This holiday season, the items consumers deck the halls with may depend on what they can find.
The COVID-19 pandemic, extreme weather events and trade issues have crippled the global economy and brought the world’s supply chains to their knees. Economic recovery is underway in many parts of the world and consumer demand is surging for everyday products, as well as artificial Christmas trees, TVs, gaming consoles, toys, turkeys, Christmas lights and other items that are in high demand ahead of the holidays. The trouble is, manufacturers and the supply chains they rely on can’t keep up.
It’s not that the pandemic and other trends broke the global supply chain. These events simply laid bare existing vulnerabilities, such as a lack of visibility into actual consumer demand, fragile planning and production processes, and a lack of real-time communication between the manufacturing enterprise, suppliers, third-party logistics providers and consumers.
Little can be done to alleviate this holiday season’s supply chain shortages immediately, and I’m not usually in the business of making New Year’s resolutions, but I think manufacturers everywhere can agree it’s time to move away from vulnerable supply chains where one broken link causes turmoil. Fortunately, implementing a digital transformation strategy can help, and manufacturers today have plenty of options at their fingertips.
Manufacturing a Magical Holiday Season
When I think of the holidays, I look forward to laughing with family and friends over a home-cooked meal or watching the kids’ faces light up on Christmas morning. These moments, of course, can’t be bought or shipped halfway around the world, but they are enabled by many of the products I hope to fill my shopping cart with.
The American Christmas Tree Association has flagged a potential shortage of artificial trees and other Christmas decor and is forecasting an up to 20% price increase. The outlook isn’t much better for turkey — the #1 Christmas dish in many US states. Ahead of Thanksgiving, frozen turkey inventories were 24% below their three-year average volumes and cost 26 cents more per pound than in 2020, per the USDA. The situation is only expected to worsen leading up to Christmas.
The availability of these products and many others — or lack thereof — varies by industry, but often boils down to unprecedented supply chain disruption linked to labor shortages, rising raw material costs, logistics challenges, factory slowdowns, surging consumer demand and a lack of visibility. Many of the factors that went into crippling the global supply chain couldn’t have been prevented, but they could be mitigated with business planning and strategic investments in digital manufacturing solutions.
Holiday Product Shortages Didn’t Occur Suddenly
Consumers may just be learning of holiday product shortages now, but manufacturers and producers have seen the writing on the wall for weeks, if not months.
Artificial Christmas tree production, for example, may have taken three weeks in 2019, plus five weeks for shipping. But what if production now takes six weeks or longer, costs more due to difficulty obtaining PVC and other materials, and 10 weeks are needed to track down a shipping container? That manufacturer probably knew that demand would outpace supply months ago. Then again, consumer spending was down this time last year, so it’s possible the manufacturer was unable to accurately forecast demand for 2021.
Manufacturers can’t control the pace at which physical infrastructure such as shipping containers or ports are built, or the fact that consumer demand for many products has outpaced manufacturing by miles, but they can leverage digital technologies to eliminate inefficiencies in their design, production and logistics processes. They can also work with partners to build robust supply networks and ensure this year’s Christmas tree and turkey shortages don’t make a repeat appearance in 2022.
Preventing Supply Chain Disruption in 2022 and Beyond
If something isn’t working, it’s time for a change — and many manufacturers are taking note. A recent Futurum Research survey of manufacturers found that 80% of companies do not expect a return to business as usual after the pandemic, and 67% are rethinking their entire business model. For many companies, that change will come in the form of an accelerated digital transformation. Global investment in related technology is expected to hit $2.3 trillion by 2023, per the International Data Corporation.
Here are three strategies to help businesses reduce overhead costs, shorten lead times and improve supply and demand forecasting in 2022.
Implement Risk Management Strategies
The pandemic has exposed the weaknesses and risks of supply chains worldwide, making it more important than ever for manufacturers and suppliers to communicate and respond to market volatility in real-time. When an automotive parts factory in Mexico shuts down, or a shipment gets stuck at a congested port, you need a backup plan. A Supplier Relationship Management solution makes it easy for manufacturers and suppliers to collaborate, identify shipment delays and other risks before they become a problem, and respond in a manner that keeps delivery times and production costs low.
Build a Connected End-to-End Supply Chain
Team up with “Santa’s helpers”, a.k.a. your network of suppliers, outsource partners, customers and everyone at your manufacturing enterprise, to gain real-time visibility into supply and demand patterns. With a connected end-to-end supply chain, you can stay ahead of the curve, manage complex warehouse operations and optimize performance through every part of the value chain.
Alternative Manufacturing Processes and Material Substitutions
The practicality of using different materials or manufacturing techniques varies from industry to industry, but automated planning and scheduling systems help take the guesswork out of the process. Food and beverage manufacturers specializing in canned goods, evaporated milk and other products in short supply this holiday season may be able to substitute another natural ingredient, but they should check the functionality of doing so with their Enterprise Resource Planning (ERP) provider. This approach helps ensure manufacturers make the most cost-effective substitutions possible, and forecast lead times accordingly.
Don’t Make Supply Chain Disruption the “New Normal”
This holiday season’s supply chain challenges may be temporary, but volatility may well become a hallmark component of global trade as the global middle class expands, economic recoveries ebb and flow and disruptors such as climate change accelerate. Digital transformation is part of the solution, but manufacturers must also change the way they think about supplier and logistics provider relationships. A lack of real-time communication and collaboration may have made it difficult to get your artificial Christmas tree shipment into stores on time this year, but these invaluable partners are also the key to ensuring these delays are far and few between.
