News that a possible rail strike could halt needed supplies for the Nestle Purina plant in Dunkirk come as no surprise for those in the business world.

Rep. Joe Sempolinski, who was elected in August and will continue to serve the 23rd Congressional District until the end of the year, said he spoke with representatives from Nestle Purina about the possible rail strike. Officials at the Nestle Purina factory in Dunkirk — which makes Purina Pro Plan, Purina ONE, Cat Chow and Dog Chow. The Purina factory in Dunkirk is also the sole producer of several popular Purina treats, including Busy Bones, DentaLife and Prime Bones — are afraid they won’t be able to work if railroad unions go on strike, as was reported earlier this week in the OBSERVER and Post-Journal.

The possibility of a railroad strike was averted shortly after Sempolinski’s visit to Dunkirk. It is just the latest supply chain headache to have plant managers and the CEOs that run national and multinational companies running for aspirin. COVID-related staffing shortages in 2021 affected shipping ports, leaving goods stranded because there weren’t enough employees to handle them. Another contributor was “lean” manufacturing which requires delivery of raw material and a quick manufacturing turnaround to produce goods to avoid having products stored too long in warehouses and waste money on storage.

Shipping has been an issue for Nestle Purina for more than a year, according to Mark Schneider, Nestle S.A. CEO, before the more recent United States rail issues reared their ugly head.

“One element where we’ve seen a bit of easing is around global container shipping rates and availability,” Schneider told investor analysts recently. “So, as you know, that was a major issue in 2021. I think that one has relaxed quite a bit. And it’s not quite back down to where it was before. The price rises started about 1.5 to 2 years ago, but certainly a lot better than we saw last year. At the moment, some of the key supply chain issues are the ones where we had run into our own capacity constraints. So, think about PetCare in the U.S. or think about PetCare in Australia that also was kind of dampening our volume and RIG growth in AOA for the third quarter. And then, of course, obviously, we will need to watch the geopolitical situation for any surprises that may be happening. But I think compared to last year and some of the shipping mayhem, we certainly have seen the situation relax somewhat.”

CHINA SHUTDOWNS

Geopolitics has come into play for Cummins, which has been reliant on semiconductors from Asia to fill orders for Cummins’ engines. Just this week, Kristalina Georgieva, International Monetary Fund managing director, urged China “to adjust the overall approach to how China assesses supply chain functioning with an eye on the spillover impact it has on the rest of the world.” She warned that international tensions between the China and the West and between Russia and the West threatened to restrict trade and its beneficial effect on economic growth and prosperity. She added that while there are concerns about supply chains disrupted by the pandemic, “we have to work harder on finding a way to counter these protectionist instincts” while being honest about supply concerns.

“Sure, on the supply chain side, we continue to see improvement and we also still have issues,” said Jennifer Rumsey, Cummins president and CEO. “So at this point, electronic component continues to be our biggest risk and disruptor. But as you said, there continue to be these dynamic lockdowns in China, congestion in certain ports that is more in the East Coast, more in Europe. And so we continue to see some supply chain disruption. So from where I sit, quarter-over-quarter it’s been improving and we’ve been taking build rates up and able to drive some operational improvement, and those issues are not completely gone. And so that is, in part, influencing this continued expectation that we’ll see improvement going into (the fourth quarter) and into next year.”

STAFFING PROBLEMS TOO

Dennis Oates, Universal Stainless president and CEO, said his company has had issues with supply chain and finding workers. Universal Stainless & Alloy Products Inc. recently reached a new three-year collective bargaining agreement with the hourly employees at its Dunkirk facility represented by Local 2693-01 of the United Steelworkers. The new contract maintains the flexible work rule terms and profit-sharing incentives.

The contract was among the positives Oates mentioned in the company’s issues hiring workers, which has combined with supply chain issues to limit the company’s production in all of its plants.

“Third quarter melt production doubled, increasing every month of the quarter, but we are unable to flex up downstream operations sufficiently to keep product flowing smoothly at a higher rate,” Oates said during a recent investor conference call. “The two obstacles being the labor shortage and supply chain issues with key parts and consumables. For some perspective, we currently have about 460 hourly employees at our four locations. This compares to 400 a year ago and we currently have a need for about 560 employees. We are addressing a portion of this shortfall with increased outsourcing and contractors.”

DRASTIC STEPS

The parent company of the SKF-MRC plant in Falconer is seeing its profits take a hit amidst inflation and supply chain problems. Operating profits decreased to 2.13 billion crowns from 2.67 billion crowns in the third quarter of 2021. At the same time, costs have increased by 2.9 billion crowns from a year ago. The company has worked to increase prices and cut costs where possible, including closing factories in Avon, Ohio; and plants in Avallon (France), Poggio Rusco and Pianezza in Italy. SKF has also fully automated its assembly and packaging lines in Gothenburg, Sweden. Cost saving moves have cut about 1,000 positions, with the majority coming in Europe. Rickard Gustafson, SKF president and CEO, said the company has begun to see lower inflation rates for steel components and logistics at the end of the third quarter, but noted the company is not out of the inflationary woods yet.

“We expect to see continued volatility and geopolitical uncertainty in the markets and as a result, we expect continued high levels of cost inflation, supply chain bottlenecks and volatile demand,” Gustafson said.

BUS PARTS SLOW TO ARRIVE

NFI Group, owner of the New Flyer plant in Jamestown, told investor analysts in late October that the company expects the final third quarter financial statements to show revenue of $500 million to $520 million and adjusted earnings before interest, taxes, depreciation and amortization to losses of between $15 and $17 million in the third quarter. The company expects to lose between $40 and $60 million this year, but also expects to see its finances improve in the fourth quarter of 2022.

Company officials said an inability to receive certain critical parts within NFI’s supply chain remain disrupted, creating continued labor inefficiencies and an increased inventory of nearly completed vehicles, which reached over 400 units at the end of the third quarter. Supply chain issues have also not allowed NFI to increase production rates for orders. While the company has been receiving most of the parts required to complete vehicles, certain critical suppliers have continued to miss agreed upon delivery timelines due to their inability to secure parts. In particular, the company has had trouble procuring electronic controls or other electrical components. NFI officials said supply chain problems will continue in the near-term, but the company has initiated an action plan to position it for a strong production recovery as supply challenges ease.

“The third quarter was another very challenging period as we saw strong demand for our products and services, offset by continuing supply disruption resulting in production inefficiencies and the inability to complete and deliver contractually committed buses. In addition, we continued to experience short-term margin pressure from higher inflation and surcharge driven input costs,” said Paul Soubry, President and Chief Executive Officer, NFI Group Inc. “We have worked diligently with our customers, suppliers, and sub-tier suppliers to mitigate these challenges, and our actions have generated numerous positives, including customer price adjustments, the introduction of many alternative parts and components, and a consistent supply of control modules (which were previously impacting vehicle completion).”