Supply Chain Disruptions
As with every other aspect of the consumer world during the Covid-19 pandemic, labor shortages have now hit factories and ports that manufacture and deliver many of the products that consumers are seeking.
Raw materials used in products and packaging are in short supply mainly due to the labor shortages, but the slow shipping times have also become a factor. Even if the actual products can be produced, often the manufacturer does not have the packaging to complete the process or to ship the items.
Production outages are occurring as Covid outbreaks continue to happen. Many production facilities have been forced to close for as long as two weeks to help stop the spread of the virus and for additional sanitizing to take place. Many manufacturers are finding it impossible to catch up from their 2-week (or longer) hiatus making their initial targets unreachable. This continues to impact supply across various retail segments.
There are various levels of disruption in shipping including a shortage of available shipping containers. Longer lead times in unloading containers from ships and emptying the cargo from the containers due to labor shortages at the ports has led to a worldwide shortage in shipping containers to fill with newly manufactured goods. There are backlogs of ships waiting in many ports waiting to be unloaded. Existing containers of product are seeing cost increases as well due to the supply and demand inequities. Even items like holiday decorations are being delayed causing retail prices to increase substantially.
The retail experience for shoppers will certainly be affected by the supply chain disruptions and other factors cause by the Covid-19 pandemic. Labor shortages and hiring concerns are a major concern for the upcoming holiday season. Most retail outlets have been understaffed for months. Typically, around this time of year, retail stores begin to add holiday help in November and December to accommodate the longer hours and holiday shopping rush and that labor pool of seasonal workers may not be available this year. This could affect extended holiday hours and limit hours of operation. This also might limit those last-minute holiday shoppers and lead to lower sales overall. These issues will most certainly lead to skewed data which will affect the historical data next year. Understanding how this will alter next year is even more important because if you underestimate your inventory needs for next year, lost sales could be rampant.
Online sales could be affected as worker shortages are an issue in distribution centers and holiday surge shipping and delivery help (think UPS, FedEx, Amazon, etc.) could be compromised.
There will be a wide variety of items that will be affected- primarily imported items, but many domestic items will see shortages as well. Imported chocolate, coffee, cheese and even seafood are all expected to see shortages due to port congestion. Electronics will be especially hard hit as there has been a chip shortage to go along with shipping concerns. Items like smart phones, video game consoles, computers, accessories and interactive toys will all be in short supply.
Domestic items will also be affected as consumers will scramble to replace the imported items with items made in the U.S. plant shutdowns and worker shortages have also affected turkeys, Christmas trees (both real and artificial) and the list goes on and on.
Retail shoppers will be approaching this holiday buying season with multiple strategies. Retailers and suppliers alike should be familiar with these strategies and how it affects not only this holiday season, but the forecasts that will be used for 2022 holiday season as well.
Strategies for Holiday Shopping This Season:
1. Shop early! If you see it, buy it. Don’t wait for it to be marked down or go on sale
2. Add in a shipping cushion time to your transit. Shipping may be delayed even if it is in stock, don’t wait until the last minute.
3. Buy Local – They may be experiencing delays in raw materials so still shop ahead
4. Gift Cards – if something is out of stock now, chances are it will become available after the holidays.
7. Homemade Items
8. Family Heirlooms
Supply chain disruptions are expected to last well into 2022, but should we expect them to extend into next year’s holiday shopping season? If so, do you have a strategy for how you will forecast based on this year’s skewed data? Machine Learning and Control Tower solutions will become even more prevalent in 2022 and will assist companies in identifying pattern changes in the retail buying sector and monitoring shipments in real time. The learning curve for manufacturers, suppliers, and retail outlets will be steep and enablement will need to be accelerated.
New strategies will need to be developed and applied for your company to adjust to this new normal. MorganFranklin’s End-to-End Process assessment and development can help.
MorganFranklin’s End-to-End Process