5 Ways to Prepare for Supply Chain Disruptions
If we’ve learned anything during the past two years, it has been about market disruptions—even to the point of the disruptions being disrupted. While accurate crystal balls are tough to come by, let’s explore five trends and how they may provide clues to solve for continued supply chain disruptions.
1. DEMAND FOR LARGE ITEMS WILL NORMALIZE. The pandemic drove increased demand for home office furniture, electronics, do-it-yourself tools and projects, and related big-ticket or high-cost items as consumers put a priority on living and working from their homes.
Consumers will maintain this home-focused habit, especially as manufacturing production continues to return to normal levels. Make sure your category forecasts are buttoned up. Focus on large-volume SKUs, rather than overstocking fringe SKUs, so you can continue to serve these consumers.
The pandemic has accelerated e-commerce and U.S. consumers have become sensitive to out-of-stock situations. They are savvy enough to find and quickly jump to another retailer to satisfy their needs. Remember: Consumers’ brand loyalty is stronger than their vendor loyalty.
2. REIMAGINE YOUR WAREHOUSE OPERATIONS. Pressure to maintain popular items in stock has put a pinch on warehouses and their operations. This stress has driven down warehouse vacancy rates, which, for example, are at all-time lows in New Jersey.
It has also driven up rents to nearly $9 per square foot, on a national average, according to CBRE, and as much as $20 or more per square foot in premium geographies like northern New Jersey.
The solution for some is to move away from a few major distribution sites in major metropolitan cities to several large hubs, served by strategically located distribution centers.
Having several major hubs within a two- to three-day delivery time of 95% of American households is the model that is cost-effective and service-oriented. This will be a challenge even for the major players. With warehouse space hard to come by, smart players will closely examine their supply chain to maximize efficiency.
Another common practice is for manufacturers and suppliers to better coordinate inbound volume to maximize existing warehouse space. For example, during the past two years, major buyers have been placing purchase orders far in advance of demand as a way to preempt the shortage of goods.
For those without the resources of major players, third-party logistics (3PL) suppliers may be one solution. A true 3PL partner offers turnkey solutions and advice around warehousing, inventory efficiencies, SKU depth and velocity, purchase planning and other vital business operations.
If you explore 3PL partners, be wary of ones that focus too much on cost efficiency. No one wants to waste money. But, you also deserve a partner that has their pulse on the entire supply chain and business trends, and then can adapt within our seemingly ever-changing world. Your 3PL partner must take time to understand your particular challenges, process, people, and business objectives.
3. INVEST IN YOUR PEOPLE. The pandemic has accelerated what was already a tight labor market. Not only are wages important, but so, too, are employee expectations for training and workplace culture.
For your supply chain talent’s long-term success, fulfillment companies must offer competitive wages, as well as a strong work environment to take care of permanent employees and ensure high retention rates. HR departments—if they’re not already—need to look at ways to offer flexible work shifts, develop new training so employees can boost their skills and learn new ones, take action to show employees that they are valued, and other activities to enhance employee loyalty.
At the same time, supplement your workforce with temporaries to provide optimal staffing and keep customers satisfied.
4. TECHNOLOGY IS YOUR FRIEND. Technology is evolving all the time and adapting to the latest warehouse management systems technology or even the upgrades can be daunting. And pricey. But that shouldn’t stop your long-term view.
A worthwhile WMS must help you grow your business. It must improve your efficiency, data, and trending analysis to stimulate growth. It must also provide an intuitive user interface, while validating and enabling sound business decisions in concert with your ERP system, using APIs that make data exchanges seamless and productive.
5. DISRUPT YOUR OWN DISRUPTIONS. The past two years have been hard. Many companies have gone out of business. Numerous smaller fulfillment companies were bought and the big players keep getting bigger.
But, we’ve also seen innovation. These demanding times have cultivated creativity and driven us to work harder. We’ve become more sensitive to the workforce at large. Innovative solutions keep costs down while providing great services.
On the global front, we have seen remarkable innovation and the creation of new markets. Think about the food delivery business!
On the finance side, strong interest by venture capitalists and private equity firms in e-commerce offerings will no doubt create their own supply chain innovations.
And, we must contend with disruptions outside of business that affect the global supply chain. While these situations may be outside our control, we can control how we react and the crisis plans we have in place that allow us to be agile and pivot to maintain business operations.
Through it all, we must never take our eye off of our business and all of its components—and what we can expect tomorrow. A well-oiled supply chain ensures your long-term success.