Holiday Impacts on the Supply Chain
With holidays around the corner, people gear up for shopping, buying gifts for those near and dear.
For businesses, the increased shopping activities rake up sales which in turn leads to higher profits. These increased shopping activities have direct impacts on the on the supply chain during the holiday season.
But the holiday season places stressors on the US supply chain companies and their global counterparts.
These stressors include huge pressure to meet deadlines, timely delivery, and keep track of invoices. Manufacturing companies must be on their toes to meet the astronomical boost in the demand for goods during the holidays. In fact, it can be 10 times more challenging during this peak season.
Manufacturing backlogs have been aggravated by current global events, such as the Ukraine-Russia crisis and the rigorous pandemic measures that have been reinstituted in China and other Asian nations. The “Great Resignation”-related labor shortages are still having a major impact on production and shipping.
Let’s walk through the factors that make the holiday season “a nightmarish experience” for global supply chain companies, especially those in the USA.
Early Season Shoppers
Many people are likely to shop for holidays earlier to get the best deals and avoid last-minute hassles. According to one survey by RetailMeNot, over 30% of shoppers start their shopping between August and September while 22 percent start shopping in October and 24 percent look for early November. Another study says that U.S. consumers are spending at a faster pace, up over 15% in September.
While it may be beneficial for a shopper and a seller, it causes a strain on your inventory before the arrival of the actual holiday season in November and December. Inventory companies may find that they are left with insufficient items to meet the thriving shopping season. In this scenario, a vendor is not able to keep up with orders to supply the inventories required for those big shopping events. Shelves are emptying fast, and they will be completely empty by the time the typical holiday shopping season starts, which runs from November through December. Ultimately, the habit of shopping earlier than the holiday season can indirectly threaten the supply chains across the USA.
Estimating Consumer Demand
What you perceive to be the most sellable holiday item instead proves to be a slow seller in your business. Likewise, a product that has been languishing in your inventory may suddenly become popular, prompting you to go through boxes and assess your inventory to see if you can satisfy the ever-increasing client demand.
Empty shelves have a substantial negative impact on your business’s bottom line since it is difficult for competitors to keep enough inventory of popular products on hand. This challenge is another way the holiday season impacts the supply chain.
During the holiday season, suppliers, manufacturers, and third-party logistics providers are all working hard to keep every business client satisfied. But all it takes is one wrong invoice and misinterpretation to wreck your supply chain. Suppliers and manufacturers must get the correct products on cargo vehicles, logistics firms as they scramble to keep up with the changes.
On top of that, there are several areas in supply chain between suppliers, distributors, retailers, and customers where things can go wrong. In reality, a GS1 US Survey found that the average accuracy of retail inventory is only 63%. And this accuracy is likely to decline when it comes to meeting the roaring demands in the holiday season.
Until the weather forecasts predict a significant storm system is headed your way, your supply chain may be operating as planned. This storm system could potentially cause your suppliers and distribution facilities to cease operations. For example, supply chain companies in Texas face the hurricane along with the state’s infrastructure issues, leading to negative repercussions for the rest of the nation.
According to the Atmospheric and Environmental Research Center, the weather has an impact on 30% of the US gross domestic product. Weather changes might affect consumer demand. When the weather is nice and people are more likely to enjoy the outdoors, outdoor recreation equipment manufacturers do well. When bad weather occurs and people prepare to stay inside, demand in other industries, like the grocery business, increases.
Weather can increase product demand and have an impact on the supply chain by diminishing available stock and posing problems when shops try to satisfy customer demands. During the winter, the supply chain can be jammed in the northern areas of the United States, especially, when snowstorms occur and cause labor and transportation difficulties.
Only 11% of suppliers, according to a Harvard Business Review (HBV) study by the University of Maryland and supply chain mapping company Resilinc, are adequately prepared for weather-related disruption. Since you cannot foresee when these interruptions will occur or which vendors they would impact, you are forced to quickly develop alternate backup plans. Longer delivery periods and product-related consumer complaints are additional issues you must manage.
Keeping track of the climate and weather patterns of any region that a supply chain interacts with is crucial for the overall performance of an operation, whether a supply chain is shipping within the United States or beyond. With this in mind, weather, can also impact the supply chain during the holiday season.
Interruptions to Vendor’s Supply Chain
Even if your supply chain might be on schedule for the holiday season, your vendor’s supply chain with their manufacturers may experience major disruptions. Like the name suggests, each portion of the supply chain is a link to another. Therefore, a distruption in your vendor’s supply chain has a domino effect. I.E. Factories may close, reduce the number of manufacturing lines, or ship fewer shipments, all of which may put pressure on your suppliers.
Holiday Impacts on the Supply Chain: The Bottom Line
Both manufacturing and retail companies are likely to experience their share of concern with the arrival of the holiday season. Other factors like weather, communication gaps, and poor management can be increased stressors during this season.
Therefore, it is important to look for potential issues and be prepared them for. For example, you can create the right contingency plans to reduce the number of interruptions that impact your operations.
It is equally important to have sound vendor management to source the products required from the manufacturers and suppliers who can meet your needs, even during the busy holiday season.