The Supply Chain Matters blog highlights a recently published survey of how U.S. consumer sentiments associated with ongoing continuous supply chain disruptions are changing buying sentiments and what that implies for brands and their associated supply chain management teams.
In prior published Supply Chain Matters blog commentaries, we have brought awareness to how the now constant developments in global-wide supply chain disruptions are impacting various industries and businesses.
We, along with other industry and business media, have declared that the ongoing supply chain disruptions, service level erosions and explosive cost impacts are going to get worse before they get better. Indeed, disruptions and added costs continue to pile and options are becoming limited and super expensive on the part of businesses.
We have highlighted a Bloomberg statistic that senior executives among S&P 500 companies have made specific mention of the phrase “supply chain” more than 3,000 times within investor briefings which has to be some sort of record in itself. Even the iconic Apple has not been immune to component shortages.
This supply chain industry analyst has specifically advised retailers, wholesalers and various businesses that for this holiday fulfillment period, enhanced visibility, precision planning and inventory management will prove to be essential in their ability to make the best of a highly challenged supply chain environment.
The inventory-to-sales ratio among U.S. businesses, which is a measure of inventory on-hand to support expected sales, had a reported value of 1.25, the lowest level dating back to 1992. Specifically for retailers, the ratio stands at 1.10 for August, hardly covering flexibility in achieving sales fulfillment needs.
Last week we highlighted to our Supply Chain Matters readers that global economists and financial institutions are now coalescing and formally quantifying that this year’s continuous global supply chain disruptions and consequent inflationary forces, are doing specific harm to businesses and to the global economy. The newly released World Economic Outlook issued by the International Monetary Fund (IMF) describes three forces: health concerns, supply disruption and price pressures as driving forces to a 0.1 percentage point decline in forecasted global economic output for this year.
Inflationary pricing trends are becoming more concerning as well. The U.S. Bureau of Labor Statistics has recently indicated that on an annual basis, product prices have risen at a 5.4 percent clip, and are expected to go higher in this final holiday focused quarter. Concerns are growing among U.S. policy makers whether inflation spikes are “transitory” and whether higher prices for consumer staples and fuel lead to more elongated inflation pressures.
U.S. Consumer Concerns
With the growing realization that ongoing supply chain component and transportation disruptions will likely extend into next year, in in certain specific cases, beyond 2022, the obvious question is how U.S. consumers are perceiving the current situation, and what are they inclined to do in their buying intentions.
Evidence to such an effect is provided by a recent study conducted by DKC Analytics for Cloud ERP and supply chain technology software provider Oracle.
The study involving 1,000 U.S. adult consumers was undertaken between September 9, 2021 and September 10, 2021. Reportedly age and location were both weighted o accurately reflect the U.S. adult population.
The noted takeaways from the survey data is that recent supply chain delays and disruptions are increasingly top of mind concerns for consumers and leaving many feeling frustrated, angry and concerned that there is no end to this litany of events. The majority (91 percent) now factor supply chain conditions in their buying choices.
Among the key findings were:
- 77 percent of respondents indicating that the rise of the COVID-19 Delta variant is increasing their supply chain concerns
- 82 percent of the respondents concerned that ongoing disruptions would ruin life plans such as birthdays, holidays or purchasing necessary items.
- 92 percent of respondents believe more disruptions are coming and 66 percent are scared that they will never end
- 80 percent indicating that delays and shortages could cause them to cut ties with favorite brands.
While all of this data is concerning for retailers, wholesalers and businesses, the last two should especially be of concern. During last year’s population lockdowns and restrictions, consumers placed a particular trust in specific brands of products in terms of expected quality, reliability and availability. Certain brands were especially rewarded for such loyalty in terms of revenues and added profitability.
Consumer product goods producer Procter & Gamble was the first to term this believe as “the moment of truth,” that is when consumer initiate their purchases, regardless of time or retail channel, they experience that same brand quality, reliability and service expectations.
The data in this study indicates that 87 percent of consumers have been negatively impacted by perceived supply chain issues with many unable to purchase certain items (60 percent), forced to cancel items due to intolerable delays (51 percent) or ration essential items for fear of running out (40 percent).
Such sentiment data has to be concerning for brands and businesses, not only for the implications, but in the added time and cost that is often needed to reestablish brand or business loyalty and lost market share. The survey data indicates that 84 percent of the view that delays would cause them to cancel their order, and a significant segment (80 percent) would motivate them to stop buying from a brand altogether.
An added concern is reinforcement of the planning bullwhip effect with 91 percent of respondents of the survey indicating they will change their buying behavior moving forward including buying in bulk to avoid running out (49 percent) or pre-ordering goods whenever possible (39 percent).
Such consumer sentiment is now reflected by new reports of empty store shelves, out-of-stocks notifications in online channels or automobile dealer lots with very slim inventories of cars that can be sold from the lot.
Detailed data related to this consumer study is provided in this specific Oracle Cloud SCM blog posting
Added Thoughts and Reader Takeaways
The data reflected in this Oracle sponsored consumer sentiment study should not be of surprise to industry supply chain management teams. It is a quantification of others in the same vein, namely that buyer and business frustrations and concerns are rising.
What this implies is that supply chain product demand and supply planning processes now have to be able to distill many forms of added intelligence and information elements. Supply chain execution and customer fulfillment processes need to be able to provide more timely updates to inventory and order fulfillment status or to bottlenecks and added disruptions. It is ever more critical for the synchronization of information among planning and supply chain execution processes that ensure smoother flow of inventories and avoid added bottlenecks. As noted above, precision planning and inventory management are now the new table stakes.
Retailers and carriers can now provide real-time information as to the status of orders, even to the point of notifying customers immediately when their order is dropped off. In that same notion, customers need added information as to product alternatives and options when their desired product choice cannot be fulfilled to expectations.
It is often stated that speed, context and depth of decision-making is the new determinate for customer and market success or brands, businesses, and that implies now more than ever.
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