"Supply chain" is the buzzword of the moment. That's because every link in the global supply chain has sustained disruptions that have been impacting businesses and consumers alike, and will continue doing so through the holiday season and into 2022. Here are some actionable steps companies can take to quell future interruptions.
Place deadlines on seasonal peaks
Peak season for most retailers historically refers to the busiest months of the year--November and December--though it's extended on both ends in recent years to accommodate e-commerce driven consumer demand. As that demand has grown, carriers have set holiday shipping cutoffs, which brands and retailers have also adopted, to ensure customers and their loved ones receive packages on time. To keep customers content and interested, the timing and messaging behind these deadlines must be carefully considered and delivered.
During the second week of November, environmentally friendly personal care brand Love Beauty and Planet began asking shoppers to sign a pledge called "Plan It for the Planet" which is dedicated to finishing shopping one week before certain retail partners begin holiday rush shipping. The pledge aims to not only to circumvent shipping delays but to reduce the impact of emissions caused by rush shipping, as well. I'd call that a win-win.
While the holiday season marks the traditional peak retail period, setting order deadlines comes in handy in various categories at other times of year when a surge in activity is expected.
Keep sourcing local
During Newell Brands Inc.'s Q2 2021 Results Earnings Call, CFO Chris Peterson touted how the company, which makes Sharpie markers, has benefited from keeping much of the manufacturing for its writing business in the U.S. According to Mrs. Peterson, it has allowed the company to avoid issues now commonly associated with ocean freight, ports, and several other areas that are affecting some of the company's other businesses.
Sourcing materials from local suppliers is well worth looking into, and not just because it can reduce lead times. Other conceivable advantages include reducing minimum buys, retaining more control over your materials, and lowering overall costs.
Build up inventory
Figuring out the perfect inventory balance when facing shortages is tricky work and the right approach is dependent upon various factors. Ultimately, you want to create a stockpile of supplies that can sustain your business through several months of disruption; this may entail an array of components from raw materials to finished goods. Some companies try to stay as lean as possible with a just-in-time (JIT) inventory strategy, for example, only stocking what's expected to sell, plus some safety stock.
A good starting point for identifying ideal inventory levels is to use the economic order quantity (EOQ) formula to calculate ideal order sizes, and reorder point (ROP) to determine the specific level at which stock must be replenished so you know exactly when to place an order.
It's important to work with your fulfillment partner or whoever manages your inventory to guide you in terms of identifying ideal quantities, timing, and navigating costs and risks costs associated with excess storage.
Track threats to the supply chain
Companies and analysts are constantly on the lookout for supply chain impacts on business. Myriad strategies, technologies and software are available to help companies keep track of potential interruptions to supply chains on their own.
For example, you can conduct manual or AI-enabled mapping to create a global map of your supply network, assess risk factors using a weighted ranking system, or utilize the Value at Risk metric from the Association for Supply Chain Management (ASCM), which allows businesses to compare the risk levels of various suppliers. There are also environmental analysis solutions, aggregate apps that provide geopolitical overviews, systems that defend against software supply cyberattacks, and much more.
From port congestion to reduced air freight capacity to labor shortages and more, keeping up with the rapid growth of retail and e-commerce has made the movement of goods difficult. There is no consensus on when supply chain operations will return to normal; in the meantime, be as prepared as possible by staying agile, alert, and ahead of the game.