I Hope You're Not Tired of Shortages


I'm sure you're well aware of the car chip shortage. It's sad to see the lack of new car inventory the dealers have; and it may continue until sometime next year. But guess what? That's not the only shortage. The rubber industry is another area that may start having problems.

90% of natural rubber is produced from the white sap (Latex) of trees found in the warm humid climates of Southeast Asia. There are 3 things that make this industry prone to shortages:

  1. Climate change: The increase of extreme weather events creates flooding and droughts that harm or destroy the rubber tree plants. In 2020, the spread of a leaf disease did significant damage.

  2. Shortage of Shipping containers: And everyone knows an ant can't move a rubber tree plant…but he has high hopes. (Frank Sinatra reference)

  3. The economics of the growers: 85% of the natural rubber coming out of Southeast Asia is from local farmers. When rubber is cheap the farmers don't make enough money. When rubber is expensive the demand isn't as great. Here's a quick example: The pandemic reduced the amount of rubber being used in 2020 by 5.3%. The local farmers couldn't sell enough so they were forced to spend less on things like; not planting new trees or taking care of existing trees. It takes 4 to 7 years for a seed to grow large enough to produce natural rubber. If new trees aren't planted each year, there will be a future shortage at some point. A very cyclical industry that tends to abuse the growers the most.

So…Why does this matter?

September and October are great months to be thinking strategically about your business. Some things to think about are the potential threats and potential opportunities that come along with a rapidly changing environment. Take time to have regular strategy sessions with your team. Make sure there are action items from these meetings. Keeping an eye on the big picture is more important than ever.

PS.

That's a picture of the World's largest tire. If you're ever driving on I94 in Allen Park Michigan you will see this 80-foot-tall giant tire.

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