By: Damian Conroy, Supply Chain Director, Olsam
According to Bloomberg, this holiday season won’t be competing on price – the battleground will be availability. This year, a perfect storm of disruptive influences,including high energy costs, geopolitical unrest, and the impacts of both COVID and Brexit, hasaffected shipping lines, the supply of critical components, and the availability of suitable labour.
As a result, many retailers and distributors are finding it unusually hard to manage their supply chains and meet the traditionally high consumer demands of the peak shopping season. Without proper contingencies in place, many will find this year’s Black Friday and Christmas particularly challenging.
Bottlenecks in every link
Supply chains have never been so disrupted or difficult to manage as they are today. What began with the Ever Given container ship running aground in the Suez Canal in March has since escalated. In the UK, the combined effects of Brexit, COVID, and poor working conditions, has led to a shortage of more than 100,000 HGVdrivers. The impact of this, along with disruption to global shipping operations, has seen thousands of containers piling up in Felixstowe and other sites across the country.
The situation has been further exacerbated by Britain’s exit from the European Union. Importing goods from the EU now involves significantly more paperwork than before, which slows the overall process considerably, especially for those smaller businesses ill-equipped to manage the additional administrative burden.
Across the Atlantic, things aren’t much better. Due to overwhelming consumer demand and a shortage of drivers and warehouse operatives, hundreds of container ships have been idling waiting outside US ports for weeks, waiting to unload thousands of containers.
Tim Uy, associate director at Moody’s Analytics, isn’t optimistic about the current situation, suggesting that supply chain problems will get worse before they get better. He suggests that “supply will likely play catch up for some time, particularly as there are bottlenecks in every link of the supply chain.”
So, as we approach the holiday season, the most critical time of year for retailers and distributors, it’s vital they explore ways to ease the pressure of this supply chain crisis.
Easing the pressure
It may sound like common sense, although it can often be overlooked, but it’s crucial to never run out of stock – especially given the current conditions. This might mean ordering earlier in the year than usual, and at a greater scale. Admittedly, this can have a negative impact on a company’s working capital but, as the supply crunch hits, it’ll bear fruit.Not only will it result in higher availability and a lower buy price, but when selling on ecommerce sites such as Amazon, a business will maintain its page ranking – a vital factor in its ongoing success.
Maintaining good relationships matters too. If a company is known as being easy to work with, its vendors are likely to show it the same courtesy. Retailers should keep the people who run the ships on side, for example – in the current circumstances, products sent in pallets can take ages to arrive, whereas products sent in parcelscan be much quicker.It’s important to remember that the relationship between a retailer and its suppliers is, effectively, a partnership. Good relationships, in which a retailer engages with all its suppliers, sharing vital information and ways of working, can therefore help put a business ahead of its competitors in the event of a supply chain crunch.
That said, retailers should ensure they don’t scale any faster than they can manage. After all, the current disruption means this year’s holiday season is like no other. Careful forward demand planning is essential. It may be worth buying from fewer brands than usual, for instance, to ensure that at least most – even if not all – of their customers’ demands can be met. Indeed, working with just three or four key partners will not only enable a company to scale more easily, itcanalso help ease issues such as data capture and, thereby, improve its ability to make critical decisions in this time of high uncertainty.
Weathering the storm
The holiday season is fast approaching – Black Friday is just weeks away – and the supply chain crisis means retailers, distributors, and consumers alike are faced with uncertainty as to just what will be on the (virtual) shelves this year.
To avoid disappointment, retailers should look to remove any complication from an already complicated supply chain. Good relationships with suppliers, a reliance on fewer brands, and effective forward planning and stock management will stand them in good stead to weather this perfect storm of disruption, andensure they’re ready to hit the ground running when calmer conditions return next year.