How can retailers best navigate supply chain turbulence?
Home Depot has contracted its own container ship as one step toward managing its supply chain crisis.
“We have a ship that’s solely going to be ours and it’s just going to go back and forth with 100 percent dedicated to Home Depot,” president and COO Ted Decker told CNBC. Other measures being taken by Home Depot include air freighting “smaller, higher value items” such as power tools and purchasing items on the spot market, despite costs up to four times that of contracted rates.
National Retail Federation’s (NRF) monthly “Global Port Tracker” report released last week showed record imports arriving at the nation’s ports as vaccines allow consumers to return to normal shopping patterns, but shortages of labor, equipment and shipping capacity are preventing retailers from capitalizing on that demand.
Jonathan Gold, NRF VP for supply chain and customs policy, said in a statement, “Supply chain disruptions, port congestion and rising shipping costs could continue to be challenges through the end of the year.”
Chewy last week said elevated out-of-stock levels reduced first-quarter sales by an estimated $40 million.
“This is clearly a supply-driven situation, which we expect to abate in the second half of this year as additional production capacity comes online,” said Chewy’s CEO’s Sumit Singh on a quarterly call. “Until then, we will keep actively managing our inventory and using our recommendation engines to help customers find attractive alternatives.”
Costco on its May 27th quarterly call said the company is being impacted by container and pallet shortages. Container turnaround time from the U.S. to China and back has increased from about 25 days to 50 days.
“The biggest way we’ve handled supply chain delays is adjusted ordering and front-loading, if you will, of orders of many items,” said Richard Galanti, Costco’s CFO. “And we think we’ve got that pretty well under control. The feeling is that this will continue for the most part of this calendar year.”
A BBC article cited a virus outbreak in China’s Guangdong province and the ripple effect of the Suez Canal blockage among recent factors potentially incentivizing retailers to order holiday goods months ahead of traditional times.
- How bad are global shipping snafus? Home Depot contracted its own container ship as a safeguard – CNBC
- Chewy, Inc. Q1 2021 Earnings Call Transcript – The Motley Fool
- Retail Cargo Continues Setting Records as Supply Chains Struggle to Keep Up with Consumer Demand – National Retail Federation
- Costco Wholesale Q3 2021 Earnings Call Transcript – The Motley Fool
- Disruption to shipping could delay Christmas orders – BBC
- Starbucks Faces Shortage of Cups, Syrup as Eased Covid-19 Boosts Sales – The Wall Street Journal
DISCUSSION QUESTIONS: How long do you see supply chain challenges lasting, and what impact do you expect them to have on the holiday selling season? What mitigation measures or contingency planning would you advise retailers to take to reduce the impact of supply chain disruptions?