New Normal? Fix Kona Business Highlights Supply Chain Shortage As Reason For Shutdown


Kaloko Furniture, which has been providing bespoke pieces for years from its location on Maiau Street in the Costco district, is closing its doors. The owners, Oliver and Julia Kiel, said they could no longer maintain a profitable business model to justify keeping their doors open.

It is not because of a lack of customer demand.

Far from there.

Orders are still plentiful.

They just can’t convince anyone to fill them in on a timely basis, citing the backward supply chain crippling the country’s business sector as the main reason they can no longer afford to keep the lights on.

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“We have no choice,” Oliver Kiel told Big Island Now. “We cannot maintain a business model without furniture. “

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The Kiel are not alone. On the other side of the island of Hawaii, grocery store shelves are bare and goods and items are difficult to find due to an impeded supply chain and reduced labor force across the country. The two factors are a pair of sequelae of the world shutting down during the COVID-19 pandemic and the slow return to economic recovery. While Hawaii, which relies heavily on importing supplies, is used to being at the mercy of freight shipments, scarce supply stock is also wreaking havoc here.

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The problem started as soon as the world started to open up again in 2020, as the nonprofit think tank Council on Foreign Affairs explained in a december article.

A pent-up, pandemic-induced increase in demand for goods exploded as soon as businesses tried to get back to normal, but businesses were not ready to respond. For years, these companies had been disciplined by the market to build ‘just in time’ supply chains and hold little inventory, but this time around they couldn’t scramble at the last minute to keep up. Americans took the money they usually spent on experiments and redirected it to things for their homes, like exercise equipment, office and classroom supplies, and other merchandise.

Coinciding with this, some sectors such as warehousing have struggled to attract and retain workers. These factors were one of the main reasons containers loaded with cargo sat idle at major ports like Los Angeles, waiting weeks to dock.

“As a result, buyers across the country saw scarce shelves and higher prices,” wrote CFA writer Anshu Siripurapu.

For Kiel, custom furniture orders that previously took a few months to pass through its suppliers in Indiana and California are now at least 18 months behind schedule. It’s especially difficult for Hawaiian businesses to order because, unlike the mainland, they have to be worth a full shipping container every time. They can’t just submit a one-part or two-part request. For Kaloko Furniture, that meant filling the value of a container with bespoke parts, up to 30 per container, and then uncovering the entire container, the 30 parts, would take over a year.

Trying to get around the problem by working with producers in China is not a realistic option. This source of production would be achievable if the goal were to obtain cheaper basic furniture, but not bespoke pieces from fine woods.

“My stuff is made in America,” he said. “I am very proud of it.

How long will the backlog last?

No one really knows. The New York Times recently estimated that the current situation is expected to continue until 2022, while the University of Hawaii’s Economic Research Organization, UHERO, has listed the labor shortage as a factor that will slow the state’s economic recovery in 2022.

“Moderate job gains will continue, although labor shortages, the end of support for the pandemic and higher inflation will weigh on progress,” the organization wrote in its December 30 Research Paper, “A Bird’s Eye View on COVID-19, Mobility and Labor Markets in the United States” “Supply chain disruptions could reverberate for some time despite limited and ultra-local responses. “

Eugene Tian, ​​head of research and statistics for the state of Hawaii, said the supply chain problem was not as bad in Hawaii as it was on the mainland.

In fact, data shows that goods continue to flow and change hands in Aloha State. Hawaii’s retail and wholesale sales have increased since March 2021 due to the recovery in tourism.

The real impact of the shortage in the supply chain is on the price, Tian said. The price of raw materials in Hawaii – that’s the average price of a good – rose 7% in the second half of 2021, and the overall amount for 2021 rose 5.3%, the highest of Last 10 years.

How important is a jump?

“The 5.3% increase in commodity prices in 2021 was the highest since 1991,” Tian said.

Add to that the fact that Hawaiian business bankruptcy filings fell 8.1% in 2020 and fell even more, 22.3%, in 2021, and the numbers show supplies are being bought – just at a rate more expensive – and businesses remain open.

“The statistics above show that the impact of the supply chain is mainly on price, not on volume,” Tian explained.

On the island of Hawai’i, businesses are experiencing what businesses around the world face, said Dennis Boyd, executive director of the Small Business Development Center: Goods are hard to find.

“It’s such a big problem, a mega-problem, we can’t really help them much,” Boyd said of the small businesses that come to the organization to seek advice and guidance on how to navigate. in the business world. “It’s already part of the standard. “

The development center, with an office in Kailua-Kona, provides professional advice, research and training to business owners and new entrepreneurs to promote economic growth.

One trend Boyd said he noticed locally during the recent COVID and supply chain disruption is the type of companies that are now entering the market. Individuals always open new businesses, but these operations are less property-oriented and more sole-proprietorship that provide services rather than supplies.

The numbers show it.

In 2019, the center assisted 101 clients statewide, which represented $ 32.5 million of capital injection in the form of loans and various other costs. In 2020, he helped 69 clients, representing $ 29 million. In 2021, it has grown to 73 people but to $ 22.2 million.

People still venture into the business world, but with less. It’s a trend Boyd said he expects to continue into 2022.

“We have seen more people launching as individual entrepreneurs,” he said. “They are still entrepreneurs … People are quite resilient.”

During this time, Kaloko furniture has its clearance sale until February 28.

While the shortage of the supply chain was the main factor behind the store’s closure, it was not the only one.

Inflation and difficulty finding workers were also part of the problem for owners, said Oliver Kiel. If they were to stay, their rent would go up and they had to call ex-employees to come to work in an emergency, so short-staffed they were sometimes.

The unemployment rate in Hawaii is around 6%. That’s a far cry from around 20% during the peak of the shutdown, but higher than the 2% it was at before the pandemic. It has been difficult to find people, as the national reports say, who want to return to work.

All of this together means it’s time to move on, Kiel said.

He’s lucky, he says, because he’s worked his whole life and whatever chapter comes next will be to complete his retirement. He has two hands and will be ready for anything, so the new phase in his life comes with some excitement as well. But he empathizes with companies that have to navigate the current climate for the foreseeable future just to make a living.

“It’s really tricky,” he said. “Nobody has anything… Everyone has the same problem.”



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