The complicated web of global supply chain disruption that began with the onset of the pandemic has only worsened this year, and retailers are now looking grimly toward a holiday season likely to disappoint consumers and shareholders alike.
The shipping bottlenecks and production capacity issues that drove up costs and exacerbated delays for retailers have only compounded in recent months, according to Bloomberg.
“I’ve been doing this for 43 years and never seen it this bad,” Isaac Larian, founder and CEO of MGA Entertainment, told Bloomberg. “Everything that can go wrong is going wrong at the same time.”
That includes factory closures in Vietnam that slashed sales forecasts for Nike and Adidas, carrier capacity shortages that have driven freight prices sky high, and raw materials shortages that have left retailers concerned they won’t have sufficient inventory to meet the tsunami of consumer demand that comes with the holiday season.
In an attempt to secure surety of supply, some retailers have resorted to buying goods made years ago. These items ordinarily would be liquidated at closeout stores or sold in foreign markets, but the pressure to fill shelves has retailers desperate.
Ongoing logistics issues have forced retailers to pay tenfold usual prices for cargo space, with many paying $20,000 per shipping container in 2021 versus $2,000 last year. Labor shortages have further mucked up shipping operations, with MGA waiting more than six weeks for product to be unloaded from a shipment of more than 600 containers.
Large retailers have the option to increase spending on logistics operations by enlisting the services of air freight carriers or chartering entire cargo ships to import product. This will undoubtedly have a negative affect on profit margins, but it will better position these major players to meet demand and gain consumer market share.
Some retailers have been storing goods in their own warehouses or renting space to ensure they can fill shelves over the next few weeks in anticipation of peak season. Others have shifted portions of their production to Mexico and Brazil and away from Asian markets that are dealing with factory closures and clogged ports.
Smaller retailers can’t afford these expensive solutions and will likely fall further behind big competitors as a result.
Needless to say, this confluence of supply chain disruption will hit consumers hard in the weeks before the holiday season. The hope is that consumers will start holiday shopping early to ensure gifts arrive on time, but the rise of two-day shipping and ecommerce has lulled many into a habit of waiting until the last minute.
“Consumers might see news about port backups, but that won’t hit home until they try to buy the toy of the year and can’t get it,” said Jennifer Bartashus, an analyst for Bloomberg Intelligence. “That’s when they’ll hit crisis mode.”
Regardless of when consumers start their holiday shopping, they will have less of a selection. Companies including Florida-based toy company Basic Fun have had to make hard decisions about which products are worth shipping.
The retailer is shipping more Mash’ems, because $135,000 worth of the small collectible toys can fit on a single container, rather than Tonka trunks, because only $36,000 of the larger, less expensive toys can fit on a container of the same size.
These kinds of cost/benefit analyses will ultimately force many consumers to winnow down their holiday shopping lists and leave many feeling disenchanted on Christmas morning.
While these supply chain challenges are certainly daunting, retailers can maintain inventory levels and manage costs through deep supplier transparency with the right technologies in place.
Bamboo Rose offers an Agile Purchasing solution designed to help retailers secure commitments on supply early while fine tuning production decisions based on market demand data, making for a supply chain that is resilient to product shortages, but agile to changing consumer expectations.
Agile Purchasing is an integrated solution within the Bamboo Rose platform enabling retailers to submit orders to suppliers that offer an early view of general demand. Over the next few weeks, retailers have the opportunity to collect real-time sales data to identify the sizes, colors, and sell channels seeing the highest demand.
Closer to production, retailers can then submit detailed decisions about size, color, tagging, and destination to suppliers. Ultimately, this phased approach to PO management gives retailers greater market flexibility and increases responsiveness to consumer demand.
Ready to build a more resilient supply chain? Try the Bamboo Rose platform today.