Christmas Shopping Season to Strain Supply Chain Networks
2020 has been a strange year. The elephant in the room, COVID-19, has caused a ridiculous amount of disruption and, to be frank, the global supply chain network and subsidiary sectors linked to it have had a bittersweet year. Naturally, as the world went into lockdown, consumer habits changed drastically and, while some regions are still stuck in it, they will start to splash the cash far earlier than usual for the Christmas season. You know those people who usually do the Christmas shop way too early? That’s everybody this year.
So, to summarise: evolving shopping habits, COVID-19, a delayed Amazon Prime Day, are leading people to do their shopping way earlier than usual. And, with the general supply chain disruptions that we’ve experienced this year, complete supply chain visibility is an absolute necessity to ensure that our logistics networks can cope with and successfully deliver the heavy load.
Amazon Prime Day
Let’s focus on Amazon Prime Day for a moment. It's truly crazy to think that a retailer has an internationally-recognised day on the Gregorian calendar, but there we go. This year’s Amazon Prime Day was delayed by COVID-19 and the havoc it wrought on supply chain networks across the world; this day usually acts as a catalyst for Amazon’s competitors like Target, Walmart, and Best Buy to produce similar ‘days’ that feature their own limited-time offerings.
Due to the fact that Amazon is truly a behemoth in the retail scene, if their competition fails to offer competitive pricing around the special day, they’re pretty much guaranteed to see a decline in sales. And, as Amazon decided to proceed with the day of sales (13th-14th October), and their competition is fearful of that loss, companies like Target are offering a ‘Black Friday’ sale for the entirety of November.
The problem is, if a retailer starts its promotions after the unofficial holiday, it’s far harder to ensure that they have enough inventory to keep their shelves stocked when they’re running low. Retailers that started their promotions early or plan to start earlier in November than Black Friday, on the other hand, will be able to identify and keep up with new consumer shopping trends. Basically, if you keep up with Amazon’s scheduling, you’ve got a chance to compete ─ if you don’t, you’re doomed.
What’s Hot This Year?
Unsurprisingly, with the change in consumer habits, we can also see a change in the buying trends, courtesy of COVID-19. The average consumer of 2020 will, in fact, be looking towards practical purchases rather than luxury items, this Christmas. Most notably, products like winter coats, snowshoes, and fire pits appear to be near the top of the Christmas list, as families and friends prepare for outdoor, socially-distant gatherings in the colder months under lockdown rules.
Electronics, just like every other year, are also high up on the list ─ especially now that so many people are transitioning to ‘work from home’ setups, rather than attending the traditional office space or workplace. Experts predict that internationally sourced electronics will have an especially difficult time travelling the supply chain, due to the widespread shipping delays caused by COVID-19; desktops, keyboards, laptops, monitors, and general desk decór seem to be in particularly high demand.
Great Concept, Awful Reality
It’s all well and good having sales, and they’re excellent for consumers, of course. But, all-month Black Friday’s and super-savings days so close to the Christmas period will cause the usual season of shopping to start much earlier, and there will be an exponential increase in orders travelling across the global supply chain network. There will be more damages, errors, and just a general strain on daily proceedings, due to reduced workforces, higher risks of contracting illness, and differing lockdown regulations globally.
Currently, to help with the demand, the best option for retailers and companies along the supply chain network is to implement a transportation management system (TMS). Leveraging TMS will allow a company to seamlessly rate, book, and track freight ─ a level of visibility that is crucial if you intend to let your consumers view the status of their shipments and track them from the supplier to their front door.
Through the power of cloud-based TMS and end-to-end supply chain visibility, logistics professionals and retailers can improver operational efficiencies, provide better customer service, and leverage detailed analytics to make better-informed decisions as we enter the bustling Christmas shopping period.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”