In this Supply Chain Matters commentary, we share some joint perspectives on the soon to be 2021 holiday fulfillment period. That includes what to expect in the coming weeks in terms of supply chain response.
Supply Chain Matters has shared a number of perspectives regarding the ongoing global supply chain disruptions, transportation, and customer fulfillment challenges. We are on record as indicating the realities that global supply chain material flows are going to get worse before it gets better. Not a day goes by in our daily news feed desk where the topic of supply chain related shortages and disruptions are being associated with the lack of specific products or services. Whether its Christmas trees, Thanksgiving turkeys and food items, toys for children or new cars and pick-up trucks, supply chains have become the fodder of unwelcome news.
To gain added insights and perspectives regarding this upcoming holiday season, and indeed what to expect in 2022, we have been reaching out to other supply chain thought leaders and seasoned experts.
This includes Mike Landry, Senior Vice President, Supply Chain Service Global Leader at global professional services firm Genpact. Mike’s previous leadership roles have been the President, North America, Barkawi Management Consultants and as the former Founder and CTO of supply chain service parts planning tech provider Servigistics. Mike is a true professional and we wanted to share his observations and insights with our Supply Chain Matters audience.
Our conversation touched on a number of relevant supply chain business process and technology topics.
Global Wide Semiconductor Shortage Implications
A certain timely topic related to the upcoming holiday season is the ongoing global shortage of semiconductor devices that is impacting not only global automobile and other vehicle sectors but high-tech, consumer and medical electronics, and appliances as well.
Mike noted that Genpact consults with many semiconductor producers on improving planning processes that now span very sophisticated, often custom designed microprocessors featuring constant development and release cycles, to volume semiconductor devices that were designed months prior and reflect volume component demand within automotive and other industries. The planning and procurement challenges involve extended lead times under normal business conditions, let alone the existing industry environment. Product demand planning processes extend to distributors and actual manufacturers seeking component supply but with different inventory planning and procurement practices. Post COVID-19 demand obviously exposed shortfalls in inventory planning and strategic supply management.
While the industry will address challenges and supply shortfalls, it is not going to help in the upcoming holiday period. Thus, for holiday wish lists that may include a new car, PC, gaming device, appliance or other electronics laden item, be prepared for limited inventories and higher prices. Just this week, The Wall Street Journal reported that auto and appliance manufacturers have allocated limited supply of chips to only their upscale premium models planned for holiday sales, and they will indeed come with corresponding premium pricing.
My observation was for all of us to observe how Apple, which has managed to amass a lot of influence in semiconductor and high-tech component supply networks, manages overall availability of both its new iPhone 13 line-up as well as previously announced models during this holiday season. The consumer icon remains reliant on supply and production flows from China and increasingly, other parts of Asia. If Apple falters and experiences inventory shortfalls this holiday season, it will be added evidence of more pronounced short-term supply chain supply limitations.
The Bullwhip Effect Is Alive
This Editor has been of the belief that the ongoing armada of ocean container vessels heading toward European, U.S. and other ports may be evidence of excess ordering. In other words, retailers and wholesalers not wanting to be short of merchandise for the holidays have placed added orders in hopes that some inventory will be able to flow to fulfillment centers in time for holiday buying cycles.
Business media reports reinforce this, especially when the CEO of Walmart informed a recent investor conference that given the learnings of 2020, the retailer “will take even more inventory if we could get it.” That would include the retailer’s recent moves to charter its own dedicated ocean container transport vessels.
Mike pointed out that if all of this inventory indeed arrives in the coming weeks, there may not be enough warehouse space to store it, given current capacity limitations. Thus is the importance of precision timing in planning and enhanced visibility to actual inventory movements.
An additional observation we discussed is whether retailers elect to enforce on-time in-full (OTIF) penalty measures given the ongoing severe bottlenecks in transportation and in inventory flows. This will be a key area for supply chain management teams to monitor given that penalties are on the rise and will add more costs for manufacturers and suppliers, not to mention some sour relationships with certain retailers.
Fewer New Products
Mike observed that where in prior holiday periods, manufacturers would offer a flurry of new products, this season, product selections will be limited because of the ongoing production and global shipping delays. Genpact has observed SKU rationalization in the order of 30-50 percent for some consumer products providers. Thus, the messages for consumers to do their research and buy early is very appropriate. In that same vein, expect different, more basic packaging given ongoing shortages of paper and corrugated board supplies.
The notion of this topic is a belief that emails and media messages relative to last calls to purchase holiday goods in time for the holiday delivery will come earlier this season. Genpact has been observing that the ongoing global supply chain backlogs coupled with average newer product SKU’s being delayed to sometime next year will drive retailers to encourage earlier buying on the part of consumers.
Mike and I discussed whether a few savvy retailers, will elect to hold on to the most in-demand products until after the traditional Black Friday- Cyber Monday holiday promotional period. Instead, they could elect to leverage the ability to maintain a higher price because of availability, and still be able to deliver that merchandise before the holiday. That will be another area to especially observe.
Added Manifestations of Supply Chain Control Tower Capability
Our final area of joint discussion was whether manifestations of Supply Chain Control Tower decision-making capabilities spanning supply chain planning and customer fulfillment execution will be more prevalent leading up to this holiday fulfillment period. Mike indicated that we will indeed and specifically mentioned Genpact clients that now have such capabilities operational in their overall supply chain decision making, while others are in active phases of implementation.
Overall, this was an interactive and insight conversation, and we thank Mike Landry for taking the time out of his busy schedule.
Supply Chain Matters readers should expect additional interactions with supply chain leaders regarding 2021 holiday fulfillment period expectations, challenges and successes. We will share these in both written and podcast formats.
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