Since the pandemic took charge, businesses have faced unprecedented challenges, with many factors disrupting supply chains. The fourth quarter is retail’s time to shine, so avoiding any potential supply chain issues ahead of the Christmas period is key. To add to this year’s difficulty, the pressure on retailers from consumers to perform well amid the challenges is mounting.
What problems are retailers facing this Christmas?
- Shortages of goods/components
Global supply chains continue to experience problems with sourcing parts as a result of the pandemic. Shortages of semiconductors have shaken the world, as manufacturers are struggling to produce their goods at normal levels, meaning the availability of smartphones, cars and games consoles is limited. Unfortunately, it may be bad news if you have a Nintendo Switch on your Christmas list!
- Shortages of workers
Recurring Covid-19 lockdowns have severely hampered the production, transportation and receiving of goods across the world. Companies across the globe are reliant on Asia to produce their goods, and in some cases, production has had to be halted in factories due to strict government regulations. This rippled across the world, and consumers eventually have been left facing shortages of goods. A lack of truck drivers has been common in the UK and the US in particular, with this limiting road freight capacity.
- Transportation problems
Worker shortages, congested ports and a lack of shipping containers are all contributing to a troublesome time for those involved in shipping. As a result, retailers and consumers are seeing long delays and extortionate prices. Due to the recent dependence on air and rail freight, these services are also now beginning to get backlogged. Mobility restrictions due to the pandemic and the introduction of new policies and tariffs as a result of Brexit are also responsible for problems within transportation.
The role of governments in ‘saving Christmas’
Governments need to communicate with the private sector to ensure supply chains are operating as smoothly as possible. Their policies should consider domestic, regional and global supply chains and leaders should be able to coordinate solutions if supply chain problems arise.
Here are a two examples of what governments are doing to ease supply chain strains ahead of the festive season:
- The United States
The Biden Administration recently announced that the Port of Long Beach will be operating on a 24-hour basis in order to clear the backlog. Adding around 60 hours a week to the work schedule is a positive step to alleviate the supply chain snarls ahead of Christmas, however, more work still needs to be done. For example, both cargo and passenger airlines want to fly more international routes, but new overflight authorities are required, preventing this from happening. With such congestion throughout supply chains, the President should be exploring every avenue to get goods moving quicker in time for Christmas, perhaps identifying any regulations hampering the supply chains, sourcing temporary container storage or working with Customs to move items quicker at the border.
- The United Kingdom
The UK has faced fuel and worker shortages, price increases and lengthy delays across supply chains over the past year. Leaders are quick to pass the blame around, pinpointing the issues on the pandemic and disregarding Brexit as a culprit. Either way, the two main factors go hand-in-hand to cause a supply chain nightmare. As well as providing funding and training to recruit new truck drivers, Boris Johnson announced a plan to give out temporary work visas to allow foreign nationals into the country to ease the shortage, however only 20 visas had been fully processed by October, which is unlikely to make any real difference down the line. To help ease the strains, the British government must work on their policies to ensure further disruptions to the movement of goods don’t occur due to Brexit.
The role of retailers in ‘saving Christmas’
Retailers play an essential role in supply chains, as they link manufacturers to consumers. It is normal practice for companies to plan for Christmas all year round, but this year’s supply chain troubles mean even more planning will be required.
In order to ensure the right products are in the right quantities at the right time for consumers, retailers may decide to source products locally if they can, to reduce the risk of the goods being stuck in transit. With severe delays in shipping and air freight costs rising, sourcing local products is not only a cheaper but also quicker way to ensure customers can access the goods they need. Companies have also expressed the importance of ordering their goods early for Christmas, to account for the severe delays in the global supply chain. It is incredibly difficult for them to plan for what will happen, as changing levels of demand and further delays cannot be predicted accurately.
The role of consumers in ‘saving Christmas’
The main piece of advice being given to consumers this year is not to panic buy. It has been proven that panic buying makes supply chain crises worse, just look at what happened in the UK with the so-called ‘fuel shortage’. Consumers are also encouraged to buy their goods early, so the usual rush of people buying Christmas goods in December is reduced. Perhaps the most important thing consumers can do to help ‘save Christmas’ is to be flexible: you may not get exactly what you want at the right time, so having an open mind is key.
The different aspects of the supply chain rely on each other to function smoothly, however coordinating this is extremely difficult in such an uncertain time. It is unlikely that we will be having a ‘normal’ Christmas due to the range of shortages and delays, but there are certainly steps that can be taken to alleviate some of the damage. The supply chain problems leading up to Christmas this year will affect most people in one way or another, however this year, we should appreciate what we have around us and make the most of being able to spend time with loved ones thanks to fewer Covid-19 restrictions being in place (for now at least!).