Supply Chain Snarls: A Holiday Season Gift that No One Wants

With supply chain snarls set to hit the holiday season hard some of the world’s biggest companies are bracing for product shortages and major disruptions. It can be tough for shoppers to buy their favorite things. Scarcity of drivers, low container availability, and port congestions is expected to have an impact on order fulfillment and timely deliveries. But not all is lost - yet.

Technology can help enterprises take a hard look at their supply chains to identify vulnerabilities and make systemic improvements to enhance resilience. Businesses will need to recalibrate to get better control of their supply chain processes.

What impacted the supply chain

As the world slowly begins its economic recovery with the availability of vaccines and the lifting of lockdowns, consumer demand is seeing an unprecedented rise.

Manufacturers are now struggling to meet pre-pandemic levels of demand due to shortages of raw materials, shipping containers, and manpower. Workforce shortages mean there are fewer drivers to move around the goods. The estimated truck drivers shortage in the U.S. is 80,000, up by 19,000 when compared to last year. The labor-related issues couldn’t have come at the worst time possible with North America’s biggest port in Los Angeles facing a record backlog.

While there’s a logjam of shipping containers at the Port of LA and Long Beach, businesses in China are struggling to ship their products to America. The shortfall in containers has resulted in rising shipping costs and delays. Freightos Index reveals that the cost of shipping a container from China to the West Coast increased to $20,586 in October.

Clogged global supply chains have been further put under pressure with power outages in China hampering production. Gas shortages in Europe have also taken a toll on the already beleaguered supply chain system. Jerome H. Powell, the Federal Reserve chair, recently said supply chain snarls are “likely to last longer than previously expected, likely well into next year.”

The supply chain mess has its roots in the pandemic. China, the manufacturing hub of the world, grappled with covid and imposed lockdowns. Factories and ports came to a grinding halt with a large part of the workforce battling the infection. Production lines around the world went dry and with it shipping companies adjusted to the fall in consumer demand.

How retailers are bracing themselves

A National Retail Federation forecast predicts record-breaking sales that will grow between 8.5-10.5% over 2020 to between $843.4 billion and $859 billion. According to Deloitte, Americans are expected to spend $1.3 trillion during the holiday season.

The holiday shopping boom is set to give retailers a major headache. A recent survey from First Insight and the Wharton School's Baker Retailing Center mentions that a whopping 98% of retail executives are experiencing supply chain issues.

The holiday shopping boom is set to give retailers a major headache. A recent survey from First Insight and the Wharton School's Baker Retailing Center mentions that a whopping 98% of retail executives are experiencing supply chain issues.

Retailers are scrambling to ensure the supply chain woes don’t result in empty shelves and hurt brand loyalty. In a recent blog post, Amazon revealed that it increased ports of entry across the network by 50% and doubled container processing capacity. The e-commerce giant will add more than 85 aircraft to Amazon Air cargo and hire 150,000 to meet the rising volumes of the holiday season.

Like Amazon, Target will hire more staff and will pay an extra $2 an hour to store and service center employees during the season. The retailer will be diverting 50% of its containers at congested ports in Long Beach and Los Angeles at night. They will also increase night pickups by 10% to meet the demand rush. Walmart is hiring new drivers, fulfillment center staff and increasing its storage capacities. The retail mega-giant started chartering ships way back in August to ensure that it had enough freight capacity to handle peak demand this holiday.

Many retailers are pushing consumers to do their holiday shopping early to mitigate supply chain disruptions. Amazon rolled out “Black Friday-worthy” deals starting October, while Best Buy said it will begin Black Friday a week earlier this year on Nov. 19.

The early promotions to lure in customers are supported by solid data. Anxious consumers are wary of supply chain bottlenecks fearing retailers will run out of stock of their favorite products A Deloitte report says that 4 out of 10 consumers will shop early this holiday season. 68% of them want to shop before Thanksgiving -- a three percent increase from last year.

Pivoting to tech-enabled delivery logistics

The holiday season crush presents several learning opportunities, none more important than modernizing the supply chain and making it future-proof. Supply chain and logistics leaders need to embrace technology to make better deliveries and efficiently manage the obstacles we’ve seen this holiday season.

Digitalization of each moving part in the supply chain process can yield multiple benefits. Real-time data can provide predictive intelligence that will enable delivery visibility. Artificial Intelligence-powered dynamic route optimization features will enhance enterprise productivity. Machine-learning algorithms will detect historical data and help businesses in better inventory management. With automation, enterprises can reduce cost, increase compliance and improve delivery management. Tech is needed to make supply chains agile and better prepared for shifts in consumer demand.

In Conclusion

Enterprises need to rethink their supply chain processes for better management of supply and demand shocks. The pandemic revealed several vulnerabilities in the supply chain that have been exacerbated by the surge in holiday shopping demand. These vulnerabilities must be addressed by enterprises.

Businesses need to reassess their approach to avoid future holiday season congestion, and the time is now.

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