4 Ways Supply Chain Disruptions Will Impact the Holiday Season

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Logistics professionals have dealt with a prolonged period of supply chain challenges. Unfortunately, analysts believe it’ll only get worse this holiday season. Here are trends we can expect to see…

1. New Opportunities for Local Sellers

As people experience difficulties obtaining holiday gifts they could once purchase with minimal trouble, many will likely conclude it makes more sense to buy things as close to home as possible. So we will likely see a growth in sales for local retailers and goods. And online marketplaces that offer local made products are likely to benefit too.

Etsy CEO Josh Silverman said, ”… We’re confident that we can serve as a reliable holiday shopping destination due to the power of our community. The Etsy marketplace is structured differently than many retailers. Most of our sellers are businesses of one and don’t rely on just-in-time supply chains to create their unique and handmade inventory.”

He continued, “The average Etsy seller works from home without complex overseas production lines and fulfillment requirements, and their supply chain looks a lot more like locally sourced raw materials and two hands.”

Will small merchants take a chunk out of big retailers sales this holiday season? Read: 4 Ways Supply Chain Disruptions Will Impact the Holiday Season #Retail #SupplyChain #Disruption Click To Tweet

Silverman also mentioned that nearly every item shipped from the United States would have an estimated delivery date. It would be easier for shoppers to search for locally made products they could pick up near where they live.

This doesn’t mean all Etsy sellers or other small merchants will necessarily have an easy time this year. However, it highlights how those entities could use their readiness for supply chain challenges as a selling point.

2. A Period of Extremes

The holiday season often features extremes. Sometimes it’s the weather wreaking havoc for truck drivers delivering goods to destinations. In other cases, challenges come as people feel under pressure to entertain relatives they rarely or never see during the rest of the year. Experts from the University of Buffalo say supply chain extremes will affect logistics professionals and holiday shoppers during the 2021 season.

Mike Wei, an assistant professor of operations management and strategy at the School of Management, University at Buffalo, said, “This holiday season will be a roller coaster ride. Suppliers and manufacturers have been working exceedingly hard to squeeze the last juice out of the supply chain. Yet, given the pervasiveness of the global pandemic, there have been constant interruptions, creating a sense of uncertainty.”

He continued, “This has had a ripple effect on the supply-and-demand relationship and further fueled the supply chain mismatch. What we will see in this coming holiday season are two extremes: Most understocked products will be sold at a premium and run out of stock soon, while other overstocked products will be sold at a loss.”

Nallan Suresh, a distinguished professor at the University at Buffalo’s Department of Operations Management and Strategy, also had specific advice for supply chain professionals. “Even as we are busy addressing every bottleneck in current supply chains, the medium and long-term goals of diversifying our supply sources should not be forgotten.”

4 Ways Supply Chain Disruptions Will Impact the Holiday Season: "Global supply chains are exposed to many more threats than shorter supply chains. Consider shortening your supply chain to improve resilience." -Nallan Suresh, Univ. at Buffalo Click To Tweet

He clarified, “Supply chains that are too long and globally extended have numerous sources of vulnerability. Shorter supply chains, with closer-to-home production nodes, must be cultivated to ensure greater resilience.” Artificial intelligence (AI) could help suppliers know what to expect, too. One study found that AI caused a one-third reduction in supply chain forecasting mistakes.

3. Prolonged Increased Expenses

Insights from people familiar with the ongoing supply chain challenges warn there’s probably no end in sight. Nada Sanders, a professor of supply chain management at the D’Amore-McKim School of Business at Northeastern University, believes they’ll continue well into 2022.

4 Ways Supply Chain Disruptions Will Impact the Holiday Season: "We will see the restructuring of global supply chains in different ways. But that isn't going to play out until 2023." Click To Tweet

“We are going to have a very, very lean holiday season with limited supply on the shelf. The holidays are going to be dismal, with not enough inventory and long lead times, and it is not going to magically improve come January. Those shelves will not be replenished,” she explained.

Sanders also previewed what’s on the horizon, saying, “We are going to see restructuring of global supply chains in different ways. But that isn’t going to play out until 2023.”

Until then, financial resources will play a role in how well supply chain professionals and customers weather these hard times. “People who have more disposable income and businesses that have more cash are going to do better. Because prices are going to continue to go up,” Sanders said.

She then provided a real-life example. “Some businesses like Walmart are chartering their own ships to move their cargo. Last week, somebody who runs a smaller trucking company was telling me that for every cargo load available, he had a demand of almost three equivalents of cargo loads. And it’s going to get worse. We are at a tipping point — an exacerbation that is not going to abate.”

Barbara Hoopes, an associate professor of business information technology at Pamplin College of Business, Virginia Tech, echoed the above comment about financial resources being helpful. “Supply chain challenges will definitely affect holiday shopping. Small businesses, in particular, may be disproportionately affected since they don’t have reserves to handle the disruptions like some larger organizations do,” she said.

Hoopes recommended using local, regional and domestic suppliers whenever possible, even if they’re more expensive. She also advised creating moderately larger supply buffers, pointing out how that approach could help companies access bulk discounts.

4 Ways Supply Chain Disruptions Will Impact the Holiday Season: "Modern digital supply chain networks can warn of disruptions and provide managers with practical responses." Click To Tweet

Companies should also look at using technology to help gather intelligence and manage the the supply chain under volatile conditions. Modern digital supply chain networks use AI to warn of disruptions and provide managers with practical responses. They will track shipments in real time, so companies and customers know in advance when a shipment or order will be late, and can plan accordingly. One Network’s Digital Supply Chain Network’s unique integrated business planning approach uses near real-time demand (e.g. point of sale data) and supply conditions to adjust all long and near-term plans for every item at every location in near real time. This advanced level of supply chain automation significantly reduces “fire-fighting” for supply chain managers, and maximizes sales based on available supply, even during periods of high variability.

Digital Twin technology for supply chains are extremely useful in uncertain times, and can help companies answer difficult business questions, by modeling various scenarios, possible responses, and seeing the likely outcomes of each. They can use them to improve node-to-node movement across the network, or adjust policies to improve the customer experience, or implement strategies and tactics that deliver the highest quality product at the lowest possible cost.

Warehouses can benefit from a host of new tools that help manage and automate warehouse processes. These technologies can help warehouses operate more efficiently, improve throughput, while reducing costs.

4. Risk of Consumer Disappointment Over Shipping Speeds

People are now well-accustomed to shopping online. They still prefer delivery to their doorsteps, despite the growing availability of options that let them buy online and pick up the items locally in a store or at the curbside.

An October 2021 Deloitte survey found 73% of consumers prefer to get their goods via standard delivery. About 43% wanted same- or next-day delivery direct from the retailer. Only one-third of people selected buy-online-pick-up-in-store services as their top option, and 21% did so for curbside pickup.

4 Ways Supply Chain Disruptions Will Impact the Holiday Season: 6 out of 10 retail executives worry about receiving their products on time. Delays impact their shipping time frames and customer service. Click To Tweet

The same survey revealed six in 10 retail executives worried about receiving products on time. Such slowdowns could have knock-on effects on shipping time frames. However, the research indicated four in 10 shoppers would likely start shopping earlier, and 49% would do so because of shipping delay worries.

These statistics highlight the importance of being as transparent as possible with consumers if delays seem probable. If a retailer gets word from a supply chain partner about a product being harder to source than usual, several possible actions exist to communicate with shoppers.

A company might send emails to customers to tell them, suggest product alternatives and post website messaging informing shoppers and potential customers about the supply chain disruptions. This helps set consumer expectations appropriately, reduces disappointment and maintains trust and loyalty.

Anticipate Supply Chain Challenges

There’s no doubt, people working to help the supply chain run smoothly this holiday season will have their work cut out for them. However, planning for supply chain disruptions helps mitigate their effects. And having crisp messaging for customer communications, will help customers understand the complexity and challenges retailers are dealing with, and help protect the long-term customer relationships. But it’s worth looking ahead, to 2022, and considering whether existing systems and processes are really up to the task of effectively managing the supply chain in volatile conditions. Today’s supply chains need to cope with high variability across demand channels, supply and logistics capacity. And with the rapid development of Industry 4.0, Internet of Things, Artificial Intelligence, the new supply chain technology of the 21st century looks very different from the old siloed systems.