While there’s no denying supply chain logistics are always evolving, it’s safe to say 2020 caused disruptions that most consumer goods brands aren’t accustomed to seeing. Now there are new challenges companies must tackle to remain successful within the competitive eCommerce space.
Different parts of the world have experienced supply chain issues that have been exacerbated for different reasons. For example, power shortages in China have affected production in recent months, while in the U.K., Brexit has been a big factor around a shortage of truck drivers. The U.S. is also battling a shortage of truckers, as is Germany, with the former also experiencing large backlogs at its ports.
Unfortunately, experts like Tim Uy of Moody’s Analytics have noted that supply chain problems will get worse before they get better.
“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Uy stated in a recent report.
Companies who survived the volatility of 2020 likely did so by way of getting lean, selling through inventory, and focusing on working capital. Suppliers and manufacturers from all over the world have largely been put to the test, encountering massive stock shortages, fulfilment delays, and lengthy backorders on common inventory items.
The COVID-19 pandemic continues to disrupt the supply chain ecosystem with new and unforeseen barriers to both productivity and profitability.
Supply Chain Challenges
- Material scarcity
Insufficient inputs have been a concern since the pandemic began, due to an abrupt rise in consumer demand like never before. Even now, companies and suppliers alike are struggling to meet this demand in the midst of limited availability for many parts and materials.
- Increasing freight prices
Contrary to initial expectations, the need for container shipping has increased considerably throughout the pandemic. With worldwide lockdown measures inciting a surge in eCommerce sales, the response has been a greater import demand for raw materials and manufactured consumer goods (a large percentage of which are moved in shipping containers). And since this demand was much more substantial than anticipated, it was met with insufficient shipping capacity and an unprecedented shortage of empty or available containers.
- Difficult demand forecasting
Demand forecasting in the middle of a global pandemic has added a new layer of complexity to many companies’ supply chain management. The onset of COVID-19 essentially shattered the forecasts for countless retailers and suppliers of consumer goods/services, leaving them without a guide as to how much inventory to stock or manufacture at any given time. The challenge, then, has come from trying to improve predictions for customer demand, while in many ways having to rely on gut instinct rather than data-driven research.
- Port congestion
Port congestion caused by the pandemic remains one of the top challenges for the world’s supply chains, seeing as port owners, carriers, and shippers are collectively still scrambling for a viable solution to this problem. Congestion occurs whenever a ship arrives at a port but cannot load (or unload) because that station is already at capacity. Although the loading/unloading process typically goes according to plan, labor shortages and social distancing associated with the pandemic has notably steered things off course, creating major bottlenecks at a number of busy global docks.
- Changing consumer attitudes
Consumer attitudes and behaviours have changed in some big ways during the pandemic, as well, like lowering the threshold for delivery times and raising the requirements for a positive customer experience. The challenge comes in having an agile supply chain that can harness the power of automations to optimise fulfilment and handle accelerated demand with ease. An excellent example of this supply chain flexibility comes from a multichannel order fulfilment services and inventory management software.
Tips For Overcoming Supply Chain Issues
- Keep liquidity in your business
Protect your business with flexible access to capital. After all, having cash on hand is often the difference between meeting demand and going out of stock. With sharp ebbs and flows of inventory expected in the coming months, it’s wise to consider a flexible line of credit that can be used to stock up on evergreen or perennial items in high demand and pay for priority manufacturing/shipping, or even air freighting.
- Diversify sourcing in your supply chain strategy
Broaden your range of sourcing, perhaps geographically, to increase choice and abundance within your supply chain. By developing a number of supplier relationships, it’s easier to become more flexible and adjust to a constantly changing market (i.e. during a prolonged pandemic that alters the entire global economy). Many times, diverse sourcing is the key to a brand’s success, as it readily locates goods and materials while maintaining profits, growing customers, and boosting innovation.
- Identify alternative shipping ports
Hedge your bets by seeking out alternative ports to meet your fulfilment needs and stay on schedule, regardless of unforeseen events or a sudden spike in customer orders. With DTC brands increasingly dependent on Asian imports, the sister ports of Los Angeles and Long Beach have become the bedrock of Transpacific trade. Given that these ports account for over 25 percent of North America’s ocean freight, it’d be wise to identify a fail safe in case of congestion or other inefficiencies.
- Improve demand forecasting
Without fail, the best way to improve forecasting is by using automations to calculate these metrics on your behalf. eCommerce sellers are always looking for a balance between their inventory levels, warehousing costs, and the demand from their customers to prevent stock-outs or inventory shortages.
The pandemic has not only amplified the need for greater supply chain optimisation, but the need for faster decision-making, too.
Your business can and should leverage technology like Skubana to get a good pulse on everything from customer relationship management to bringing more visibility to your supply chain. Once you have artificial intelligence and analytics to inform inventory build, make sure you have flexible access to capital so that you can place your orders when you need to and ultimately, meet customer demand.