Material shortages, port congestion, labor shortfalls, tariffs, and the lingering impacts of COVID-19 continue to create challenges for the supply chain. As we approach the holiday season, major distributors are already warning of potential delays, stock-outs, and other disruptions.
Here’s how these issues will likely impact consumers and businesses during this holiday season — and what they can do to prepare.
The Current State of the Supply Chain
Every link in the supply chain — from manufacturing to distribution to warehousing — is under pressure right now. Rapid growth in retail demand coupled with shutdowns and ongoing labor shortages have made it much more difficult to move goods both nationally and internationally.
Other challenges include intensifying port congestion, rising ocean spot prices, factory shutdowns due to COVID-19 outbreaks in East Asian manufacturing centers, and reduced air freight capacity.
Additionally, labor shortages in the US have caused trouble for the trucking industry and last-mile delivery providers. As businesses stockpile ahead of the holiday season, unprecedented warehouse space shortages are also beginning to concern industry experts.
While efforts are being made to keep goods flowing — like the recent move by the White House to expand hours at the Port of Los Angeles and fine owners of idle containers — experts have no prediction for when supply chain operations will return to normal.
Supply chain challenges will continue to impact businesses well into the holiday season and likely beyond.
High Demand Ahead of the Holiday Season
At the same time, post-lockdown demand surges and a recovering economy have retail spending, often used as a proxy for overall consumer demand, abnormally high.
Real purchases in January 2021 through July 2021 were significantly higher than for the same period in 2020, 2019, and 2018, according to data from the Institute for Supply Management (ISM). In the words of Sue Doerfler, writing for the ISM,“Peak season is no longer a term that applies to the holiday shopping season ... it has been peak season for months.”
However, retail sales are also likely to remain volatile. In Germany, they fell 0.3% in September after an unusually strong August, which saw sales rise a full one percent.
Some retailers and industry experts anticipate growth to cool before a demand spike this holiday, potentially giving retailers, distributors and other businesses time to prepare for the 2021 peak season.
However, consumers may shift their spending earlier to prepare for shortages. A recent parcelLab survey found that 50% of American consumersplan to complete holiday shopping by Cyber Monday.
How Businesses Can RespondPackaging and promotional materials experts like ePromos have recommended that businesses remain open to alternative merchandise solutions and new ideas.
Innovation may be essential as business-as-usual becomes challenging or impossible.
Businesses may find that their usual packaging solutions may not be available or that shortages prevent sourcing a certain material or component. Diversifying suppliers and researching alternatives can help businesses prepare for shortages and disruptions.
Assuming that a shortage is coming and demand will outstrip available supply this holiday season, businesses need to take action soon.
Stockpiling goods, moving orders forward, and communicating regularly with suppliers, third-party logistics and other essential supply chain partners can help companies prepare for a challenging holiday season.
Preparing the business’s reverse logistics process for peak season with strategies like demand forecasting and inflow separation can also help businesses prepare for the likely influx of returns and refunds.
Some businesses, like retailers Lululemon Athletica and Build-a-Bear, are already pulling forward orders in anticipation of high peak season demand and ongoing supply chain challenges.
Businesses Should Prepare for Supply Chain Difficulties This Holiday Season
Experts aren’t sure when these supply chain challenges will end. Businesses should assume that logistics will remain complex through the holiday season.
Preparing now will help companies ensure they can meet elevated holiday demand. Stockpiling goods and staying in close communication with suppliers may help them foresee and avoid emerging supply chain challenges.
Megan Vitanzais a Digital Content Analyst at WebFX. She has over five years of SEO and content marketing experience working with B2B companies.