How recent supply chain issues are impacting retail

Retail supply chain has been hit hard by pandemic interruptions. How will recent changes affect future supply chain trends and planning?

How recent supply chain issues are impacting retail

The COVID pandemic has had far-reaching impacts on all aspects of the retail supply chain, as well as consumer behavior and spending habits. People worldwide have re-evaluated  liquidity and expenditure, based largely on  household spending, disrupted supply chains and ongoing health concerns.

 What products were hit hardest by recent supply chain issues?

According to data released by the White House's Supply Chain Disruptions Task Force, in November 2021, the shelves at stores remain at about the same level as before the pandemic.

While on-shelf availability is at 89%, consumer prices are 5.4% higher than pre-pandemic and are close to a 30-year high in inflation.

The products hit the hardest by recent supply chain disruptions are:

1.   Gasoline: The shortage is not gasoline supply but a shortage of truck drivers to transport the fuel, which slows down the pace of fuel deliveries. Contrary to the belief of many Americans, higher gas prices are not reflective of the president in office but a result of the demand for truck drivers to transport the fuel.

2.   Coffee: Brazil produces one-third of the world's coffee beans and dealt with a drought that resulted in smaller crops than usual in 2021. In addition, the lack of available shipping containers and backed-up ports has increased pressure on the supply chain.

3.   Semiconductor Chips: Semiconductor chips are integral for production in the automotive industry, for mobile phones and many other industries. Since the United States only produces a small percentage of the world's semiconductor chips, there's still a waiting period in  supply chain to receive new shipments from international suppliers.

4.   Diapers: Supply shortage for the raw materials to make disposable diapers is responsible for the increased cost of production and the consumer impact on prices and supply.

5.   Chicken: On top of the increased demand due to consumers cooking at home, processing facilities dealt with the struggles of staying open safely.

6.   Lumber: Wood prices have been climbing for years, but increased consumer free time has inspired many people to undertake home-improvement projects due to the pandemic. The price increase isn't due to a shortage of raw material; it's due to the increased demand for the processed version of lumber.

7.   Toilet Paper: The prices for ground-up wood pulp used to make paper products like toilet paper increased dramatically. The raw material isn't the issue. People want processed goods: toilet paper, not paper pulp.

 What issues have had the largest impact on retail supply chains?

The most significant impacts on retail supply chain can be attributed to several defining issues — namely, the increased demands for product transportation and the lack of resources to fulfill the demand.

After the pandemic broke in the spring of 2020, businesses and supply chains worldwide were grounded to a near halt while safety solutions were designed and implemented. Empty shipping containers were not collected and relocated to where they were needed, impacting supply chain management worldwide.

Cargo ships are backed up outside globally vital ports in southern California and the East Coast.  That's not to say these are the only ports experiencing back-ups; they are just the most prominent U.S. ports experiencing ongoing issues. Outside each of these ports on any given day are dozens of cargo ships backed up, waiting to unload cargo.

 Trends shaping retail supply chain of the future

Several significant trends are shaping the retail supply chain of the future, including retail returns. About 30% of ecommerce purchases are returned. The process of reverse supply chain can be inefficient and costly for the manufacturer.

 What cultural trends Are shaping the retail supply chain of the future?

Mobile is the future for both shoppers and companies, necessitating the prioritization of mobile users when developing digital marketing strategies and website UI and UX.

Check out these statistics on mobile commerce trends:

  • Datareportal recorded a staggering 5.22 billion unique mobile users online in January 2021 alone, or 66.6% of the global population.
  • 90.9% of internet users use mobile devices to access the internet at least some of the time.

 What environmental trends are shaping the retail supply chain of the future?

Sustainable, environmentally friendly supply chains are becoming more prevalent as companies work to match customer expectations and reduce the environmental impacts from their supply chains.

The latest supply chain trend is eco-efficiency.

Eco-efficiency focuses on reducing the negative environmental impacts of economic activity. Green logistics drives eco-efficiency by reducing greenhouse gas emissions (GHG), minimizing waste, and consuming less non-renewable energy.

To achieve a greater degree of eco-efficiency, companies along the supply chain are focusing on:

  • Reducing GHG emissions by utilizing local sourcing and decentralized hubs, redesigning product packaging and improving load planning to reduce the number of trips to transport products.
  • Cleaner modes of transportation and equipment. For example, switching from diesel vehicle fleets to hybrid or electric vehicles.
  • Implementing the "circular economy" into business and supply-chain operations to increase renewable and recyclable resources used at each supply-chain stage while reducing raw materials and energy consumption.

 How new tech will transform retail supply chain

How has digital transformation changed the eCommerce supply chain?

Digitalization of the world has had profound effects on eCommerce supply chains. The fast-advancing digital innovations for eCommerce supply chains will be the Internet of Things (IoT) and Artificial Intelligence (AI).

IoT and AI are software and hardware developments that will play an increasingly significant role in eCommerce, particularly with payments innovation. Retail tech, such as virtual point-of-sale systems (vPOS), allows retailers to manage all POS terminals on a single store server, reducing friction on the backend and smoothing order fulfillment and reverse logistics of product returns.

The deployment of automated technologies in ports, factories and warehouses will ease labor shortages strain and help smooth the flow of goods along the retail supply chain.

 What the future looks like

How can businesses develop more agile retail supply chains?

Businesses can develop more agile retail supply chains with options such as third-party delivery. Businesses like convenience stores utilize this to launch eCommerce options previously unavailable or not widely available in most markets.

Online delivery options also have the benefit of attracting a new customer base while lowering the entry barrier to eCommerce for smaller businesses without the resources and IT infrastructure to launch independently.

 How can retailers prepare for the next global supply chain shock?

Supply chain leaders can prepare for and mitigate the harmful effects of the next global supply chain shock by:

  • Implementing a digital control tower that connects each aspect of the supply chain from end to end, creating transparency and accelerating response times when issues are identified.
  • Optimizing each aspect of the supply chain and prioritizing the market distribution of inventory to the most-needed sectors and regions with the highest demand, helping to alleviate the strain of demand.

Efficiency is the goal for supply chains, and technology is the keystone that supports progress. Workforce automation and the digitalization of all industries will be a permanent addition to the supply chain. Technological innovation will continue its relentless march, solving problems and providing solutions by revolutionizing how things are done at each stage of the retail supply chain.

From the logistics of raw-material sourcing and inventory management to automation in transportation solutions and the reverse logistics of returning products to the manufacturer, technology will help alleviate many strains along the retail supply chain.