Surviving the 2022 Supply Chain Storm
We’ve all seen the global supply chain problems highlighted on endless news loops for months, thanks in large part to the pandemic. And, as with everything we’ve seen with the pandemic, these problems may not be resolved in 2022 – and may even get worse. Therefore, for any retail supply chain to succeed with these added barriers, companies must continuously pivot faster than in the past.
The supply chain storm
The Great Resignation is causing increased labor costs driven by decreased labor pools. It affects every aspect of the industry – from inventory to warehouse to carrier. Companies can’t afford delays at peak times, and fewer employees can cause these to increase.
Have you seen the recent port issues? If long-lead-time delays were our only concern, we might be able to wait it out. However, with more products flowing through U.S. warehouses, third-party warehouse space is now at a premium – if available at all.
The carrier network is also stretched to its limits. This is causing significant delays and concerns in postal shipping because of port issues and the Great Resignation. Carriers are dropping or limiting the number of packages a company can ship. Some companies see packages rejected from pickup only as left scrambling to determine which orders are shipped and which are not.
Become familiar with how your carriers handle these challenges. Do you know your current shipping capacity with your carrier contracts? Are you tracking over or under your package quantity bandwidth contracted with your carriers?
Then, there are increased costs from ecommerce returns: costs that are double those of brick-and-mortar stores, shrinkage (product loss from shipping damage), and higher costs on returns. This creates even higher labor costs with the need to restock, doubling the negative impact of ecommerce returns in this supply-chain storm.
How is a company supposed to manage these issues? Ask yourself the following questions:
Is your warehouse optimized?
Warehouse optimization and efficiency are some of the key areas to evaluate. For example, can you quickly and accurately see your inventory? What is in the warehouse today against upcoming orders for tomorrow? Are there areas you can use your current warehouse space more efficiently?
What are your labor benchmarks?
Having a benchmark of your needs throughout the year is another component of lowering labor costs. For example, have you tracked labor by quarter to know what you’ll need this year versus last year? Have you tracked sales projections, ecommerce returns, or order cancellation rates? Is labor the right area for you to make expense cuts?
How about parcel concerns?
Parcel delivery costs usually exceed labor expenses by two to four times. And the carrier and service selected per package can mean the difference between delivering on time or missing customer expectations. Therefore, this is your most critical area for both expense management and customer experience – and possibly the most complex. Layer on top of that the intricacy of carrier networks, services, and rates and you have a perfect storm! Do you know what your shipping expenses are compared to labor? How many of your packages are being delivered on time?
You may need a variety of postal carriers at your fingertips. Knowing which carrier is less expensive for each item or shipping destination will help lower your total shipping charges. Knowing your cost and profitability per item is imperative. Which items are worth shipping? Or which should be offered only in-store or as add-on items? Do you have this data readily at hand? Do you have visibility into postal carrier charges and flexibility in which carrier to use for each package? Are you optimizing which carriers you use? Are you looking for cost-saving alternatives?
Unable to answer any of these questions affecting your company in today’s troubled and complicated climate? and can help get answers to these and other supply-chain questions. So call us today to discuss your business-critical needs.