AuthorJennifer Chen, RUSCA Blog Committee Ever since the pandemic started in early 2020, shoppers are no stranger to the havoc it has wreaked upon global supply chains, from the unforgettable panic over toilet paper shortages to outrageous price increases. Many of customers’ desired products are missing from shelves with little hope of reappearing in the near future, and businesses are equally as frustrated that they cannot get their hands on any stock. With the holiday shopping season rapidly approaching, consumers are already experiencing more empty store shelves, price changes, and delayed shipping times, potentially throwing a wrench in their gift giving plans. One of the major reasons why there are more empty shelves and price increases is that demand is rising fast. Now that over half of the U.S. population has received their COVID-19 vaccines, in person shopping has resumed and businesses have lifted pandemic related restrictions. This has increased demand across the board, with retail sales in September hitting “$625.4 billion as consumers flocked to bars and restaurants, federal data show.” (Telford). According to Deloitte’s annual forecast, holiday retail sales are expected to increase by 7 to 9%. (Deloitte, 2021). Although demand is picking up, the supply chain is still experiencing issues on all levels, causing a chain effect down the line. The labor force has been hit by “The Great Resignation”, an informal name for the widespread trend of workers quitting their jobs due to a pandemic burnout and job reevaluation. As a result, the nation has a shortage of warehouse workers, truck drivers, and retail employees. Due to COVID-19 protocols and the labor workforce shortages, U.S. ports are extremely backed up, extending delivery times. In addition, raw materials and other components needed to create finished goods are in short supply. While there are many more detailed factors as to why the supply chain is tied up, these are some of the reasons that contribute towards this holiday season’s gifting complications. Experts are advising shoppers to purchase their gifts well before Black Friday and Cyber Monday if they want them to arrive on time. To help speed up delivery times, President Biden recently called for the Port of Los Angeles, the nation’s largest port, and companies such as Fedex and Walmart, to work around the clock. Not only should shoppers be marking gift shopping on their calendars a little earlier than usual, they are also predicted to spend more. According to the NPD Group, 29% of consumers are expected to spend more than last year. Besides higher product and shipping prices, anxious shoppers who fear popular items running out of stock are unlikely to wait for Black Friday deals. SOURCES: https://www.nytimes.com/2021/10/31/business/economy/global-shipping-delays-shortages.html https://www.washingtonpost.com/business/2021/10/21/start-holiday-shopping-early-2021/ https://www.whitehouse.gov/cea/blog/2021/06/17/why-the-pandemic-has-disrupted-supply-chains/ https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-holiday-retail-sales-expected-increase-seven-to-nine-percent.html AuthorTrupti Valsangikar, RUSCA Blog Committee In early November, shipping company Maersk announced their acquisition of shipping company Senator International along with the purchase of two Boeing aircrafts to further their logistics resiliency as a result of the west coast port congestion. The congestion occurred in October when the shipping ports in Long Beach, California became significantly backed up, leading to hundreds of cargo ships sitting idle in the water waiting to be unloaded. Maersk is one of the companies affected having their ships and capacity held up. The Danish logistics company realized that the effects of the port bottleneck would not be resolved soon, and decided to invest in other forms of transportation namely, air cargo. In a press release after the acquisition announcement, Maersk’s CEO Vincent Clerc said “Air freight is a crucial enabler of flexibility in our customers’ supply chains. Therefore, as a natural next step in expanding our integrated logistics offering, we are ramping up our service within air freight.” The addition of Senator International will likely serve as a great enabler for Maersk to achieve its air freight goals. While Maersk already had an air cargo presence, using Senator International whose “airfreight services are [a] core for the forwarder, bringing in 65% of the company’s revenue in 2020” (Lopez), will further Maersk’s position as one of the largest shipping companies in the world. By 2024, when the Boeing aircrafts will be operational, plus Senator’s air fleet, Maersk will almost double its air cargo capacity (Skydsgaard). While Maersk has found a solution to the port problem, other shipping companies will most likely have to follow suit to avoid facing a similar situation again. That being said, this Californian port backup is just the most recent instance, as the same issue occurred in July and March of 2021. The reasons for these backups range from increased consumer shopping to COVID-19 restrictions on port workers to a decrease in the transportation workforce. But no matter the cause, the problem for shipping companies remains the same. Figuring out how to transport inventory in a timely manner especially in crisis situations will probably require an investment in either new forms of transportation or improved technology on existing freighters. Observing and mimicking the steps of Maersk may be a step in the right direction for similar companies to lessen the port risk and protect their business. SOURCES:https://www.senator-international.com/en/news/news-detail/article/senator-to-be-acquired-by-maersk.html https://www.supplychaindive.com/news/Maersk-buys-Senator-International-air-cargo/609314/ https://www.reuters.com/business/aerospace-defense/maersk-expands-air-freight-with-new-boeing-planes-logistics-firm-acquisition-2021-11-02/ AuthorShradha Rajgandhi, RUSCA Blog Committee On November 2nd, 2021, American Eagle Outfitters (AEO)announced that they would be acquiring Quiet Logistics in exchange for $350 million in cash. This is not the first time that AEO has decided to make acquisitions given that they bought AirTerra a while back. Quiet Logistics is a third-party logistics company that specializes in providing order fulfillment and returns management services to e-commerce retailers and their partnerships with DTC and Omnichannel brands allow them to focus on accuracy, speed, and efficiency. Quiet Logistics uses a logistics strategy that prioritizes having products close to the physical stores and customers while having the best speed and freight cost savings in comparison to other firms. Specifically, this logistics firm focuses on omnichannel distribution in order to provide a convenient shopping experience for customers whether it is at the physical brick and mortar stores or through an online purchase. They also pride themselves on using urbanization, automation, and fulfillment robots in order to increase their warehouse productivity. Technology is continuing to change and AEO is trying its best to get ahead in response to growing demand for e-commerce and diverse ways for customers to get their shopping done; “shoppers want to buy online, in-store, and online pickup at the store, and they want to return purchases in multiple ways too” (Root). These days, people are very quick to find alternative stores to meet their needs and do not hesitate to return something if it is not the right product. Shopping continues to grow on the online platforms and AEO proves to be successful as their “digital sales accounted for 35% of total revenue in the second quarter of this year, up from 25% before the pandemic” (Berger). Based on these statistics, it is clear that American Eagle is very determined to lead and innovate in its supply chain environment. Although acquiring Quiet Logistics gives American Eagle a greater scale and flexibility with their shipping methods, it is definitely difficult to beat the major retailers such as Amazon. The acquisition is very beneficial to the company and they have been able to drive the economies of scale by expanding their services and customer base to other small brands and retailers looking to advance their logistics capabilities. The main appeal of this logistics company is their strategy in automation. They created robotics that can “guide workers to items to be picked and can transport goods across a warehouse to be packed and shipped” (Berger). These robots are unique in that they are helping physical workers instead of replacing them. The topic of whether automation will eradicate the physical labor force remains a concern, but Quiet Logistics is advancing technology while preventing workers from becoming jobless. Amid recent company news and acquisitions, AEO has been on the rise financially and investors are feeling incentivized to buy their stock. However, investors need to assess all aspects of the company and focus on whether AEO is creating on-trend clothing while satisfying the needs of young adults and the fashion industry. Overall, this acquisition is a great addition to the company’s list of subsidiaries and it solidifies the backbone of AEO’s supply chain distribution. SOurces: https://www.barrons.com/articles/amazon-retail-supply-chain-american-eagle-51636159574 https://www.wsj.com/articles/american-eagle-outfitters-to-buy-quiet-logistics-for-350-million-11635850920 https://www.businessoffashion.com/news/retail/american-eagle-outfitters-acquires-quiet-logistics-in-350-million-deal AuthorCole Sayde, RUSCA Blog Committee As the holidays approach, consumers across the country are ready to hang up decorations and celebrate; for businesses, though, this is far from the most wonderful time of the year. Amid supply shortages, rising prices, and increased lead times, major companies like Hershey are questioning whether or not they can even engage in holiday marketing, as they cannot count on fulfilling “demand that [Hershey] would create through [their] very impactful advertising” (Vranica). Like every business, Hershey wants to maximize its revenue, but global supply shortages are infringing on their ability to do so. While the chocolate maker has elected to not act on holiday demand, major retailers and manufacturers are crafting strategies to take advantage of the growing demand, and gambling on less price-sensitive customers. To meet demand, Target, for example, has taken shipping into their own hands and chartered their own cargo ship. By adopting this strategy, the company will be paying almost $2 million per month, plus the operating costs covering the price of 500 to 1500 containers that will be placed on the ship (Garcia). While this is a large upfront cost, Target will avoid paying carriers over $10,000 per container and, more importantly, be able to ship to the ports of their choosing. The latter benefit is what will allow Target to meet customer demand; instead of shipping to the congested Los Angeles and Long Beach ports, the retailer can direct their ship to an alternate west coast port—such as Seattle—and avoid prolonged, costly wait times. Some companies, however, are sticking to the more traditional route of paying transatlantic carriers to ship their goods, but far in advance of the holidays. Global toy manufacturer Hasbro has maintained this strategy and ordered early to build up inventory for the holiday season. In order to offset the growing logistics and commodity costs, though, the toy brand has “established price increases that go into effect during the third quarter” (Mayo). So, while demand is being met, it will be consumers’ pockets that are hit hardest. While these solutions will get products onto shelves, it comes at a price, and consumers will be hard-pressed to find the holiday discounts they are used to. So, companies like Target and Hasbro are left asking themselves if their expenses will pay off. Fortunately for them, according to the 2021 Deloitte Holiday Retail Survey, overall holiday spend is expected to grow 5% in 2021 and consumers are prepared to foot the bill, with 39% of them expecting to pay more due to higher prices alone. Sources: https://www.wsj.com/articles/supply-chain-crisis-has-companies-asking-should-we-still-advertise-11635599386 https://www.businessinsider.com/hasbro-toy-prices-rising-third-quarter-holiday-season-shipping-inflation-2021-7 https://www.marketwatch.com/story/walmart-target-home-depot-and-other-large-retailers-are-chartering-ships-to-bypass-supply-chain-problems-will-the-strategy-save-christmas-11633455167 https://www2.deloitte.com/content/dam/insights/articles/us164630_2021-holiday-retail-survey/DI_2021-Deloitte-holiday-retail-survey.pdf AuthorDane Kuehnrich, RUSCA Blog Committee Seemingly endless, the COVID-19 pandemic has dealt the entire world a devastating blow. In particular, there has been a sharp increase in global companies’ vulnerability to complications in their supply chain. From trade restrictions, to shortages in components, to a sheer decline in the global workforce– supply chain operations have been disrupted in every which way. On top of this, these initial shocks in supply quantities are now being followed by a dramatic increase in demand, resulting in extreme shortages in most markets. As companies scramble to make last-minute adjustments to their supply chains in order to deal with these complications, they are beginning to wonder how they can avoid similar circumstances in the future. While the idea of resilience has always been a factor in a company’s supply chain–particularly within logistics, it is not uncommon to often find companies sacrificing their resilience in order to reduce costs and gain further competitive advantages over their competitors. The devastating impact COVID-19 has had on global markets has not only affected businesses, but is forcing government bodies to step in and implement changes in order to build durability in their global logistic network– “policymakers are now calling for supply chains of critical goods, especially medical supplies and high-tech products, to be reshored to the United States” (Lakovou). By reshoring the supply chains of these products to become more domestic, they are indeed reducing the risk of complications in transportation and logistics, but in exchange costs will be much higher. This leads to other problems, like higher prices and lower inventories. This sudden rise of economic nationalism is the product of trade restrictions and shortages of pharmaceuticals, medical supplies, and other crucial products– as well as the ongoing U.S.-China trade war (Shih). With their attention now shifted on streamlining and reinforcing these crucial supply networks, countries such as the U.S. and China are competing–each in their own way– to reach peak logistical sustainability in case of another global disruption like the pandemic. China is more focused on improving their international infrastructures, “investing more than 1 trillion dollars to develop an advanced logistics network as part of its Belt and Road Initiative” (BRI). This network of road and rail routes, ports, airports, and oil and gas pipelines linking Central and West Asia, the Middle East, Europe and East Africa provides both geostrategic and economic benefits” (White). Meanwhile, the negatives of China’s BRI initiative opens up opportunities for the U.S. to work with new trading partners in order to build a new generation of global supply chains built around a complex profile of strategic sourcing options. In short terms, to obtain elastic global supply chains, it is going to require a combination of both government policy implementation and tweaks to manufacturing processes within companies. While countries such as China and the U.S. may take different approaches towards reaching sustainability, their purpose is the same. The goal is to create a global logistics network with minimal vulnerability, while maintaining competitive advantages over competitors and keeping costs low. Entering the optimistic post-pandemic world, it is crucial to realize that the competitive nature of resilience is growing, as it will be a key component to supply chain models in the future. Sources: https://hbr.org/2020/09/global-supply-chains-in-a-post-pandemic-world https://www.brookings.edu/techstream/how-to-build-more-secure-resilient-next-gen-u-s-supply-chains/ https://www.whitehouse.gov/cea/blog/2021/06/17/why-the-pandemic-has-disrupted-supply-chains/ AuthorJames Nichnadowicz, RUSCA Blog Committee In 2021, industries across the globe have been facing massive supply chain disruptions from the fallout of the 2020 pandemic. Recently joining the mix of severely disrupted industries are America’s food supply chains. Specifically, the food supply chains supporting school lunches have come under extreme and unprecedented pressure since the start of the 2021 school year. Following a tumultuous eighteen months of hybrid schooling, school districts across America have begun to return to standard operations. However the operations of school lunch programs are facing colossal supply shocks. Labor shortages in warehousing and transportation across America have impeded consistent delivery of foodstuffs, substances suitable for student consumption with some shelf life, and created massive price increases. In September 2021, the cost of food increased 4.6% in the month alone, the highest since December 2011 (U.S. Bureau of Labor Statistics).These supply constrictions have become so massive that districts have been forced to bear the increased price of food to keep their students fed. In an interview with The New York Times, North Kansas City Schools Director of Food and Nutrition Services, Jenna Knuth, lamented that the districts are taking in any food they can and are practically begging suppliers for contracts (Ngo New York Times). Knuth is responsible for 21,500 students; her faculty have been forced to make routine trips to retailers such as Sam’s Club and Restaurant Depot to compensate for the lack of deliveries from outside food suppliers. Further, the labor crisis has persisted into the school districts themselves, as some institutions are facing internal food workers shortages. Richmond Public Schools in Virginia have had to replace hot lunches with grab-and-go meals. This change has been to many of the student’s dismay, as the new options offered are extremely less appetizing and nutritious (Ngo New York Times). Some of these shortages have become so dire that schools are turning to shelf stable meals, including shelf stable meats. Anchorage School District Senior Director of Student Nutrition, Andrew Mergens, disclosed to the Times that four of his cafeteria managers have quit prior to the current school year, also stating, “[a]s you can imagine, shelf-stable meat isn’t great, but it’s all we got” (Ngo New York Times). The crisis has become so pressing that on September 29th the United States Department of Agriculture passed a bill sending $1.5 billion dollars to schools across the nation in hopes of alleviating pecuniary stress on district’s purchasing budgets. A survey conducted by CNN reported that 97% of school meal program directors fear supply chain disruptions for the foreseeable future (Lobosco and Luhby Central News Network). The bill allocates $500 million dollars directly to states to distribute the funds among qualifying schools, and the remaining one billion dollars directly to the districts themselves. This bill hopes to provide reprieve to struggling districts, however, global supply disruptions across industries and increasing inflation rates bode scary futures for schools across the nation if this support is not sustained. Sources: https://www.cnn.com/2021/09/29/politics/supply-chain-issues-school-lunch/index.html. https://www.nytimes.com/2021/09/27/us/politics/schools-labor-supply-shortages.html. https://tradingeconomics.com/united-states/food-inflation. AuthorChristina Chen, RUSCA Blog Committee Globalization has defined modern supply chains, as new technologies and increased communication capabilities allow companies to reach new markets and source from all over the world. But the disruptive effects of the COVID-19 pandemic may prompt firms to change their strategies to lessen the impact of possible future disruptions—something increasingly likely in an interconnected world. Increased demand has exacerbated the problem of limited cargo space on freight ships, causing bidding wars between freight forwarders and shipping companies. Even when companies manage to get their containers loaded onto ships, it isn’t necessarily smooth sailing from that point forward. Companies can expect long lead times due to overwhelmed ports and truck driver and rail car shortages. Container ships could sit in port for weeks before being unloaded—at the Ports of Los Angeles and Long Beach, the average wait time before being loaded onto trucks “was 4.76 days in June [2021], up from two days in March of 2020… Containers sat even longer before getting on trains—an average of 11.8 days, up from 7.9 days in January” (Semuels). In short, every step of the supply chain has become complicated, resulting in higher prices and slower deliveries for consumers. The pandemic exposed the fragility of the current global sourcing model. International purchasing can take advantage of efficiencies such as lower-cost materials or labor, but with outsourcing comes the risk of dependency on faraway suppliers. Disaster events were uncommon in the past, but in a globalized world, a crisis on the opposite side of the world can impact the entire supply chain, as was the case when key Chinese suppliers shut down their operations and logistics connections during the pandemic. In response, some automotive manufacturers such as Toyota and Tesla have begun to shift away from just-in-time (JIT) manufacturing (Witham). By producing some of their own core components rather than relying on suppliers to deliver materials “just in time”, these companies are recognizing the importance of reducing risk. Risk mitigation is increasingly vital to supply chain strategy. While price is important, companies should also consider supply base diversity to lessen the impact of future disruptions. Currently, many firms rely heavily on single sources. For example, Taiwan Semiconductor Manufacturing Company is dominant in the semiconductor chip industry, but is still dependent on one supplier for advanced lithography systems, which in turn sources optical engines from a single German factory. Barriers to entry such as economies of scale make it difficult for other suppliers to compete, but “long-term purchasing commitments that reflect production learning will give alternate suppliers the incentive to invest, and it could help ensure competitive pricing over time” (Shih). This way, supply chains will become stronger and more adaptable in the long run. While it is unlikely that companies will stray away from globalized supply chains altogether, what they learn from the pandemic has the potential to fundamentally alter global supply chains for the better and help shape a more resilient world economy. Sources: https://time.com/6088033/why-inflation-is-rising/. https://sloanreview.mit.edu/article/is-it-time-to-rethink-globalized-supply-chains/. https://www.forbes.com/sites/forbestechcouncil/2021/09/09/supply-chain-lessons-learned-from-the-covid-19-pandemic/?sh=1bf7ff9424ca. AuthorJennifer Chen, RUSCA Blog Committee Marketing is all about creating, communicating, and delivering value for customers. Supply chain management encompasses the processes required to create products and services and deliver them to customers. At first glance, marketing and supply chain management may seem like an odd pairing because of how different the industries are. However, there are many overlapping aspects within both disciplines, and a successfully implemented relationship between the two can drive better business results. Failure to work together can cause misaligned internal objectives, ultimately resulting in dysfunction and poor performance. Marketing has access to tons of consumer data, which can help determine demand for supply chain operatives.The marketing department has “so many more tools and so much more data at their disposal than the supply chain team.” (Olenski). For example, marketing managers can help predict demand by analyzing the results of advertising campaigns, conducting market research, or collecting customer feedback through surveys and focus groups. Because of this important information, marketing plays a role in balancing supply and demand, improving the efficiency of operations and ensuring customers are satisfied and get the products and services they need. Another crucial component of successful supply chain management operations is the collaborative relationships between suppliers, customers, and other partners. Marketing can strengthen these relationships but a disjointed working relationship and lack of communication between departments can lead to tarnished brand images. When the marketing team is planning promotions and advertisements for certain products, it is important they coordinate with supply chain managers to prevent potential inventory issues, such as stockouts. Continuing on the topic of brand image, another important factor that captures customer loyalty is product quality. The supply chain department is responsible for sourcing and procurement, two critical components that determine the quality of a company’s products. Marketing comes into play when creating campaigns and strategies to communicate the company’s efforts towards producing quality goods for their consumers and capturing their attention. Therefore, everyone has to work together to ensure the right messaging that fully represents the quality standard is being promoted. If marketing releases misleading information, customers will lose trust in the company’s claims. In order to improve execution and loyalty, there needs to be “a culture of sharing and trust throughout the supply ecosystem, as well as a singular focus on serving customers.” (Hand). Collaborative relationships are crucial when it comes to the success of a business, and that of marketing and supply chain management is no exception. Sources: https://www.ascm.org/ascm-insights/retailers-use-supply-chain-to-harness-the-power-of-brand-loyalty/. https://www.forbes.com/sites/steveolenski/2017/12/08/a-marketing-teams-success-is-only-as-good-as-the-companys-supply-chain-management-process/?sh=6eed60b52135. https://www.dolomitesconsulting.com/3-key-relationships-of-marketing-and-supply-chain-management/. https://www.unf.edu/~ggundlac/pdfs/03_pub.pdf. |
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