I know what you’re thinking: A Christmas blog in October! Has the world gone mad?
Hear me out as I explain why Santa can’t procrastinate this year.
If You See What You Want, Buy It!
Everybody has that annoying relative who brags about having all their Christmas shopping done by the end of September. Well, this year the advice from many experts is that you should be that annoying relative, if you want to make sure that that special gift is under the Christmas tree.
This is due to a major toy shortage this holiday season, which is attributed to backups in the global supply chain. Their advice: If there is a hot toy on your child’s wish list, start your shopping now to get those essentials and avoid large shipping costs and potential delays.
The Domino Effect on the Global Supply Chain
To work out why, we must start at the beginning. Of course, it all starts with COVID-19, as the pandemic has triggered a domino effect across the global supply chain. The delta variant has continued to cause plant shutdowns in Asia.
Even when products are manufactured, port closures have caused a bottleneck of supplies sitting awaiting both containers to package and vessels to carry them. This has increased the cost of shipping goods. For example, if it used to cost $3,000 to ship a container from southern China to the west coast of the U.S., it could now cost $20,000 or more. This is going to reflect in the cost we must pay as consumers.
And this has increased congestion at inbound ports on the west coast, where there was a record 70 cargo ships trying to get into the Los Angeles and Long Beach ports in late September.
Then we see labor shortage not only at the ports, but also distribution facilities and the trucking industry.
Which Products Could Be Affected?
- Toys: With many toys already reported to be stuck in containers in ports halfway around the world, those “hot toys for 2021” will be harder to get than ever, and if they are available, they will be at a premium price the longer you wait.
- Gaming Consoles: When it comes to the looming PS5 versus Xbox Series X battle it may come down to “what’s available?” You’ll want to grab a system sooner rather than later, thanks to shipping delays and widespread chip shortages making it harder every day to find one at your favorite retailer.
- Kitchen and Home Appliances: Forget about curling up with a glass of wine and binging Netflix, Chinese appliance companies are experiencing logistics problems with both wine fridges and TVs.
- Sneakers: With large-scale factory shutdowns in Vietnam, congestion at ports, and shipping disruption, footwear companies will have a challenging time meeting consumer demand.
- Furniture: Shutdowns in Vietnam have also affected major furniture manufacturers. Add to this the growing cost of wood and other materials, and you might be reading “The Night Before Christmas” sitting on your lumpy old couch.
- Smart home gyms: The shortage of microprocessors and flash memory chips coupled with shipping delays could delay New Year fitness resolutions.
- Artificial Christmas trees: Yes, if you are looking for a new tree to place the gifts under, the American Christmas Tree Association has reported a potential shortage of trees and other Christmas décor and flagged a potential 20% price increase.
How Can Supply Chains Become More Resilient?
What are areas of focus that businesses should be thinking of to ensure the right solutions are in place to address these challenges?
- Put risk mitigation strategies in place. The pandemic has exposed the weaknesses and risks of a global supply chain. When a furniture factory shut down in Vietnam, or a toy shipment is stuck in a closed port, you must have a “plan B” for your key products or components. By identifying alternative sources of supply and balancing off-shore, near-shoring, and on-shore suppliers and contract manufacturers, you can significantly reduce the risk of disruption.
- Incorporate inventory optimization strategies across your business network to establish inventory safeguards at strategic decoupling points and buffer against disruptive events.
- Improve visibility into actual demand by considering leading indicators like sentiment analysis of what is hot on social media. We also need early signals about actual sales, as well as how and where they are happening.
- Respond to change with synchronized planning and execution. We have seen that the clock speed of planning processes has sped up. Where once we may have had a monthly planning cycle, we now have weekly or — in extreme cases — daily planning. This requires business planning systems that can rapidly simulate scenarios and re-plan based on changing market dynamics, and the flexibility to execute these changes across manufacturing and logistics processes.
- Collaborate with “Santa’s little helpers.” Most companies rely on a network of contract manufacturers, suppliers, and third-party logistics to meet changing customer demands and needs. By connecting with these trading partners and communicating in real time, you can leverage the power of the network to respond to changes in supply and demand.
To learn more about how supply chain leaders minimize risk and maximize opportunities with resilient, sustainable, and customer-centric supply chains, download the recent IDC Analyst Connection.
Follow Richard on Twitter at @howellsrichard.
This story originally appeared on SAP BrandVoice on Forbes.