Supply chains deliver everything from food and household goods to the raw materials for factories, but until COVID-19 few of us realized how fragile they are.

In this six-part series, The Logic examines the weaknesses in Canada’s supply chains, the solutions some companies are trying to apply, and how a shift from “just in time” to “just in case” thinking brings challenges of its own.

Readers are already familiar with the macroeconomic issues at play amid the ongoing supply-chain crisis: GDP numbers have slumped, trade flows have been transformed and manufacturing giants like automakers have had to pare back production amid a shortage of parts.

But beyond the headlines, countless small businesses—from whisky distillers to paint stores—are dealing with the crisis on a daily basis. The Logic talked to five small-business owners about the logistical (and personal) toll of the supply-chain crisis. 

‘I’d be lying if I said we aren’t all feeling burnt out right now’

Jeremiah and Joshua Clark are used to adapting. The brothers, founders of Moonshine Creek Distillery in Waterville, N.B., had set out to open a whisky distillery in 2018, but at that point their grain-based spirits hadn’t aged enough to qualify as whisky. Instead, they decided to specialize in moonshine—a blanket term for high-proof alcohol, typically grain-based and unaged. The rebranding worked and business was going well. Then the pandemic hit.

The distillery survived the 2020 lockdown and by October 2021, the Clarks had a bonafide whisky. But a new set of challenges emerged. It started with glassware. Heightened demand for silica sand—a key material in concrete, glass and computer chips—ballooned during the pandemic, while shipping costs and delays made the product especially elusive. A glass shortage ensued, leaving Moonshine Creek Distillery without access to its signature pistol-grip bottles—a classic moonshine jug with a small handle for hooking an index finger. As a stopgap, the Clarks are paying about triple the cost for a shipping container of generic glass bottles. 

Barreling their spirits has also been a challenge. A surge in bourbon-making over the pandemic drained the supply of American white-oak barrels. The Clarks went from paying about US$200 to US$700 apiece for the vessels, and they’re now waiting up to a year for shipments that once took eight weeks to arrive. 

“This has been a bit of a problem for us, trying to incorporate these additional costs and forecasting,” said Jeremiah Clark, the company’s CEO. “For a small business, we order what we need when we need it. It’s just a better way to manage our money. But now we’ve had to adapt—start buying in bulk in advance. So we’re sitting on a lot of overhead compared to our first two years,” he said. “It does create more economic stress.” 

Clark said they had been planning to decrease their retail prices after the New Brunswick Liquor Corporation implemented a “don’t touch it, don’t tax it” policy in 2019 that removed government markups on products sold directly from the producer. Moonshine opened a bar on-site to take advantage of the policy and boost its sales. “I think they were trying to help us be more competitive,” said Clark, “but all it did right now is help us survive these additional costs.” 

Clark said sourcing their primary ingredients close to home has also helped them stay afloat.  Their grains come from a local mill and they make a rum-like spirit made from maple syrup tapped from trees in the province. 

Overall, Clark said the business is going well, but it hasn’t been easy. “I’d be lying if I said we aren’t all feeling burnt out right now,” he said. “Like a lot of entrepreneurs or small business owners, we do whatever it takes to make sure that we’re keeping the lights on and keeping the dream alive.” – Catherine

‘If we were a normal startup, that would have put us right out of business’

James Keirstead had avoided the worst of the pandemic supply-chain crisis until August of last year, when his order for 67,000 semiconductor chips simply didn’t arrive. 

Suddenly Keirstead’s company, Edmonton-based Levven Electronics, which builds and installs wireless lighting and control systems for homes, was unable to fulfil the bulk of its work orders. Some clients were forced to turn to other suppliers as they waited on long-delayed shipments.

Luckily, Levven has a secondary part of the business building electronics and controls for clients like hot tub manufacturer Arctic Spas. That helped Levven stay afloat as cash flows from its home-control systems division plummeted. 

“If we were a normal startup, that would probably have put us right out of business, because we’ve had no revenue on that side of our business virtually for the last 10 months,” he said. 

Keirstead and his roughly 50-person team quickly made efforts to adapt to a newly constrained semiconductor market, where manufacturers had hiked prices as much as 20 per cent amid global supply shortages.

Levven gets its processing chips from Austin, Texas-based designer Silicon Labs, which in turn counts Taiwan Semiconductor Manufacturing Company among its main suppliers. Chip-upgrading companies like Silicon Labs had turned to smaller wafers—from 180 nanometers down to 40—in an attempt to fulfil more orders, Keirstead said, which forced his company to substantially rework its home control systems.

“We ended up having to go back and redesign a bunch of our products to accept a new chip because the old chip was going obsolete,” he said. 

Levven has since received the majority of the 67,000-chip order, and has now completed more than 4,000 installations in total. Another order of 88,000 chips arrived this July. 

Still, Keirstead worries it may have lost some of its clients permanently. Some in the construction industry have been slow to adopt new technologies like Levven’s systems, which mark a major departure from typical electrical systems by allowing users to control all light switches and power controllers in their home from their smartphones and other devices.

“We’re probably not going to get them all back,” he said. “Because we’re talking about a new technology and a very old industry. Their biggest concern was: ‘What happens if you can’t supply us?’” – Jesse

A ‘deep and ongoing’ component shortage

For Ben Cowie, president of the London Bicycle Café, the lead time for ordering some e-bike parts and models has stretched past 36 months. 

“On the consumer side you might not notice if you walk into our store,” said Cowie of his London, Ont., bike shop. But, “supply chain issues are deep and ongoing,” he said in an email to The Logic.

Cowie’s managed to keep the store stocked and looking more-or-less normal to the average customer, but it’s meant spending more money to take on excess inventory, since he doesn’t know when he might next receive a shipment.

For the bike industry, supply-chain crunches started early in the COVID-19 pandemic. Montreal-based manufacturer Dorel, then the parent company of Schwinn, Mongoose and Cannondale, saw demand surge as people took to spending time outdoors and avoiding transit. With commuters looking for alternatives, e-bikes became their No.1 product. 

That was “excellent news,” executives said in March 2021—except for a shortage of shipping containers that left their products stranded on the other side of the Pacific Ocean. 

Demand has continued into this summer, thanks in part to high gas prices. But like in many industries, a few big companies have cornered the supply chain—like Shimano, which dominates the bike-parts industry and reportedly refused to increase production during the pandemic to meet demand.

“Shimano makes an obscene percentage of global bicycle components,” he said. “So even if they’re impacted by a 10 per cent slowdown, the entire industry is affected.” 

Canada imported at least $187 million worth of e-bikes in 2020. Cowie said the Canadian e-bike market relies heavily on imports, as does the U.S., where the majority of bikes are imported. Supplies have been crunched by closed battery plants in Malaysia, trade tensions and shipping times that at one point last year had doubled.

“Nobody’s been unaffected,” said Cowie. “I expect challenges and disruption to continue into 2023, and while things might be getting a little better, there isn’t a true ‘light at the end of the tunnel’ anytime soon.”  – Anita

‘Before COVID I could call them on Wednesday and it would be there on Thursday.’

Ordering rolls of leuco dye-coated paper used to be no big thing. Before the pandemic, John Marsh—who needs the specialty paper product for his custom labelling business, Elecompack Systems—would receive shipments almost immediately.

But he was forced to change his approach as the supply-chain crisis pushed delivery times further and further out. Supply-chain considerations have become top-of-mind at Elecompack, and orders are now planned out months in advance.

“We’re always trying to keep six months to eight months ahead now,” he said.

“Before COVID I could call them on Wednesday and it would be there on Thursday.”

Marsh’s Oakville, Ont.-based company, whose custom labels are used everywhere from meat-packing plants to veterinary offices, had been contending with a tight paper market even before the pandemic struck. Paper factories, which had for years been trimming back their output, had underestimated demand in recent years and are now struggling to keep up. (A leuco dye shortage hasn’t helped matters).

“We’re in the paper business,” he said. “Paper has been one of the markets that’s been most brutally affected by [the] supply chain and COVID and everything, because even before any of that happened, there was a lot of pressure on paper.”

Part of Marsh’s strategy involved stocking up on products that are cheap but vital to day-to-day operations. He still has boxes of packing tape stacked to the ceiling in the back of his warehouse, bought in the teeth of the pandemic to ensure Elecompack could continue to complete shipments. 

When he saw that supplies for “cores”—picture the little white tubes that receipt paper comes on—were dwindling, he turned to a new supplier in Ohio. Though he would typically order 60,000 to 80,000 cores at a time, he placed an order for 400,000.

“It’s a relatively inexpensive item that for $5,000 we can cover ourselves well,” he said. “If you don’t do it, you could be sitting there in big trouble all of a sudden.” 

Marsh says he’s managed to avoid the worst of the supply-chain crisis’s effects by planning ahead, but his and other paper-dependent companies are still wrestling with supply shortages and higher prices. Costs for the leuco-dyed paper he requires are up around 60 per cent over the last two years, he said. – Jesse

‘It only takes a few times and they’re gone’

It was during one of the worst pandemic stretches in early 2021 that Pete Lewis’s paint-supply store entered a supply-chain perfect storm. 

Paints, primers, brushes, rollers and every other product stocked by his company, Airdrie Paint & Blinds, were already hard to come by at a time when new orders would be delayed for weeks. Then severe winter weather swept across the state of Texas, forcing major chemical giants like BASF and Dow Chemical to shut their facilities. That in turn crimped critical supplies of the resins used to manufacture products like paints and vinyl windows, heaping new pressure onto an already strained market. 

“It was certainly compounding. I don’t think it was one small thing,” said Lewis, owner of the store in Airdrie, a town located just north of Calgary. 

While Airdrie Paint & Blinds operates as a small independent storefront, it’s also a certified seller for Benjamin Moore, the paint and coating manufacturing giant and Berkshire Hathaway subsidiary. While that has given the company a competitive edge, Lewis said, it created its own challenges as paint supplies began drying up. 

“Because of our licensing agreement, we can’t turn to competing companies and bring in another product, so within the products that we have, we have to find something else that works for the customer that is available.” 

Lewis’s store was at times forced to turn away customers and contractors, particularly on larger orders they weren’t able to completely fulfil. He worries that some long-time contractor clients could be permanently lost. 

“It only takes a few times and they’re gone,” he said. 

Adding to his supply chain woes, major manufacturers tend to prioritize supplying big-box stores like Home Depot and Canadian Tire, which pushes smaller retailers to the back of the line. 

Airdrie Paint & Blinds is part of a buying co-op with 250 independent retailers, Lewis said, which has helped bolster his buying position and allow his company to keep prices as low as possible by buying at scale. His company has already faced two “significant” price hikes in 2022 alone as supply shortages linger. – Jesse