Planning Ahead (Already) For Supply Chain Shortages This Holiday Season (Part 1)

It's not too far ahead of time to think about the intersection of supply and demand planning this holiday season. In fact, it might be too late for some organizations, depending on industry and supplier relationships, to maximize their supply chain's potential. A recent story in Electronic Buyers News sums it up perfectly with the title: It's July: Are you Ready for Christmas. Granted, consumer electronic products are just one category on customer shopping lists leading into the Christmas season, but they're representative -- or more specifically, their supply chain -- is representative of a broader challenge facing many industries at the moment. To wit, a perfect storm of extended geographic supply chains, manufacturing capacity constraints, lower tier supply market price escalations (reducing higher tier suppliers' working capital) and shortages are coming together to not only lengthen lead times, but also create additional risk that orders placed might not be orders fulfilled in a contractual manner.

Still, there's hope. AndEBN suggests five tips in the above-linked article for dealing with holiday season supply chain challenges and bottlenecks. Their first piece of advice is to "focus on the big, global picture" because "it's hard to tell exactly which products would be most popular with customers during the holidays until the end of the year." I also like the suggestion that organizations "need access to multiple modes of reliable transportation and solid back-up plans if goods are delayed in the supply chain for any reason and do not arrive as expected," yet I disagree with the implied statement that air freight should be anything but a last, last ditch escape chute to pull. All too often, we rely on air freight when in fact we should be building additional resiliency into our supply chains by shortening them or developing regional supply alternatives (e.g., production in neighboring Asian countries vs. just a single one). Consider how clothing retailer Zara pays a premium to work with local suppliers on a unit cost basis but makes it up on the total cost and top line.

According to Inbound Logisitcs, Zara "sources a significant amount of production at parent company Inditex's factories located largely in Europe and neighboring countries...These locally produced goods are trucked to market, not flown." Why, you ask? According to one source, "Zara decided to handle its production in Spain and elsewhere in Europe because, even though that costs more than Asian production, the company changes merchandise every two weeks, and speed to market is a critical competitive advantage...Zara wants a two-week order cycle time, not 45 days." Or five months, for that matter. Granted, we can't all gussie-up our supply chains at the speed with which the Spanish retail expert does, but no doubt, preparation for the holiday season (and beyond and before) is one of the most important activities that we can be collaborating with our suppliers on at the moment.

Jason Busch

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