Coronavirus supply chain: Discovering resiliency in a disruptive world
The coronavirus has revealed faults in the global supply chain, as companies are discovering that resiliency requires insight and agility.
Surely, by now, all the shipping and holiday supply chain issues that caused so many empty shelves and delayed packages last year are fixed, right? Hardly.
In fact, the global supply chain is in just as bad of shape, if not worse than it was during the depths of the pandemic.
From factory and port shut-downs in Asia to scarce containers and trucks amid a massive labor shortage, the supply chain is in dire straights. The logjams threaten to put a damper on the holiday shopping season.
“We fully expect major delays in delivery going into holiday season,” said Jason Boyce, an Amazon expert and founder and CEO of Avenue 7 Media, LLC, a seller management group for direct-to-consumer brands.
“There’s no way around it,” he said. “It’s not just an Amazon problem. Every retailer will have this issue.”
Supply chain issues spell potential holiday catastrophe
Long lines of cargo ships waiting to unload at the ports of Los Angeles and Long Beach are a stark illustration of the fractured supply chain. A shortage of workers to unload the cargo and drive trucks, combined with surging consumer demand, is creating a perfect storm right just as the holiday shopping surge is about to begin.
Some brands have reported fallout due to supply chain issues and spiraling costs. Citing factory shutdowns in Vietnam, labor shortages, and shipping delays, Nike lowered its fiscal 2022 outlook. Bed Bath & Beyond said higher costs related to supply chain problems cut into its sales and profits, according to CNBC.
Meanwhile retailers like Costco, Target, and Walmart are trying to avoid a holiday disaster by chartering their own boats to carry merchandise from Asia.
Even if an Amazon seller is able to get products delivered and unloaded at their warehouse, getting it all delivered, logged and ready to ship at an Amazon Fulfillment Center can take weeks, Boyce said.
Managing the customer experience amid holiday supply chain woes
For consumers getting ready to start searching for gifts, all the supply chain issues and the spiraling costs of getting goods shipped from overseas means:
- Higher prices and fewer discounts
- More out-of-stock items
- Delayed packages
“No one should expect two-day delivery this holiday season,” Boyce said.
Adding to supply chain mess, the United States Postal Service recently changed its service standards for first-class mail. For mail traveling longer distances, that could mean waiting a couple days more for delivery. USPS also implemented a temporary price hike for shipping during the holidays.
Retail experts say holiday shoppers should start early and might have to settle for second choices, particularly for items like toys and electronics. In fact, there are already reports of shortages of holiday decorations.
Many retailers have already started their holiday promotions, including Amazon.
Hurricane season is here: The global supply chain must prepare
Supply chain risk management must be a priority for the global supply chain industry, especially with the start of the US hurricane season, which forecasters say will be dangerous.
As usual, retailers have a lot riding on the holiday shopping season. And if experts’ forecasts pan out, they should do well despite all the supply chain issues. Deloitte predicts US retail sales will increase 7% to 9% this holiday season as consumers return to stores and restaurants. At the same time, e-commerce sales are expected to continue growing as consumers hang on to COVID-influenced shopping behavior.
Boyce noted that Amazon implemented technology last year that helps a buyer know when to expect delivery. Being up-front about potential delays helps prevent customers from getting frustrated.
“All online retailers need to do a great job at managing expectations with delivery,” he said.
Honesty is the best strategy, advises Ken Merritt, a Korn Ferry senior client partner. “You don’t want to overpromise and underdeliver,” he said in a blog post.
Holiday spending predictions: A return to stores, soaring e-commerce
Experts predict holiday spending to surge in 2021, as confident consumers splurge on holiday gifts in stores and online.
Pondering supply chain solutions
COVID exposed a lot of cracks in the global supply chain, and there’s no easy fix, Boyce said.
“If this pandemic has taught us anything, we need to do more to diversify our supply chain and where we get our goods from,” he said.
Benneton and other fashion brands are shifting away from factories in Asia and moving production closer to home. In the US, some say the solution to repatriate manufacturing jobs.
According to experts at Korn Ferry, potential solutions for holiday supply chain issues include partnering with competitors or businesses that operate similar supply chains in order to share container space. Other solutions could be arranging suppliers and manufacturers in multiple regions, and backup chains.
Technology that incorporates automation and AI can help organizations can help businesses fortify their supply chains and provide better visibility in order to spot problems before they cause disruption.
But as Boyce said, there’s no quick solution. “This will be a 2022 problem,” he said.
