What is the Current State of the Supply Chain?
Updated: Jan 12
Navigating the Current Supply Chain Shortage: Strategies for Managing Inventory and Maintaining Business Continuity
Unprecedented supply chain delays have plagued industries from automotive to grocery to tech and beyond in 2021. Consequently, consumers are no longer seeing many of their staple products on store shelves, and retailers (especially smaller ones) are being forced to rethink how they operate.
So what created these challenges? And what are organizations doing to avoid being a casualty of the current supply chain crisis?
Rising Operational Costs
Access to Materials
Access to Capacity
Rising Operational Costs:
A massive labor shortage has been felt across industries since the onset of the pandemic, with several factors combining to leave positions unfilled. First, workers have become increasingly selective about their employment. Quarantine made many workers reassess their current working conditions and leave in favor of remote opportunities, higher wages, and better benefits. This difficulty in recruiting and retaining employees has stoked increased wages and benefits, giving larger corporations (with larger pools of resources) an overwhelming advantage.
Before the pandemic, sending a container from Shanghai to Los Angeles could cost $2,000. By 2021, the same trip could be as much as $25,000. Executives at Sysco say they have “never seen prices this high.” Slim margins within the industry mean that these increased operational costs often are pushed to the consumer unless you’re an organization that can absorb a certain percentage. As always, increasing costs to the consumer opens the risk that they will seek alternatives.
Labor costs aren’t the only ones that are on the rise. A shortage of materials like aluminum, glass, and packaging materials (the list goes on) has inflated costs around sourcing these and more items. And with such high demand for transportation services, the cost of getting your items in a shipping container, although starting to drop, is still prohibitive for many companies.
Amazon CEO Andy Jassy reported that the company expects “to incur several billion dollars of additional costs” in the last months of the year due to “labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs.” Such costs are well within the company’s means, but smaller retailers won’t have the deep pockets to make these changes.
Access to Materials:
The growing list of materials in shortage has created a dynamic shift between supplier and buyer. When the supply was meeting demand, costs in most cases were manageable for organizations, great and small. Now, the scarce materials are going to only the highest bidders.
Perhaps the most visible example of this is in grocery stores. Grocers are finding it increasingly difficult to stock shelves with staple products from canned meats to toilet paper to dairy. Which items will be low and when has been very difficult to predict. Once again, the scarcity has driven prices sky high, and the highest bid won’t be your small local grocer but large chains that have the resources to compete.
"Lack of enforcement of antitrust laws in the grocery marketplace has allowed dominant retailers to secure more favorable terms and ample supplies of high-demand goods while leaving many smaller retailers with limited selections or, in some cases, bare shelves." - Chris Jones, National Grocers Association.
Access to Capacity:
National Truck Driver Shortage, economics behind deficit~ 40% of time lost for long haul drivers due to supply chain delays, traffic & weather. With demand outpacing supply, carriers have the ability to be picky on who they haul for. For large shippers like Amazon & Walmart, they have an advantage with an open checkbook and the overall transportation spend to monopolize available capacity.
To respond to the driver shortage, some top retailers have doubled pay for drivers. In an industry with historically low pay and poor working conditions, drivers are either changing careers or driving for these mega-corporations. These corporations aren’t without their own shortage obstacles, but it’s the smaller ones that have begun closing their doors.
Even many of the top retailers fall short in visibility across their supply chains. The pandemic didn’t create the problem but it did make it more obvious. The handoff between transportation and warehousing needs to be seamless. Every time it’s not, the result is costly network wide. Trucks backed up at the warehouse, shipments not arriving on time, disruptions in transit, over and under-manned facilities all result in a lost opportunity.
The cause of these inefficiencies is visibility. For most retailers, management of the supply chain is siloed and very manual. This makes it difficult to organize all the moving parts into an optimized, seamless workflow, and not only that, but monitor that workflow so that when hiccups arise, you can pivot in real-time to avoid disruption.
This is why there’s a developing trend among retailers to adopt cloud-based, predictive software to monitor and optimize their supply chain. Only about 25% of retailers currently use this type of software, but its use is projected to grow substantially in the coming year. While most continue to manage everything manually (phone & email), such software will give early adopters a significant advantage.
BiggerPicture is a dock management application that provides:
Smart scheduling to determine the optimal dates/times to schedule orders
A bird’s eye view of the freight flow to coordinate seamless interactions between carriers and facilities.
Real-time intelligence to anticipate disruptions and manage the workforce accordingly.
BiggerPicture is an affordable solution that makes retailers of any size more competitive. By eliminating waste in the supply chain, retailers can redistribute labor, money, and other resources to where they are really needed in order to weather the shortage.
Switch from manual scheduling to BiggerPicture dynamic scheduling