As fragmented supply chains slowly get realigned in the wake of the pandemic, ongoing shipping and transportation challenges have persisted throughout 2021.
This brings in elevated costs for businesses across the board and is subtly reshaping the activities of manufacturers and distributors dealing with increased product lead times, escalating prices, and widespread materials shortages.
Here, we review the extent of the pressures on the global logistics industry, how businesses have been reacting to this new reality, the prospects ahead for meaningful change, and how manufacturers and distributors can continue to mitigate the impact on customers.
Choppy waters, turbulent skies.
As global economies have burst back into life in the wake of lockdown measures, surging consumer demand for goods has placed real pressure on the global shipping network – whether by air, sea, road, or rail.
Frequent blockages at major ports and distribution hubs around the world, along with the Suez Canal crisis have conspired to make it costlier than ever for businesses across Europe, the US, and way beyond to transport goods, with freight rates hitting record levels, significantly increasing cost pressures the length and breadth of the supply chain.
This situation is further compounded by serious blockages, delayed delivery times, and cost escalations in the global shipping industry as fractured supply chains slowly get pieced back together.
With such disruption to this highly interconnected system, the result has been that many manufacturers and distributors experience increased delays in receiving essential materials and products, forcing them to lengthen their own product lead times and pass on increased costs to customers.
While there are thankfully some signs that global supply chain woes are beginning to recede, with ocean freight rates falling back from recent record highs, manufacturers and retailers broadly believe a return to normal conditions isn’t likely until well into next year, and cargo will continue to be delayed if Covid outbreaks carry on affecting distribution hubs.
People shortages are common in multiple sectors right now but are being felt particularly in transportation.
Whilst this is a global challenge, there has been a much-publicized ongoing struggle to source HGV drivers in the UK, with tens of thousands of individuals needed to plug the gap. While the government has brought in new measures to try and address the situation, prominent voices see shortages of trained drivers persisting into 2022, creating further cost pressures on businesses that have had to increase pay and benefits just to keep their operations moving.
This situation has also had a notable impact on the already strained product, materials, and component lead times, forcing companies into some difficult conversations with customers looking for deliveries to satisfy demand – especially now during the busy holiday season.
With businesses of all sizes, from ‘mom-and-pop’ outfits to global giants alike affected by these challenging dynamics, we are seeing some subtle changes to the way manufacturers and distributors go about their operations – and with good reason.
If nothing else, the pandemic has really brought home to all businesses just how broad and long their supply chains are and therefore how susceptible to the disruption they can be.
Against this backdrop, some businesses are narrowing the geographic spread of territories they serve, focusing on local and even hyperlocal markets that require fewer supply chain touchpoints. Others are going a step further in this quest by considering the feasibility of establishing micro-factories in locations near major customers to ensure continued certainty of product supply and minimize potential disruption.
At the other end of the scale, some of the largest operators are reconsidering their offshoring strategies, to look at and reshoring with a view to reducing their susceptibility to supply chain challenges.
These changes of course take time and investment themselves, further increasing existing cost pressures already in play. Little wonder then that inflation is running hot in many global markets, with the latest figures showing the headline rate in the UK hit 4.2% in October. It’s a similar story in the US, where the figure is at a 31-year high, with prices increasing by 6.2% over the past twelve months.
Getting ahead of the game with data.
Whatever their size and the markets they serve, all businesses have had to double down on customer relationship management during the pandemic to navigate these choppy waters and maximize customer retention.
When it comes to sales, those operations with clear and full access to historic customer purchasing patterns through sales enablement technology like sales-i have been particularly well placed to step up to this challenge.
These businesses have been able to look into customer purchasing data at the touch of a button to help guide clients on what they could or should be buying at any given time. This intel is also useful in helping to identify potential shortages and supply gaps, providing valuable opportunities to work even more closely with customers.
NAPA - Walker Auto and Truck had this exact issue of not being able to easily generate sales reports, and there was a gap in their visibility. Through using sales-i, they can now quickly run sales reports at any time and see the data in a clear way, allowing them to easily identify sales trends and notice if a customer has stopped purchasing specific product lines.
Towards clearer waters?
There remains much uncertainty about how long the shipping and logistics industry will be subject to these current challenges but multiple sources see them continuing into 2022. Just this month the UN announced that elevated shipping costs will further fuel inflation around the world next year.
Separately, analysts in the US believe back-ups at big U.S. ports are unlikely to shift meaningfully until well into the new year.
For now, at least, it appears manufacturers and distributors will have to strap themselves in for continued turbulence and cost pressures around the global shipping system for some months to come…