The supply chain will remain strained for some time yet. Don't be surprised if problems extend through the holidays
The holidays are still quite a ways off, but there's already concern the supply chain won't be able to keep pace with demand this year.
Bradley University affiliate instructor and supply chain expert Daniel Stanton says stocking up earlier may be better for holiday shoppers. For some businesses, however, it may already be too late.
DANIEL STANTON: You know, the truth is, supply chains have always been there. They surround us every day. We're all part of supply chains, and we depend on them. But we generally take them for granted. We don't think a lot about our supply chains and all the people and the processes and technologies that we depend on every day.
And you know, what we've really seen over the last couple of years, amplified by COVID, is that these systems that we depend on, these supply chains, have capacity limits. And when we have big rapid changes either in supply or demand, well, that can really cause a disruption for the supply chain. And sadly, at the end of the day, we end up not always being able to get the things that we're used to having when and where we want them.
TIM SHELLEY: The holiday season — even though it feels like Christmas is still quite a ways away — there's already a lot of concerns from people of, what's the holiday season gonna look like? What's your perspective on that?
DS: Yeah, do you remember the old days when we used to joke about putting out the Thanksgiving decorations before Halloween, right, and everybody's doing their Christmas shopping in September in October?
It is a fact that because supply chains are so clogged up right now at places like ports and distribution centers, many of the things that that we had planned to have on the shelves and retail stores for the holidays, aren't going to get there in time. And it is virtually impossible to predict what those things are, because it's really just a function of which container they were on which ship that was on which port it pulled into, and where in the pile of containers that particular container ended up. Was it at the top and it got picked up earlier was at the bottom?
So I think everybody just sort of needs to prepare themselves that, you know, some of the things that we would have expected to have, are likely aren't going to be there. Emotionally, that's only a problem if you've got really high expectations, and you just assume that supply chains are always going to work. But I think you know, if, if we sort of prepare ourselves for that and know that it's coming, then it's a whole lot easier to say, okay, maybe I can wait a couple of months for that thing that I wanted, whether that's you know, a gift or an outfit, maybe I can wait a couple of months and and might even get a better deal on it by getting it then or substitute find something else or that I can use as a gift or or get by.
TS: What should businesses do to adapt to this?
The truth is, for any item you have, there are two different categories of inventory. There is what we call the the cycle stock: the stuff that you buy, and you sell through a lot of. People call that just in time inventory, right? What do you need to support your customers.
And then there's another type of inventory, which is safety stock, that's inventory that you have as an insurance policy in the event that that you've got more demand than you expected. Or if there's an interruption in supply, if you're not able to get what you expected to get.
A lot of companies really don't like to spend money on safety stock inventory, that what they want is to try and get a really good forecast of what their sales are going to be. And only, you know by the the inventory that they know they're going to sell to only have that just in time inventory. Now that's actually a really smart financial strategy, as long as your supply chain is resilient, right, as long as you're going to be able to get the things that you need when you want to.
What we're seeing now is, you know, a lot of companies had really focused on that just in time inventory, and it tried to get by without having the just in case inventory. Well, when your supply chain breaks down, that's when you pay the price for it. At this point, you know, there's not much you can do. You can't buy insurance after you've had a fire, after you've had a flood, right? You had to do that in advance.
So you know, the things that that companies can do now are look for alternate suppliers, right? You know, you typically buy your stuff from a supplier there, there's somebody you're used to doing business with. If they can't supply you, figure out who else can look around. You may, you may not, get the same quality that you're used to. You may have to pay more for it. But you may be able to find somebody that that can provide you with the products.
The second thing you can do is look at substitution, right? Is there something else that you could use instead? That's more available.
A third option is you know what I'd call rationing and And it's actually you know, there, you're seeing like Costco start to do this, which is you know, limit the amount that you use or limit the amount that people can buy, so that you can conserve it so you can stretch the inventory that you have out further.
And then the fourth option is just to go without, to just say, listen, I know I'm not going to be able to get it. In the case of a store, I just got to fill the shelves up with whatever I can get so that the place doesn't look empty.
Stanton says he expects most supply chain issues to clear up by February of next year, though some may persist longer.