How to avoid the Back-to-School Supply Chain Blues
Have you finished your back to school shopping?
Or are you like me and you haven’t started, so the last-minute dash for school supplies, will be met with picked over or even empty shelves.
And this year, the rush for sneakers, backpacks, calculators, and other necessities might be worse than ever.
As schools look to return to full capacity for the first time in almost two years, the National Retail Federation is estimating that the average shopper in the US will spend $850. But, with new COVID-19 outbreaks in countries such as Bangladesh and Vietnam causing more factory shutdowns, many retailers across the globe could be faced with a supply and demand imbalance due to low inventory levels and delayed shipments. This inability to replenish the shelves for the back-to-school surge could result in shortages and increased prices for clothing, shoes, stationery, and supplies.
The search for everything from sneakers to school supplies
My father used to tell me he had to “walk barefoot to school ……. uphill both ways …….. in the snow!” But it is no joke if you can’t find a new pair of sneakers.
A recent report from Panjiva, the supply chain research unit of S&P Global Market Intelligence, said that there could well be a shortage of sneakers as the spread of Covid-19 has recently halted production in several Vietnam suppliers.
The risks of a global economy have been exposed in the past 18 months due to such closures that have been compounded by shortages of cargo containers, port congestion and closures, and labor shortages. This fragility was also highlighted, when the mega tanker, the Ever Given, collided with the banks of the Suez Canal in mid-March, blocking the channel completely for over a week, and caused a major disruption.
And due to the global nature of supply chains for clothing, backpacks, and stationary, this could just be the tip of the iceberg.
The electronics challenge – Not enough chips to go around
And what will be in that new (or potentially old) backpack? According to a recent Deloitte back-to-school survey, spending on technology products such as personal computers, smartphones, and tablets are projected to increase 37% from 2020 to $11.8 billion.
However, these electronics are already in short supply due to the global chip shortage triggered by an enormous spike in demand for consumer products as we all worked, studied, and entertained ourselves at home during the pandemic. This, along with the resurging demand in the automotive industry, and the influx of smart products, has caused a supply and demand imbalance in the semiconductor industry.
School Food Shortages – Not enough chips to go around
And once they get to school, there is a concern about keeping children nourished, as schools are struggling to secure food, and in some cases, staff, to prepare student breakfasts and lunches ahead of classrooms’ planned reopening in the fall.
Some are cutting menu choices as food suppliers face labor shortages and transportation challenges that are limiting supplies and increasing costs. Food distributors and school officials say they expect to run low on everything from lettuce to lunch trays, and some worry that the lack of options will deter students from getting meals at school.
What can businesses learn from the back to school challenges?
Visibility across the business network into both supply and demand are key
On the demand side, in addition to tracking what customers are buying through point of sales data, you also need to know what they are thinking of buying, by tracking market and customer sentiment analysis of what is “hot”. Visibility and collaboration on the supply side is equally important. Which shipments are in risk due to plant closures or restrictions? Which deliveries are facing delayed in-transit?
We plan in the perfect world and execute in the real world
Having good plans based on an accurate view of demand is important. But equally important is the ability to respond to the expected and unexpected changes in supply and demand. This requires business systems and business process with the agility to respond to these changes. This was highlighted in a recent discussion with Bimal Subhakumar, Senior Consulting Manager, at Novigo who explained, ”This year’s Back-to-School season is expected to bring a massive boom in the sales of school supplies, apparel, and footwear. While this can be a time to ramp up inventory for retailers, we need to understand that shippers generally have dedicated freight contracts with specific carriers during this time”. He continued, “For example, at one of the world’s largest stationery & office products company, we found that the Back-to-School (BTS) rates for some lanes were costlier than the normal rates of non-BTS carriers. This finding helped them to renegotiate the rates for these lanes during the next bid process and save freight cost.”
The new 3 R’s – Risk, Resiliency and Responsiveness
It is critical to design your supply chain to withstand disruptions and take advantage of opportunities. This requires having plans in place with the resiliency to sense and respond to supply chain risks. What are my alternate sources for a product if a supplier fails? Do I have a local supplier I can turn to? Should I keep additional inventory of key products closer to the source of demand? Can I trigger a rush delivery by air?
The pandemic has taught us that the globalization of our supply chains, while reducing costs, have also increased risk. Executives are now demanding more resilient supply chains that can sense, absorb, and respond to these risks, and come back stronger.
To learn more about how supply chain leaders minimize risk and maximize opportunities with resilient, sustainable and customer centric supply chains, download a recent Oxford Economics study.