Supply chain issues 'driven by three key variables,' Veritiv CEO says

Businesses across industries are feeling the pinch from supply chain bottlenecks and labor shortages. The same scenario is playing out at one packaging and publishing company, according to its chief.

The intense crunch felt by Atlanta-based Veritiv (VRTV), which sells packing and paper products, is "really being driven by three key variables," CEO Sal Abbate told Yahoo Finance Live (video above).

#1: Unprecedented demand

"First is just the unprecedented demand," Abbate said. "We're just seeing record demand across many of our products... [from] the packaging products in particular [to] even our print business, which has been in secular decline, is actually booming right now."

The "unprecedented demand" is not only a result of pent-up demand after millions of Americans spent many months in quarantine during the COVID-19 pandemic but also the e-commerce boom, he added.

Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, California, U.S., October 1, 2021. REUTERS/ Alan Devall (Alan Devall / reuters)

#2: Raw material shortage

Meanwhile, the surge in demand is matched with a shortage in raw materials.

"Resin-based products, obviously paper corrugated, we're seeing escalating prices," Abbate said.

Other firms have also reported supply chain challenges for getting required goods due to congestion at U.S. ports.

Many expect the flow of goods to continue to be slow and backlogged into next year. According to a recent survey by Oxford Economics, out of the 56% of businesses affected by the supply chain crisis, 64% expect the crunch to end only after mid-2022.

Worker Martha Escobar sorts products after they've been labeled with the help of a Rapid Robotics system at Westec Plastics Corp warehouse in Livermore, California, on August 19, 2021. REUTERS/Nathan Frandino (Nathan Frandino / reuters)

#3: 'War on talent'

And to make matters worse, labor is also a key problem area that's keeping Veritiv from meeting the surge in demand, the CEO said.

"The most significant is the labor shortage," Abbate said. "You know, with 2.7 million people still short in the workforce, the number of people per open jobs [is] at half of its normal rates."

The challenges Veritiv is facing is in its supplier base, Abbate explained. At its manufacturing facilities, the company has had to offer sign-on bonuses and really ramp up offers in order to be "ultra-competitive for the war on talent out there, particularly in those frontline jobs."

Abbate expects this crunch to persist through the first quarter of 2022.

A container truck arrives at the Long Beach Container Terminal at the Port of Long Beach on November 12, 2021 in Long Beach, California. (Photo by FREDERIC J. BROWN/AFP via Getty Images) (FREDERIC J. BROWN via Getty Images)

Barclays estimates that supply chain bottlenecks have shaved around 50 basis points off of global GDP growth, according to a Nov. 18 note.

Meanwhile, inflation in America reached a 30-year high in October: The Consumer Price Index (CPI) increased by 6.2% in October as compared to the previous year, the largest 12-month increase since November 1990.

Leaving out food and energy prices — both considered to be more volatile — the index rose by 4.6% over the same duration and saw the biggest jump since 1991. Retail sales also rose in October, and electronics and appliance stores saw a big increase in sales.

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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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