Supply chains have been suffering from intense issues for the last couple of years due to problems such as repeated outbreaks of coronavirus, which led to production lines grinding to a halt and many people only being able to work if they could do so via a digital platform. These intense supply chain issues will continue into 2023 as post-pandemic issues, labor shortages, and the Russia-Ukraine war grind on.
We’ve all learned how vulnerable global supply chains are, and supply chain issues can hugely impact retail businesses’ bottom lines.
Within the last twelve months alone, 85% of companies across the UK and the US had to deal with significant disruption in their supply chains. This led to over half of them having to deal with stockouts, which, on top of soaring costs, heavily disrupted both the US economy and US supply chains.
The supply chain crisis also has a profound impact on customers—the average shopper was let down four times while shopping online during the last peak season.
However, there’s reason to hope despite the crisis. Every issue comes with a solution. We’re going to delve into the causes behind supply chain problems. Then we’re going to explore some of the most common and effective remedies.
Major causes of supply chain issues
Are you frantically searching online for “beat supply chain crisis” for tips on how to help your company weather the storm? In order to minimize the risk to your business caused by the supply chain crisis, you have to understand what’s causing the problem in the first place.
Various disruptors have impacted the global supply chain, and the issues keep evolving. The following eight reasons are a good starting point and will explain the reason behind most supply chain management issues you’re likely to encounter.
Changes in consumer demand
Consumer demand plays an important role in the supply chain as the ultimate goal for each merchant is to find the most cost-effective way to meet customer demand as much as possible in order to maximize revenue and profit.
Let’s consider a clear example: the semiconductor chip shortage of 2020 that was caused by the high demand for new technologies such as electric cars. Automakers found it difficult to meet demand due to insufficient capacity at computer chip manufacturers and logistics problems exacerbated by the pandemic.
The global lockdowns in 2020 also meant that consumers completely shifted their shopping behavior, including where they shop, what they buy, and how they shop. This made many people turn to online shopping, and there was a clear change in the goods they wanted to buy.
For instance, homeware and beverage goods soared in demand, while jewelry and luxury goods declined because consumers spent much more time at home.
Sudden increases (or decreases) in consumer demand can make it difficult for suppliers to keep up.
Lengthy, unpredictable lead times
Merchants in booming sectors like homeware and sporting goods have probably suffered from lengthier-than-ever and unpredictable lead times in the last couple of years.
Lead-time fluctuations actually made a dreadful impact on customer acquisition because of negative online reviews from unhappy customers who couldn’t get their orders on time. Bad reviews push new customers away.
A mix of factors have led to lengthy lead times, such as shortages of raw materials, shipping containers, and labor. And those shortages continue to have an impact on lead times.
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Limited warehouse space
Lengthy and unpredictable lead times also have an impact on warehouse space. A great number of merchants have overbought goods to mitigate the impact of lengthy lead times in order to be able to deliver goods to their customers.
However, as customer demand has shifted fast, many retailers are now suffering from overstocked items that they bought previously, which now occupy their warehouse space and hold valuable cash that can’t be invested in new goods.
It’s also much harder to organize space inside a warehouse when nothing arrives on time. If you’re setting aside space for a specific delivery, but it’s held back due to labor shortages, you’ll have to either rearrange your whole warehouse or look for extra warehouse space.
Inadequate shipping containers
Without container ships, you can’t shift large quantities of stock. Despite the fact that the global economy sees a surge in the number of ships and containers deployed each year, there isn’t always enough for everyone who needs them.
American imports of Asian goods are growing particularly quickly, and exports from Asia are using up more shipping containers every year, leading to a shortage of shipping containers in the region.
It can get difficult for the right number of shipping containers to be available at the right time with these levels of demand. That’s why inadequate availability of shipping containers contributes to supply chain issues.
Rising numbers of cargo ship problems
Suppose you’ve got enough cargo ships, and they’re ready to go at the appropriate time. That means everything’s in good order… right?
Not quite, as it turns out.
Cargo ships can run into all kinds of problems. Whether it’s sanctions on specific items in specific places, bottlenecks from too many ships trying to depart at the same time, or political situations that affect travel, many factors can delay or even prevent cargo ship arrivals.
Insufficient port space for unloading
In major ports, like the ports of Los Angeles or New York, you’d think there would be plenty of docking space. However, these ports are very popular, making it difficult to find enough space for everyone to unload their goods in a timely way.
At the same time, companies with warehouses close to smaller ports might find that there just isn’t enough dedicated space for unloading in the first place. That creates major delays, especially when coupled with other factors.
Interrupted unloading operations
Strikes, unexpected weather problems, and worldwide shutdowns can all stop an unloading operation in its tracks. Sometimes, unloading can be over 90% complete before it suffers from an interruption, which could go on for indefinite periods of time. And when it’s impossible to keep unloading, the goods can’t get to where they need to go.
Lack of equipment and labor shortages
The global supply chain depends on the workers that keep it moving and the tools they use to do so. Without the right numbers of workers and equipment, transporting stock can slow to a crawl or even a complete standstill, making inventory replenishment more difficult.
Changes in the labor force don’t always follow expected patterns, either. Consider the sudden drop in the size of the workforce at the start of the global lockdowns, for example.
How to mitigate supply chain issues
We’ve covered some of the most prominent examples of supply chain issues, so now it’s time to look at the best ways to address those issues. The following best practices and tips will guide you toward the right solutions and ensure that they don’t crop up again later on.
Sell on multichannel
One of the most important lessons that the last couple of years have taught us is to have a multichannel approach so that you can capture your customer demand as much as possible.
However, a multichannel approach also means multiple challenges. Firstly, you must be able to quickly push your offering to a new sales channel, such as Tik Tok or Instagram. This means you need a flexible front-end solution.
If you’re not selling on those platforms yet, Shopify could be a good option as it allows you to sell on those social platforms very quickly. Secondly, you’ll need to understand what products are selling and how much inventory is needed for each channel to avoid overselling or running out of stock.
Accurate inventory forecasting and planning is challenging. If you’re still using spreadsheets for it, consider upgrading to a specialized inventory planning software for higher accuracy and less hassle. Last but not least, you’ll need to sync and update inventory levels across all your sales channels and warehouses in real time to avoid any discrepancies.
The best option is to go with a Retail Operating System that integrates seamlessly with major e-commerce platforms and offers inventory planning and management functionality.
Plan your inventory purchasing ahead
Although supply chain disruptions are unpredictable, you can adjust to any issues or changes faster if you plan purchasing far enough in advance. For instance, when facing fluctuating lead times, if you’re able to quickly update the lead times, you’ll know better when the inventory is likely to arrive and whether you need more inventory or not based on new sales forecasting.
However, planning purchasing ahead requires greater capability in future demand forecasting and flexibility in planning adjustment. Look for an advanced inventory planning tool like Inventory Planner to help you better plan your inventory ahead of the curve with its flexible lead time management and forecasting methods.
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Focus on your most-profitable products
With supply chain issues hitting hard on merchants’ bottom lines, less is more. This means focusing your cash and time on less, but higher revenue or profit products to keep a healthy cash flow. So you can avoid draining your cash on slow-moving products and ensure you have enough time to manage your bestsellers appropriately.
However, do you know which products are most profitable to your business and how much inventory you need to just meet demand? If not, you need an inventory-planning solution that gives you an in-depth view of your products’ performance and tells you how much inventory is needed for each bestseller and when you need to reorder.
Be careful with “safety stock”
Safety stock is a widely used inventory management technique to reduce stockout issues, especially in the last 12 months when the supply chain was heavily disrupted.
However, safety stock can be risky to your cash flow because it’s actually excessive inventory that isn’t selling and holds your cash, and you need a good cash reserve to be able to react to any unprecedented shifts that might happen.
If you’re using safety stock, it may be time to re-evaluate your forecasting process.
Check out this blog post: The case against safety stock: why it doesn’t work and what to do instead.
Automate your supply chain operations as much as possible
You must be agile to react to any supply chain disruptions to survive and thrive. If most of your time is still spent on manual work, you’ll never be able to react quickly enough to supply chain disruptions.
So you need the right solution to automate laborious but low-value tasks throughout the whole supply chain to free up your time. Automate things like inventory receiving data entry, updating order status, routing orders, creating goods-out notes, printing shipping labels, placing purchase orders.
Knowing exactly where your inventory is at all times is incredibly helpful for reducing the number of issues you have to deal with. For example, if your shipment is stuck in China, you’ll know to speak to authorities there, rather than at your local port, to resolve the problem.
This also goes a long way toward ensuring optimal quality control. That’s because you’ll know precisely where, when, and how the raw materials are turned into finished products.
Trim down supply chain issues with Inventory Planner
Inventory forecasting and planning software is in great demand as this is one of the most suitable solutions to mitigate supply chain issues. And Inventory Planner is the leading-market solution for e-commerce merchants. With over a decade of experience fine-tuning its forecasting methods, Inventory Planner tells you how much inventory is needed and when it’s needed based on reliable demand forecasting, even in the most fluctuating times.
This is because Inventory Planner takes into account various factors like lead times, your purchasing frequency, sales trends, seasonality, festive sales, and abnormal sales. So you’ll be equipped with smarter inventory purchasing recommendations, taking away the need for guesswork.
FAQs about supply chain issues
How can I help mitigate supply chain issues?
While this depends on the specific issues you’re experiencing, good planning is key to mitigating supply chain issues. A specialized forecasting and inventory planning software like Inventory Planner can be a good solution. It predicts demand and offers purchasing recommendations, allowing you to respond fast to fluctuations.
What are the key issues of supply chain management?
Aside from fluctuations in customer demand, most issues in supply chain management center on logistics. For example, there might not be enough shipping containers, ships, or space in the port in question.
Political situations that aren’t rooted in economic factors, like the conflict between Russia and Ukraine, can also cause complications.