Supply chain disruption is causing a severe impact on retail
Retailers are stuck between a rock and a hard place, thanks to severe supply chain disruption around the world. How can leaders become more resilient?
The global supply chain is experiencing stress unlike anything before. From clogged and backed-up shipping ports to trucker shortages, shelves are empty and retailers are feeling the effects. Supply chain’s dire challenges are severely hindering retail businesses’ bottom line, throwing forecasts and plans into disarray. We’ll examine the impact on retail and how retail leaders better plan for disruption to be more resilient in turmoil.
Supply chain turmoil sent retail into uncharted territory
The world went through major event after major event from 2020 to today. First, unforeseen consumer demand during the pandemic caused supply shortages in retail stores. According to Forbes, retail sales went up an estimated 6.7% in 2020. The five-year average was only 4.4%. Several key items were difficult for retailers to stock, especially essentials like food, cleaning supplies, and personal hygiene products. Although retailers benefitted from the sales, increased consumer demand without adequate supply left retailers seeing consumers leave empty-handed, missing ample sales opportunities.
Because of increased consumer purchasing, shipping container volume hit record numbers. In fact, CNBC reported that the Port of Los Angeles saw 16% more traffic in 2021 than in 2020. Additionally, automotive and technology retailers felt the squeeze of pandemic-related factory closures, like a severe shortage of computer chips essential to the manufacturing of cars and computers. The pandemic’s impact was manifold for retailers around the world.
The disruptions simply piled up. A blockage in the Suez Canal caused an 11% spike in late retail shipments. Trucks move 72% of American freight but a trucker shortage to the tune of an 80,000–person deficit threw the industry off balance.
Retailers are still contending with these uncertain and completely unpredictable times, and without tools to combat unforeseen events, they could be left in the lurch.
Retailers are feeling the stress
According to industry publication Supply Chain Dive, 98% of retail executives reported supply chain issues in 2021. Of the same cohort of executives, 59% said their product price or shipping costs would increase for consumers. Most troubling for retailers, 6% of executives said they were taking a margin hit in order to keep prices level for shoppers.
In 2021, the Christmas tree business faced an unprecedented hike in shipping costs. Per Retail Dive, the National Tree Company typically paid $2,000 to $3,000 for ocean-bound shipping containers, but in 2021, that price jumped up to a staggering $25,000. It can feel impossible to maintain a healthy margin with such extreme fluctuations in expected norms.
It’s not only shipping that is troubling retailers today. A labor shortage leaves retailers with no choice but to make some hard decisions about their operations. Many stores, especially smaller retailers, were forced to close stores, adjust open hours, send apology emails to customers for disruptions in service and expectations, and more. Even retail giant Walgreens experienced the stress, needing to spend $120 million more on labor to assist current staff, who are stretched thin and in dire need of reinforcements.
But retailers don’t need to flounder when hit with unexpected challenges.
Resilience is possible
Anaplan gives retail leaders the ability to use concrete metrics across the entire enterprise for continual optimization from supply chain to consumer. These same data points and a clearer and more open line of visibility help leaders find areas of improvement and risk quickly, allow exact pinpointing of opportunities to improve performance.
Dynamic real-time supply chain forecasts also enable granular adjustments at the lowest possible level to adequately to react to the lowest possible product, time period, and location levels. Then, supply chain leaders can easily modify baseline forecasts to allow ongoing course corrections using scenarios and to incorporate leading indicators and external data versus history to provide guidance to forecasts. Of course, with Anaplan’s ability to connect both internal and external stakeholders to access and absorb each other’s data, supply chain leaders can engage in open collaboration and forecasting with vendors, suppliers, and trading partners.
All of this makes Anaplan an essential tool for combatting extreme disruptions to retail operations where possible, from supply chain stress to personnel shortages, allowing each business unit to share, react, and adjust operations to meet the industry’s challenges.
Global turmoil doesn’t need to send retailers into a tailspin. Although it’s beyond simple to get caught in a trap of inadequate or outdated plans due to disruption, Anaplan allows on-the-fly adjustments, “what-if” scenario planning, and open communication between partners and internal leaders to allow resilient operations. Become impervious to the rapidly changing world of today by adopting Anaplan to increase resilience, stabilize or improve margin, and stay competitive in an increasingly volatile market.