It’s the new year and… everyone is still talking about global supply chain issues. After two years of upheaval, chances are good that you’re borderline bored of it all: the omicron variant, zero-covid policies, chip shortages, climate change — to name a few factors that are challenging supply chain resiliency in 2022.
Stories about these disruptions are all over the news, filling up most of your social media feeds. Even your parents are talking about it (they probably shopped early for Christmas and the holidays because they’d heard so much about products potentially going out of stock).
But while you likely don’t want to talk about the supply chain breaking anymore, you also know it directly impacts your brand’s bottom line and future. So, you can’t afford to tune this information out.
Some leaders in the logistics space are calling these disruptions “a global supply chain crisis.” And one way or another, every retail brand under the sun has been affected.
For some, this meant the procurement of raw materials became near impossible. For others, their manufacturers closed down temporarily, and the delayed shipments these closures caused led to widespread stockouts.
On a larger scale, these disruptions led to backlogs in container ships and countless fulfillment difficulties popping up. And DTC brands were forced to either find new, creative ways to fulfill consumer demand or disappoint their customers. (The second obviously wasn’t a real option.)
So, how can e-commerce brands manage these issues? First, it pays to understand what’s really happening with the global supply chain.
(Spoiler: If you’re a brand trying to scale from single digits to $50M+ in revenue, pay close attention. We have a special section just for you below. )
The global supply chain is the worldwide business network used by companies to coordinate the manufacture, supply, and warehousing to source and ship goods and services to customers. Global market information is reflected through the processes and resources that move through the global supply chain.
The global supply chain only works if all collaborating parties from different countries are able to play their critical roles.
Import-export hubs in China, ports in Long Beach, California, and everything in between, all contribute to this worldwide system. And everyone, from truck drivers in New York to providers of raw materials in Asia, matters to the global supply chain.
Today, retail brands are focusing on how this global supply chain impacts the production of physical goods they can sell to customers.
That’s because each step in the system takes products one step closer from creation to the end consumer’s hands. And retail brands need these links in the DTC supply chain to be reliable, so they can reduce their costs and stay competitive in the business landscape.
No retail brand can take a product from idea to production all on its own. All brands depend on others to make their business work, albeit in different ways.
So, the most important thing to understand about the global supply chain is that if one link is broken, the entire chain is broken. And if the chain is broken, the whole system suffers.
Right now, several links in the chain are very, very broken. And there’s still a way to go before it’s fixed.
So, in the meantime, how can retail brands deal with the fallout?
To better understand how brands can manage the disruptions and streamline their workflows, it’s fundamental to first grasp what caused the DTC supply chain to unravel and what’s causing the aftermath to continue plaguing businesses.
Of course, there’s the pandemic, which nobody saw coming. (Well, most of us didn’t.)
The pandemic was that kind of black swan event that rarely, if ever, happens. And it came as a complete surprise to the world’s economic system and a catastrophic threat to business as we know it. But there were a few issues affecting supply chains even before the pandemic broke out.
Here are some reasons why issues first started and continue to be detrimental:
The past two years have seen factories shut down due to COVID outbreaks, sick workers, and lockdowns. This lack of manpower has massively decreased the manufacturing industry’s output, particularly in Asia.
These outbreaks and lockdowns have also caused a decrease in access to raw materials for manufacturing products. For example, India witnessed a shortage of oxygen, which is often used by automakers, because it reserved its oxygen supply for COVID patients.
The Ever Given blocked the Suez Canal for six days until it was finally dislodged, but, in that short time, hundreds of ships were blocked from traversing the waterway.
Natural disasters like winter storms in Texas, Hurricane Ida, and frequent wildfires in California affected food supply chains and logistics networks.
Congestion at certain key ports shocked retail brands’ planning at different points in 2021. June saw a massive backlog of containers in Vietnam. September and October brought more dwell time for containers in Long Beach, California. This particularly affected DTC brands’ holiday sale plans.
With all this being said, we can identify these causes in hindsight. But this doesn’t guarantee that new causes for DTC supply chain disruptions won’t pop up in 2022 and beyond.
Because the global supply chain is a network of links, all of them feel the fallout when one breaks.
As a result, all stakeholders in the global supply chain are feeling the burn from the subsequent challenges. Let’s walk through how the supply chain challenges affect a few parties of the retail business world: suppliers, retail brands themselves, and consumers.
As I mentioned earlier, manufacturers face labor shortages when outbreaks happen at their factories. The same goes for truckers and companies focused on moving goods from ports to other parts of the country.
This results in reduced output and productivity. As a result, the cadence of new orders and services they are capable of providing is negatively affected.
One of the main ways retail brands can manage uncertainty is by diversifying their manufacturing (more on this later). This means suppliers hit by delays may risk losing customers in the short- and long-term.
Brands face dramatically higher prices to ship their products from manufacturers (usually from China or somewhere in Asia) to the US (mainly to California). Add to that prolonged shipping delays.
This is not a good combination. Costs are up and stockouts are happening more frequently, and these long lead times are causing brands to pull in less revenue.
This leads to less working capital on hand to run these businesses. In fact, over one-third of the small businesses that closed in 2021 attributed their failure to a “lack of capital.”
And for many who survived, lack of capital is still a growing concern. In a recent Flexport survey, around two-thirds of respondents said that the difficulty and cost of moving goods is the main concern for their business this year.
While some retail brands had the working capital to weather the storm, the financial implication of these challenges had disastrous consequences for some brands.
The global economy has been shaken by COVID-19, but consumer demand has bounced back strong. On top of that, the global market for goods has surpassed that for services.
But shipping delays and their resulting stockouts have left customers disappointed and dissatisfied at times. Overall, though, consumers have become accustomed to longer wait times.
In some cases, consumers are facing higher prices for goods. As shipping costs go up for retail brands, some businesses have found themselves in the situation of having to adjust prices for their business to remain viable.
The latest data projects that global supply chain issues could last another 2 years, but if there’s one thing we know for sure is that nobody can predict the future.
All the latest projections on when and how these issues will be fixed are guesses and shouldn’t be counted on. Instead, forward-thinking businesses should adapt to this “new normal” as best as possible.
Because now that we’ve experienced how vulnerable the global supply chain is, it’s unlikely it’ll ever go fully back to normal.
Consumers are demanding goods over services, so congestion is not likely to ease too much this year.
Initiatives that would truly move the needle on easing the disruptions—like fulfilling new ship orders, building out ports, or developing self-driving trucks—take longer than we can afford to wait. And as DTC supply chains become more complex, the effects of disruptions may become harder to unravel.
Here’s what Ryan Petersen, CEO of Flexport, has to say about it:
In other words, it will take a while to understand all the bottlenecks in our supply chains and manage them accordingly. In the meantime, let’s dive into tactics and strategies modern brands are implementing to come out of this stronger than ever.
Solving the supply chain crisis isn’t as simple as 1-2-3. But your brand can implement strategies on the marketing, fulfillment, and logistical side of things to lessen the fallout from these disruptions.
Let’s start with the tactics that require the smallest lift to implement: marketing.
While the overall DTC supply chain issues will take longer to resolve, you can implement interim solutions on the marketing side to eliminate the risks posed by stockouts.
These strategies will buy time for supplier shortages and alleviate consumer frustration. If implemented correctly, they can increase brand affinity and grow your customer base simultaneously.
These interim marketing solutions include:
Some of these tactics will make more sense for your particular brand, consumer needs, and product types. But in general, these marketing strategies help reduce the risk of missing out on converting customer demand.
On the fulfillment side, here are some tactics and strategies put forth by Flexport, a global leader in freight forwarding, in their recent webinar:
Historically, brands have moved toward leaner, just-in-time processes. While this is a beneficial strategy under normal circumstances, it’s wreaked havoc during this supply chain upheaval.
With no excess or slack in the DTC supply chain system, there’s little buffer for things going wrong. To solve this, brands need to build muscle to act quickly and proactively. Here’s how:
These are just a few of the strategies we recommend to help manage the supply chain issue’s effects on your retail brand. And Cogsy makes implementing these strategies easier.
With Cogsy, get a godlike view of your stock levels, restock needs, incoming purchase orders, supplier lead times, and upcoming marketing events. All in 1 place.
Plus, forecast demand with pinpoint accuracy (up to 12 months out), so you can stock up accordingly. You can even run “what-if” scenarios to identify your best-case, worst-case, and most probable inventory strategies.
We’ll even send you restock alerts (with recommendations on how much to order) whenever you’re running low on inventory. That way, you avoid expensive mistakes (like stockouts and excess) that keep you from reaching your revenue goals.
Stocked out despite all this? Seamlessly switch to a backorder model, so you can keep revenue coming in each when you’re out of stock.
Direct-to-consumer (DTC) supply chain includes businesses that manufacture and sell their products directly to consumers, eliminating the retailer or wholesaler from the process. DTC brands handle inventory management independently, ensuring the most optimal SKU levels.
Some of the most significant supply chain issues DTC brands are battling on a global scale include:
An optimized global supply chain maximizes efficiency and profitability across industries. By implementing smart supply chain management practices, companies gain control over their internal and external SKU management, production, distribution, and sales. Ultimately, it supports business growth and helps elevate the customer experience.