Holiday Season Forecast: Supply Chain Disruptions
We hate to be the bearer of bad news, but it appears that supply chain disruptions, port congestion, capacity crunches, and soaring shipping costs are on the forecast for the foreseeable future. As we round the corner of Q3 and move into the fourth quarter of 2021, retailers are bracing for impact as the peak holiday season nears.
Many brands and their crisis communication teams are preemptively apologizing to their customers anticipating the impact of the shipping crisis and supply chain strain on the overall customer experience. Like watching a collision in slow motion, roaring consumer demand and supply chain bottlenecks are coming to a head as we approach the busiest shopping season of the year.
Sound like a recipe for disaster? Supply chain bottlenecks have continued amidst wide scale raw material shortages, rising commodity prices, and a world wide transport slowdown. The pandemic had already thrown a wrench in global supply chains with new regulations and constraints, but many companies did not foresee skyrocketing consumer demand on the horizon. Government lockdowns and global shutdowns did not cause an appetite loss in consumers; in fact, quite the opposite.
Much to many’s surprise, consumers began shopping more than ever from the comfort of their homes which, for unprepared companies, took a toll on inventory and supply.
"Manufacturing is struggling to keep up with roaring demand,"
— Will Compernolle, Senior Economist at FHN Financial
Source: Reuters
Consumer demand has resulted in world wide order delays and tied up vessel capacity which in turn has added to a global container shortage. The growing container demand has driven skyrocketing prices. According to a global pricing index by London-based Drewry Shipping Consultants Ltd, the average price world-wide to ship a 40-foot container has more than quadrupled from a year ago, to $8,399 as of July 1, . The measure has surged 53.5% since the first week of May.
The deluge of shipment delays and container stalls outside major ports have produced cargo volume surges that are difficult to process. Cargo continues to come in and produce a backlog that can take days or weeks for ship crews to get to and unpack. This is a pattern that of which is hurting the circulation of containers and is fueling the rising shipping costs. Not to mention, a shortage of domestic labor has also contributed to prolonged order backlog.
So what does this all mean for the upcoming holiday season? Retailers are uncertain if they can manage demand and keep pace with consumer orders, but one thing is for sure: consumers will face less options and higher prices. Retailers must expect the unexpected. Customers may be more inclined this holiday season to shop brick and mortar where shelves are sure to be stocked with products. Many retailers plan to double down on best selling products to respond to customer behavior effectively by hyper focusing on feasible deliverables.
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In a time of great uncertainty, certainty is priceless. At TradeRiver, we provide small businesses with certainty and peace of mind. Now more than ever, capital is tied up in transit and delayed payments are mounting. A revolving trade credit facility bridges cash flow gaps and provides both Buyers and Sellers with a safety net to ensure operations stay afloat and important supplier relationships are nurtured.
For more information on our end-to-end supply chain finance solutions, please contact us at info@traderiverusa.com!