The supply chain versus the holidays

How retailers are managing consumer expectations
Peter Johnston
NRF Contributor

At some point in the past few months, it became clear that there was a major problem with the global supply chain. By early September there were reports of ships waiting days, sometimes weeks, to be unloaded at major U.S. ports. At the Los Angeles/Long Beach harbor complex on April 13, for example, there were 26 container ships waiting to unload; by October 13, that number had doubled.

Things were no better on the Atlantic side. In Georgia, the Port of Savannah had nearly 80,000 shipping containers at the beginning of October waiting either for ships to take them to their final destination, or for trucks to drag them off to a warehouse. At the warehouses, containers were stacked to the rafters, waiting for overworked crews to find time to unload them.

Join retail supply chain and sustainability experts at NRF Supply Chain 360, June 20-21, 2022, as we take a holistic look at the modes and methods needed to build the future, faster. Learn more.

How it got this way

While opinions differ as to the probable outcome of the current supply chain situation, there is general agreement as to how it came about. The sequence of events was something like this:

  • Early last year, COVID-19 revealed itself to be a global pandemic.
  • Places where a lot of the world’s manufacturing is done — China, South Korea, Taiwan, Southeast Asia, parts of Europe — were hit hard.
  • The number of workers sick or in lockdown forced factories to shut down or reduce production.
  • Shipping companies, expecting a drop in demand, responded by cutting their schedules.

But there was no drop in demand. Instead, demand skyrocketed; people responded to store closures not by spending less but by going online. According to trade and development experts at the United Nations, global ecommerce rose from 16 percent of all global retail sales to 19 percent over the course of 2020. There was a big jump in the United States, where ecommerce rose from 11 percent of all retail sales to 14 percent; the biggest increase was in Korea, closely followed by the UK, China, Australia, Singapore and Canada.

Retailers respond

Meanwhile, the 2021 holiday season approaches, and with it a question: Given the breadth and severity of these problems in the global supply chain, what can retailers do to manage customer expectations and keep their communities happy?

Quite a lot, as it turns out. In early October, Joe Metzger, executive vice president, supply chain operations for Walmart U.S., released a statement explaining what his company is doing to be in the best position to deliver for its customers. Among other things, Walmart is:

  • chartering ships and diverting shipments through less congested ports
  • rerouting inland shipments, using alternative transportation methods to avoid train delays
  • investing in supply-side associate wages, both to express appreciation for their efforts that went above and beyond the call of duty and to meet customer demand
  • hiring more than 3,000 drivers this year, with more in the pipeline
  • hiring for 20,000 new permanent supply chain positions to keep the system moving as rapidly as possible
  • promoting and training thousands of supply chain associates (Walmart plans to hire a total of 150,000 new associates in various positions across the country)

Shopping early and often

In a study of its customer base, Lowe’s Companies learned that more than 90 percent of surveyed consumers are planning to spend as much on holiday gifts this year than they did last year, if not more. Another study revealed that more than half of the consumer base plans to shop for these gifts before Thanksgiving.

“Even before the transportation issues started to surface, we had made a strategic decision to order and bring more product into our warehouses and stores,” says Bill Boltz, Lowe’s executive vice president for merchandising. “We’ve been bringing the product in earlier, and we’ve been able to remain relatively close to the timelines needed to keep price points in line with what the consumers want.”

Having this inventory in hand, Boltz says, creates an opportunity to make customers happy by delivering it quickly. For example, Lowe’s is promoting two-day shipping and curbside or in-store locker delivery of purchases from local stores. The company has stocked up heavily on Christmas and holiday decorations, and as of October 30 will be offering free shipping on fresh-cut Christmas trees with online purchases of more than $45.

Supply chain

Learn about the latest supply chain disruptions within retail and what is being done to find solutions.

Training for an essential profession

One effect of the current supply chain disruption has been to make clearer than ever before the essential role the supply chain and the people who work in it play in retail. To help provide these skilled workers, and to facilitate a career pathway for them, the NRF Foundation has added the Warehouse, Inventory and Logistics credential to its Rise UP skills training programs.

Developed in collaboration with the Association for Supply Chain Management Foundation, the program is aimed at students or employees who are interested in working in warehouses or distribution and fulfillment centers.

“We’ve had a lot of good interest,” says Adam Lukoskie, vice president, NRF Foundation. “We have quite a few retailers looking at the curriculum. There’s the possibility of its helping build a talent pipeline, and of its being used to train new hires.”

Now what?

Jon Gold, NRF’s vice president, supply chain, acknowledges that the supply chain is stressed from end to end. “Demand for goods and materials is far outpacing the system’s ability to supply them, so there’s a logjam,” he says.

“There’s a shortage of shipping containers, there’s a shortage of space available on ships, there are challenges when the ships arrive. Contributing to that are some of the operational practices of terminal operators, such as returns policies. There’s a driver shortage. There are issues and problems at every step of the way.”

And yet. The message from Walmart and Lowe’s, and from the busy promotional activities of thousands of other retailers, is that though the system is stressed and scrambling, it still works. And in spite of everything, it is doing what it is supposed to do.

“In general, talking to members,” Gold says, “despite all the challenges they’re facing, many feel they will have a better holiday season than last year.”

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