Canadian Tools Maker Lee Valley Warns of Yearlong Supply Delays
(Bloomberg) -- Canadians looking for the perfect holiday bench plane, cookie sheet or gardening trowel may find themselves out of luck amid growing supply chain disruptions and rising inflation.
The head of Ottawa-based Lee Valley Tools Ltd. says the company is facing unprecedented backlogs as transportation costs soar and international shipping delays mount.
“To bring in a container from Asia that used to cost C$7,000 now costs C$34,000 unless you’re Home Depot and can afford to charter a ship,” Chief Executive Robin Lee said in an interview. “I don’t think the public understands how much of what they buy is comprised of freight.”
Meanwhile, shortages for raw materials, such as magnesium, are slowing production of finished goods, causing further delays and price increases. High-grade Baltic birch plywood used in some Lee Valley products now costs twice what it did a year ago, Lee said.
The family-owned firm, famed in Canada for its high-end woodworking tools, kitchen gadgets and gardening paraphernalia, has gone so far as to warn customers to temper their holiday expectations.
“We are now seeing lead times for some products that exceed one year, if our order even gets accepted -- and not all do,” Lee wrote in an email to customers. The retailer is releasing its Christmas catalog “uncomfortably early” and customers “can count on many prices increasing,” he wrote. Right now, he expects those increases to be between 5% and 9%.
Bank of Canada Governor Tiff Macklem said Thursday that inflation, driven by supply chain disruptions, is likely to last longer than originally thought.
“Measures of inflation are probably going to take a little longer to come back down,” he told reporters following meetings with the International Monetary Fund and World Bank in Washington. “These supply disruptions, they continue to be viewed as transitory, but they are likely to be more persistent than most of us thought around the table.”
Labor costs are also rising at Lee Valley. Since its beginnings as a mail-order company founded in by Lee’s parents, Leonard and Lorraine Lee, in 1978, the company has maintained a “pay slope,” in which the highest-paid worker doesn’t earn more than twelve times the wage of the lowest-paid worker.
Despite this, the company is facing labor shortages and is increasing salaries to retain workers, as well as offering flexible hours. There is a shortage of machinists, in particular, as many older workers retired during the pandemic and the talent pool of new immigrants shrank, he said.
“We don’t know how good we had it two or three years ago with the availability of goods and services,” Lee said. “It’s not like one tennis ball is going through a snake, it’s like the snake is going to be eating tennis balls for another 18 months.”
©2021 Bloomberg L.P.