The supply chain slowdown and back-up came about because of a confluence of factors that all came together in a “perfect storm”. COVID-19 stopped or slowed much of the manufacturing production in Asia, where a tremendous number of goods are made, and companies didn’t have back-up supplies on hand because they had kept very lean inventory in order to limit their costs. Demand soared during the pandemic when people began to spend their money on goods, rather than experiences, and all of this happened at a time when people’s expectations for quick delivery are as high as they’ve ever been.
Today’s supply chain wasn’t built to have the sort of resiliency to deal with this kind of situation; it was designed to ship truckloads of goods to stores or warehouses, not manage smaller groups of individual packages being delivered to stores and homes, all on varying schedules.
Focus On What You Can Control In The Supply Chain
All things considered, there are still things retailers can do to keep operations on the right track going forward – if you can’t make things run entirely smoothly you can make them run a bit less disastrously than anticipated into the new year. Here are a few tips:
- Start Promotions Early. Stretch the demand curve out. Amazon achieved this by offering ‘Black Friday-worthy’ deals as early as the beginning of October. By spreading out the peak volume and modifying your promotional schedule you can increase your chances of avoiding a disastrous lack of supply during the seasonal crush or running into delivery partner capacity limitations.
- Offer Incentives. Incentives are a great way for brands to spread out delivery commitments. Retailers took some of the pressure off the crush of Black Friday and Cyber Week by saying to buyers who’ve loaded up their carts online: “Hey, we’ll give you 10% off if we can ship this next week instead of tomorrow.” Empower customers to select the urgency associated with their purchases, and actively be part of the solution rather than being wary or disgruntled at possible delays.
- Focus On Digital Presence. By leveraging multiple channels and embracing an omnichannel strategy, retailers and brands can offer customers more ways to shop, think curbside pick up or varying shipping speeds. Ultimately, a digital focus enables retailers to optimize inventory across locations, making stock available for sale regardless of where it is in the supply chain and avoiding sitting inventory.
- Shop Around For Regional Delivery Partners. Insulate against national delivery partner risk by thinking aggressively about shipping alternatives beyond FedEx, UPS, DHL, USPS and Yodel, etc. Amazon is capitalizing on its own delivery partner fleet through the current crisis. But even the smallest retailer has options. Shop around for local and regional transportation options and you will likely find competitive pricing.
- Have Conversations With Customers. Many brands have a bit too much of a tendency to act like a vendor rather than a partner. They focus on KPIs and contractual commitments and that works fine during normal times, but these aren’t normal times. If you approach customers early and tell them, “this is what’s going on this year, here’s how we’re trying to deal with it, and here’s what you can expect,” you decrease the likelihood that they’ll feel blindsided and surprised. It also prepares customers to actively make choices about the sort of incentives that brands can offer, as outlined above.
Labor: The Elephant in the Room
Ultimately, the biggest challenge this year has been the scarcity of labor. That’s the wild card. Every single retailer and supply chain leader is having the labor conversation daily. Across industries there has been a significant worker shortage this year for a variety of reasons. Figuring out how to manage that, either by spreading things out geographically with distributed order fulfillment, or simply spending more on labor, will be a key factor in how successful retailers will have been this season and into the new year.
If there’s a winning strategy amidst this year’s challenges, its biggest component may be letting customers know what’s going on in advance, and working with them to figure out alternative delivery and pricing options. Trust and reliability are absolutely critical to maintaining customer loyalty. Talking to customers early year-round, and often, could make all the difference.