The holiday shopping season is also the holiday shipping season, and some Americans fear their gifts won’t arrive in time.
The supply chain domino effect started with pandemic-related lockdowns in Asia, which caused production and factories to shut down and created shortages of items produced overseas. The lack of labor, truck drivers and warehouse workers as a result of the pandemic have contributed to port congestion and stalling product in warehouses short on space.
To ease the ripple effect, President Joe Biden’s administration unveiled a plan in October to run operations 24/7 at the California ports of Los Angeles and Long Beach, which account for 40% of ocean freight entering the United States. Even after administration officials announced round-the-clock port operations, the backlog of ships anchored off the coast only grew.
A shortage of truck drivers is not the only factor at play in these delays. Drivers are paid by the load instead of an hourly wage, forcing them to wait around until they’re needed, at no cost to the shipping companies—leaving little incentive for companies to use them more efficiently.
Efforts to relieve pressures in other areas of the ports have been successful. On Oct. 25, port authorities announced Container Dwell Fees—fees charged for containers lingering after nine days—to address the cargo standstill. The ports have delayed implementing fees until December 13 because early compliance led to a 26% drop in long-dwelling containers.
Fortunately, major retailers report they have imported most of the merchandise they need for the holidays. Unfortunately, it is costing more to ship it. UPS, U.S. Postal Service and FedEx have instituted peak shipping surcharges in response to increased expenses and heightened demand.
Prepare for Holiday Shipping
Many factors jamming up the supply chain are outside companies’ control, but strategies can be implemented to prepare for holiday shipping and improve supply chain resilience. in and out of peak season.
1. Ship by air
Strategically shifting volume from ocean to air can boost supply chain efficiency and help businesses meet peak season demand. Although shipping via air is typically more costly than other means of transportation, options like air freight consolidation—where freight from numerous suppliers gets consolidated at the port and fees are split—can make this shipping alternative more cost-effective.
Companies like Crocs are turning to air transportation—spending $8 to $10 million on air freight this year—as a response to several missed weeks of production due to factory closures in Vietnam.
Supply chain redundancy allows companies to respond to and manage disruptions quickly. If 20 to 30% of a supply chain is redundant and protected, the company can continue operating and accommodating customers regardless of broader supply chain issues.
Redundancies may include holding extra inventory, maintaining low capacity utilization, employing additional workers, partnering with several suppliers and using multiple distribution centers. While implementing some of these redundancies can be costly, it can be worth it to have this insurance policy in the event of unforeseen supply chain woes.
2. Multi-carrier solutions
Strategically working with more than one carrier can allow businesses to recover more quickly when there is a sudden disruption in the supply chain. Implementing a multi-carrier strategy can help mitigate risk, maximize savings and ensure companies have options if their volume is capped during a busy shipping period. This strategy gives businesses a competitive edge while building supply chain resilience and improving their ability to meet customer expectations.
4. Business Continuity Planning
Supply chain redundancy is often a component in a broader strategy called a Business Continuity Plan (BCP)—a protocol a company creates to manage potential threats or catastrophic events like pandemics, cyber security breaches, natural disasters and more. Plans should include an assessment of business risk and impact as well as address emergency preparedness, response and recovery. An experienced supply chain management partner can assist in establishing an effective BCP.
A BCP focusing on diversification can help any business deal with global supply chain issues. Generating more supplier options, shortening the supply chain and developing closer relationships with suppliers in the network are ways to diversify a company’s supply chain.
While global supply chain disruptions have eased in the last few weeks, a return to normal operations could be far off. Covid-19 outbreaks and the Omicron variant could affect key distribution points, perpetuating delays—thus bringing us back to the beginning of the domino effect cycle. If steps toward building supply chain resilience have not yet been taken, now is the time to start making improvements to protect your company and customers.