Supply Chain Weekly Wrap-Up: 06/05/20 – 06/11/20

Ocean shipping shrinks as pandemic pummels retailers

Some shipping lines, whose retail customers are being severely affected by the coronavirus pandemic, are reducing sailing speeds and taking longer routes around Africa, thus avoiding Suez Canal passage fees, according to the companies and ship-tracking specialists. Many are also cutting down the number of voyages and providing short-term storage for clients as the industry faces its biggest downturn since the 2008 financial crisis.

These new tactics not only reduce costs, but also help adapt to the needs of cash-crunched retailers – among their biggest customers – who are stuck with huge inventory surpluses thanks to COVID-19 store closures and a collapse in consumer demand. Slower shipping times also allow importers to delay payments made on delivery.

From Puma to Gap, many retailers have been forced to reduce or slow down shipments of new merchandise. However, at the same time, the shipping slowdown has created headaches for those retailers, including Walmart, Amazon and shoe seller Rothy’s, who have never stopped selling products to homebound consumers, ranging from books and shoes to exercise equipment, much of it sold online.

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Logistics Operators Targeting E-Commerce Boosted Hiring in May

Logistics operators tied to e-commerce added jobs in significant numbers in May as online shopping increased while the broader economy showed signs of recovery from the shock of the coronavirus pandemic.

Courier and messenger companies that deliver packages to homes and businesses hired for 12,100 job roles last month, according to seasonally adjusted preliminary employment figures released by the U.S. Bureau of Labor Statistics. This was the third straight month of expansion in this sector, which has stepped up hiring even as much of the U.S. economy shut down in April and May.

Delivery companies have been scrambling to meet unprecedented demand during widespread lockdowns and parcel networks are straining to handle a flood of online orders for everything from household staples to home office equipment. However, despite this delivery giants FedEx Corp. and United Parcel Service Inc. are adding surcharges to some shipments to offset rising costs driven by holiday-level package volumes.

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Food makers are hoarding ingredients for fear of more supply chain disruptions

Hoarding cash during a pandemic might seem prudent, but America’s packaged food companies are spending more, mainly stocking on raw materials, like oats and sugar, so they can maintain production in case supply lines get disrupted or imports are held up.

Campbell Soup Co. is buying more ingredients amid a boom in demand for pantry staples. Bobo’s, a Boulder, Colorado-based producer of snack bars and toaster pastries, has stocked up on organic oats, sugar and coconut oil. Their chief executive officer, TJ McIntyre, said in an interview: “We just wanted to have an insurance plan for our business. If we ran out of oats, we’d be in trouble,”.

This is a striking shift in strategy for food companies that for years have operated just-in-time inventories, which minimize storage costs. It also underscores the lessons learned after the coronavirus pandemic upended supply chains and sparked concerns over shortages of some ingredients.

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Have a lovely and safe weekend!