Supply Chain Issues and How to Address Them (2024)

After a tough few years, with the pandemic causing an economic downturn and major changes to the way people shop, experts predicted that supply chains would normalize in 2023. But the crisis isn’t over yet.

There’s more than one reason why supply chain issues continue to plague both large and small retailers. A combination of conflict, ongoing lockdowns, labor shortages and economic downturns seems to be making it difficult to maintain a healthy and predictable supply chain.

Impact of Supply chain issues While every business is different, most are feeling the squeeze – in fact, studies have shown that businesses are suffering losses due to supply chain disruptions. On average, 10% of annual revenueThis, combined with the growing demands of today’s consumers who expect next-day delivery, makes for tough times for retailers.

Here we discuss the main supply chain issues ecommerce brands face and the steps you can take to keep your supply chain as seamless as possible.

What are the supply chain issues?

A supply chain issue is a disruption or inefficiency in the chain of processes involved in producing and distributing goods. These issues can arise from a variety of factors: a shortage of raw materials can halt production, or a labor shortage can cause manufacturing or delivery delays.

What is the biggest supply chain issue today?

Global political unrest

be SAP ResearchRetailers believe that political uncertainty is the main cause of current supply chain disruptions, with 58% of those surveyed believing that the conflict between Russia and Ukraine is having a significant impact on their ability to source and transport materials and products.

Restrictions on air freight traffic between Europe and Asia (where flights normally pass through Russia) are also spilling over into Nordic ports, while disruptions to rail freight traffic between China and Europe are affecting how retailers source and ship products to consumers.

Rising fuel and energy costs

The conflict between Russia and Ukraine is having knock-on effects, especially when it comes to fuel and energy, as rising energy costs make it more expensive for retailers to store and ship inventory.

Rising consumer expectations

The pandemic set a new precedent for next-day delivery. When brick-and-mortar stores closed, a surge in shoppers moved online and never returned. Today, more shoppers want their orders delivered within two days, free shippingThis puts pressure on retailers as they try to maintain customer loyalty and satisfaction in the face of rising costs.

What is causing the supply chain issues?

Supply chain issues aren’t caused by a single factor; a confluence of events is making sourcing and shipping costly and restrictive.

The main causes of supply chain shortages include:

Russia-Ukraine conflict

Rising energy prices and air travel restrictions to Russia and its neighboring countries have made it difficult and expensive for brands to ship or source products from China and Europe.

Expect fast and free shipping

Consumers Free next day delivery During the pandemic, retailers need more inventory and are asking for more. This puts pressure on how retailers fulfill orders, where they fulfill them, and how they ship them. Some retailers have increased their storage and shipping locations closer to customers. This is a good solution, but it can mean high demand for warehouse space, which can be costly and difficult to manage.

Broken supply chain

Transportation barriers and long wait times for materials and manufacturing create unstable supply chains with multiple moving parts. If one of these parts stops, it impacts the entire supply chain. Float Factoryhas seen these delays firsthand.

“The biggest supply chain issue we’re facing is that shipments from overseas aren’t coming in on time,” he says. “Shipping costs are a lot cheaper now than they were before and when we first started, but the logistics of knowing where the containers are and where they are at all times are still not fully operational.”

Supply Chain Bottlenecks

Retailers are still recovering from the pandemic, which saw huge consumer demand amid labor shortages and global uncertainty. Logistics Bottlenecks are still present and many brands are struggling with the ongoing impacts, with labour shortages particularly at ports causing shipping and receiving delays around the world.

Dealing with supply chain disruptions: Steps to take

Supply chain issues are likely to remain, but you can preempt them by taking four steps to minimize the impact on your business.

1. Increase inventory

The most common way to deal with the current supply chain crisis is to hold extra inventory. Since 2019, 3,000 of the world’s largest companies have increased their stockpiles, stocking up on almost 1 million tonnes worth of products. 1% of world GDP.

Why? More inventory makes it easier to meet customer needs. It helps avoid “out of stock” stickers that can impact retailers’ bottom lines.

However, it’s important to get your inventory balanced properly. There’s a fine line between having too much stock and having too much, which can lead to increased carrying costs. Instead, look at your sales data and use it to your advantage. Forecasting inventory Based on product popularity and customer demand.

Prepare for product delays and increased demand. Natural PatchAn Australian brand that sells insect repellent for children keeps 20% of its inventory (a three-month supply) in stock. “Our rule is we can’t run out of stock,” says founder Michael Janke. “It doesn’t just mean we stop marketing the product. It means we scale back things. It hurts our finances.”

2. Diversify your product supply sources

Brands with resilient supply chains gain a competitive advantage – that means anticipating delays, preparing for periods of material shortages and filling the gaps between production and delivery as much as possible.

One way to achieve this is to diversify the sources of your products, which will make you more resilient to unexpected supply disruptions.—Global conflicts, natural disasters, rising energy costs, etc.—Because you Another resource you can turn to is Shopify. the study 30% of merchants New Suppliers29% of companies purchase products from multiple suppliers or countries.

Developing good relationships with multiple suppliers also helps prevent delays.

“By working with our suppliers on forecasts and reserving and committing to orders early, we’ve been able to shorten some of the long lead times that have been a challenge recently,” he said. Bear Bottom Clothing.

Robert and his team found success by working with their suppliers to prepare fabrics and enable them to make quick decisions when they were ready to place a new order.

“By implementing and improving these best practices, we’ve been able to reduce costs while simultaneously supporting the growth of our manufacturing partners,” he says. “This approach benefits both parties and fosters mutually beneficial relationships.”

3. Addressing excessive return rates

High customer acquisition costs have reduced the lifetime value of each customer, but that’s not the main cause. Returns are the cause. Ecommerce customers return. 4% to 10% of the purchase pricePrices vary based on category, directly impacting retailers’ revenue.

Not only to improve customer satisfaction, Fewer returns This leads to less pollution, less strain on the supply chain and better inventory management.

There are several ways to minimize the number of returns.

• Detailed product description: Set customer expectations from the start by providing a clear, accurate description of your product. Provide a clear list of dimensions, specifications, and features.
• Customer Reviews: Reassure shoppers with social proof from past purchasers. Include testimonials and photos of satisfied customers who have used your product.
• Bring your product to life: It provides full transparency of your product, including demo videos, 360-degree photos, and even augmented reality visuals.
• Charge a restocking fee: Zara’s UK branch A small fee will be deducted from returns filed by mail.However, customers can return items in-store free of charge.

4. Digitalization of the supply chain

Supply chains need to move fast, but doing it manually is difficult. the study It was revealed that one-third of brands plan to digitize manual processes within their global supply chain.

What does that actually look like?

• It uses a scanning app to automatically move products from one stage of the supply chain to the next and keeps track of all inventory.
• use Inventory and Supply Chain Management Software that automatically orders new stock and monitors stock levels.
• They will rely on machine learning or artificial intelligence (AI)-based solutions to handle load pooling, dynamic rerouting, and other issues.
• Leverage technology to gain greater visibility and insight into deeper layers of your supply network.

Future supply chain issues: Where will the impact be felt in 2023 and beyond?

Current supply chain disruptions are expected to continue, with disruptions to raw materials such as industrial metals supplies impacting multiple industries, including automotive, construction and healthcare.

Inflation could reduce consumer spending. This will impact demand for imports and slow sales of big-ticket items. For retailers, it’s time for change, even if it’s just to keep up with trends. Consumer expectations.

of SAP Survey The majority of brands are planning to strengthen their global supply chains by adopting new technologies, implementing contingency plans, increasing inventory and diversifying product sources.