13oz #G3329. As of today, there are ~4,000pcs at the domestic supplier. All 15oz or 16oz options are out of stock, same lead time applies. Need your PO to reserve your ware – once this sells out it will be after Oct. 1 for more!”
This is where problem number one kicked in: The WOLF STREET mug has become iconic and cannot be changed, ever. And stepping down from a 16oz mug to 13oz mug – the only available mug – is also out of the question.
I explained this to Sarah and ordered the Koblenz Beer Steins, no matter what the wait.
Waiting for Godot.
On June 3, Sarah got back to me. Now we’re running into problems pricing the shipping costs and getting important details worked out if the mug should ever ship.
I had asked for a truck with a liftgate to drop off the mugs at the San Francisco headquarters of my WOLF STREET media mogul empire. There are 24 mugs in each box. The boxes are shipped on pallets. Because I have no room for pallets, I asked for help carrying the boxes across the sidewalk into the garage.
So Sarah wrote on June 3:
“Their [PyroGraphics] accounting team had us fill out forms to start reserving the stock, so there has been progress, just not with a shipping quote!
“We would definitely be able to reserve a liftgate, but the driver’s availability/capacity to help wouldn’t be a guarantee. As soon as I have the numbers, I’ll get that over to you for your decision, and we have plenty of time to update if needed.”
On June 17, we received shipping cost information from PyroGraphics. Seems like we’re going to get this worked out. Whether or not the driver will be able to help remains an open item.
On August 8, Sarah said that she’d checked with Pyro, “and they replied with more bad news.” She quoted from Pryo’s email:
“We [Pyro] just learned that this item won’t even be produced until Jan. 2022. The glass factory recently let our supplier know that they are now pushing things out further unfortunately.
“The alt [alternate 13oz mug] that I suggested is out of stock.
“Would they [WOLF STREET] consider a ceramic stein? Those they have plenty in stock. I apologize for this delay in stock.”
So the glass alternate 13oz mug that was still available is now also sold out, and the new alternate is a ceramic mug, still plenty in stock. And pretty soon, after everyone switches to ceramic mugs, we’re down to plastic mugs. But then there’s a plastics shortage because the petrochemical industry on the Gulf Coast got hit in February by the Big Freeze, and then by hurricanes, or whatever….
But the WOLF STREET mug is iconic and can never be changed. A 16oz Koblenz Glass Stein or nothing.
If and when I get the mugs, I will have paid for the blank mugs, the printing of the mugs, and the shipping of the mugs from the manufacturer to the Pyro, and from Pyro to me. All this accounts for less than half of the final costs of the mug.
As of today, I still have not received an actual date in 2022 when production of the blank mug will start. And since there are other folks ahead of me in the queue, I don’t know when my mugs will be produced after production starts.
The box shortage hit the mugs last spring.
I wrap each mug individually in special packing paper that I buy from a US company. The lovingly wrapped mug goes into a cardboard box that I buy flat by the hundreds from a big US company. I pick them up locally to save on shipping expenses.
But last spring, when I reordered the boxes, they were on backorder, due to the box shortage, and it dragged out, and I couldn’t get the boxes, and I finally ran out of boxes.
On May 2, I finally got the boxes. So now, I have plenty of boxes, but I’m going to run out of mugs.
Everyone passes their freight expenses on to the next guy, with the ultimate guy being me. These mugs are heavy, and fragile, and shipping them is expensive. A lot more expensive than last time. The most expensive part of the mugs, accounting for about half of the total costs, is shipping the mugs from the WOLF STREET media mogul empire global headquarters to the recipient.
I ship the box in a FedEx Pak on One Rate pricing, which takes about three business days and costs about the same whether I ship across the US or across the Bay. The pricing is lower for most distances than UPS, as far as I can tell. And it’s convenient for me.
Alas, FedEx just announced another price increase across the board, including for One Rate, “during this challenging time,” effective October 4 through January 17, its holiday special, and its rate increase #2 in less than 12 months.
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