Since 2020, nearly every industry has been impacted by scarcity, delays, and shortages resulting from large-scale supply chain disruptions. Two years later, many ecommerce brands are wondering when they can expect things to return to normal. Unfortunately, experts expect supply chain issues to continue for some time. Let’s break down what you need to know about the state of the supply chain and what creative tactics you can use to overcome disruptions.
Why are there supply chain issues?
The global supply chain is massive, interconnected, and vulnerable to disruption from economic and social changes. So, the onset of the pandemic in 2020 proved a perfect storm. Factories in China, where many global companies source component parts, were heavily impacted by shutdowns for months at a time. Simultaneously, demand grew rapidly for manufactured goods as people were trapped at home and spending less on experiences like travel and dining. Labor shortages impacted transportation logistics, reducing the availability of trucks and drivers. These rapid changes created new bottlenecks in supply chain systems designed to maximize efficiency by reducing sitting inventory. The result is familiar to anyone who produces or sells goods: shipping delays, missing components and products, and lack of warehouse space.
How do supply chain issues affect consumer brands?
For consumer brands, the supply chain crisis hit at an inopportune moment. For many categories, like home goods and electronics, demand grew rapidly in 2020 and 2021. Yet, it became harder than ever to keep products in stock and to get them to customers on time. This supply chain crisis led to many rippling effects for consumer brands:
- Increased the difficulty of sourcing existing materials and products: parts are more expensive, take longer to arrive, and may not be available at all, making it more difficult to keep your existing products in stock.
- Increased the cost and extends the timeline of new product development: shipping delays from overseas, increased costs of materials, and lack of warehouse space make it difficult to efficiently develop new products and bring them to market.
- Affected the customer experience: shipping delays and logistics issues mean consumers are having worse experiences with delivery and returns than ever before.
These particular effects of the supply chain crisis can deeply impact brands built on a reputation for excellent customer experience and innovative product development.
When will the supply chain be back to normal?
There are signs that disruptions to the supply chain may be easing slightly, as overseas freight costs begin to decline. However, fixing supply chain bottlenecks is a tedious process: each time a bottleneck (for example - container unloading time) is addressed, new bottlenecks emerge that require analysis and process changes to fix. As such, high consumer demand and changing order timelines mean that supply chain disruptions are likely to continue into 2023 and beyond.
How consumer brands can combat supply chain issues
For consumer brands, it is crucial to plan and adapt in order to maintain inventory levels and continue to meet customer expectations. We recommend a few tactics:
- Plan further ahead. It sounds simple, but for small and scrappy teams, forward planning can take a backseat to reactivity. Taking the time to forecast demand and make early purchase orders for peak retail seasons like holiday and back-to-school will make your busy season less stressful and leave buffer time in case of delays.
- Optimize your logistics. Make sure your middle-mile transportation, warehousing and last-mile delivery are well-suited to your order volume and market locations. We recommend using a tech-enabled 3pl solution like Stord that can tailor its capabilities to your business needs.
- Set customer expectations. Being honest with your customers can help manage expectations for longer delivery times and product availability. Be sure to clearly communicate your shipping SLAs, and update them frequently. Leverage your marketing channels to warn customers about shipping deadlines for important holidays, and make it clear how to reach your customer service team. If your customer does experience a long delay, consider offering a small discount or gift as a token of appreciation.
- Expand your product catalog without taking on inventory. Expanding your product catalog can grow your AOV, and bring customers back to your store. But, you can avoid the costs of new product development by using Canal to discover new products and partner with trusted brands in our network. Adding products to your store without holding inventory lowers your overhead and operational lift — and Canal handles the logistics of shipping pass-throughs and payments.
The supply chain disruptions that began in 2020 will continue to impact ecommerce brands, but with creative tactics and new technology (like Canal!), your brand can weather the crisis and continue to build brand loyalty with your customers.
Ready to add inventory-free products to your catalog? Learn more about Canal.