Yet another round of COVID-19–related supply chain interruptions now is threatening to create supply shortages going into the back-to-school and holiday shopping seasons and put supply chains on a long, complex road to recovery.
“Spot shortages of clothing and footwear could appear within weeks, and popular toys may be scarce during the holiday season,” David J. Lynch writes for The Washington Post. “Even as the U.S. economy is slated to enjoy its fastest growth since 1984, supply lines now are expected to remain snarled through the first half of next year or longer.”
Steve Lamar, CEO of the American Apparel & Footwear Association, adds in the article: “Nobody can get anything. Do your Christmas shopping now.”
The most formidable part from a supply chain management perspective is that the reasons behind these shortages are complex and not limited to one area of supply chain. Instead, the problem is related to the precarious nature of many global supply chains, which have many links around the world that can be more fragile than we’d like to think. Furthermore, the interruptions are linked to nearly every major supply chain process. (See the ASCM SCOR Digital Standard for an outline of the six major supply chain processes.)
In this age of uncertainty, it’s nearly impossible for supply chains to stay ahead of the challenges. Forecasting and planning have never been quite this difficult. In the last 18 months, planning has been turned on its head as surprising demand spikes coupled with operations interruptions have resulted in out-of-stocks for a wide variety of items, the latest of which include air conditioner parts. It’s anyone’s guess what the next high-demand product or service will be, which makes it difficult for organizations to prepare. As a result, sometimes it seems like the bullwhip effect is the new normal for planning.
Localized COVID-19 outbreaks have made it difficult for organizations to reliably source materials, components and products from international suppliers. At the end of May, an outbreak at the Port of Yantian in China reduced activity at the world’s largest container terminal as strict disinfection, quarantine and partial closure measures were enacted. Experts estimate that about 5% of global freight capacity was held up during this outbreak. Weeks after the port lifted its restrictions, there still are shipping bottlenecks at the port as the team plays catch-up.
Sourcing challenges are exacerbated by manufacturing interruptions. New COVID-19 outbreaks in Vietnam and Bangladesh have factories there shut down through at least the end of July and August 5, respectively. Vietnam is the second-largest supplier of footwear to the United States, behind China, so the lockdown likely could affect Nike, Adidas, Puma, Wolverine Worldwide and Under Armour, which all import footwear from the region. Bangladesh is the second-biggest apparel manufacturer in the world, behind China. The mandated lockdown will be a setback for these suppliers at a busy time as global orders for clothes continue to surge, especially as workers return to the office and children go back to school.
Manufactured items are then getting stuck in transit. In addition to the port bottlenecks in China, U.S. railroads are creating some bottlenecks while trying to fix others. Union Pacific and BNSF Railway put a temporary pause on container shipments from the West Coast while they try to expand container-storing capacity. Midwest rail yards are clogged with previous shipments because there are not enough trucks to carry the cargo to its next or final destination. The overall goal is to clear cargo backlogs ahead of the annual shipping season peak, but the pause only puts more pressure on clogged California ports.
Union Pacific CEO Lance Fritz told investors on an earnings call last week, “It's likely these issues will persist through the end of the year as the capacity to move boxes from our ramp to the final destination falls short of demand.”
Reverse logistics challenges are still ongoing too. U.S. e-commerce sales were up nearly 40% year-over-year in the first quarter of 2021 and grew faster than sales in the previous two quarters. Some experts estimate that e-commerce sales will grow 20% by the end of the year. Increased e-commerce sales usually give rise to more returns too — typically at a rate of 20% as consumers send back items that don’t meet look, feel or size expectations. Companies deal with similar transportation challenges for their reverse logistics as they do with their forward logistics. On top of that, because organizations and their partners are working so hard on forward logistics, they do not always have the time and resources to best manage the reverse logistics.
With these challenges and complexities, it is more critical than ever for supply chain professionals to put their heads together to come up with creative but practical ways to bolster global supply chains.
This year, ASCM is excited to provide a hybrid experience for ASCM CONNECT 2021. Taking place October 24-26 in San Antonio and on a connected device near you, this year’s event will enable attendees to tackle these latest supply chain challenges through in-person and virtual educational sessions covering hot topics such as sustainability, dynamic fulfillment, intelligent supply, synchronized planning, resilience and much more. In-person and virtual networking events also will bring together the best supply chain minds from around the world to share ideas.
Early registration rate ends July 31, so register today to save up to $200! We look forward to seeing you!