What’s in Store for the Supply Chain in 2022?

Chip shortages, component supply issues, increased costs and growing shipping costs are projected to impact manufacturers, retailers and consumers for most of 2022.

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For most retailers, there hasn’t been just one thing that’s disrupted the supply chain over the past 18-24 months. Retail leaders are dealing with multiple factors that can have a major impact at any given time. Navigating the challenges related to chip shortages, shipping delays and antiquated logistics systems (to name just a few) hasn’t been easy, but through this, we’ve all learned a lot of valuable insights that have helped mitigate some of the harm to our businesses. In fact, many of the processes that we’ve improved upon during the pandemic will be in place long after COVID ceases to play a role in the supply chain issues.

As we continue to manage the disruptions at the start of 2022, it’s clear that we still have a long way to go. More than ever before, labor shortages are affecting retailers’ ability to adapt. Not only are manufacturers experiencing problems with simply getting products made, but transportation companies are struggling to get trucks from one location to another because of a lack of workers. Every piece of the puzzle is affected when employees are out of work due to the Coronavirus disease (COVID-19). With uncertainty around the pandemic still looming, continued innovation, flexibility and patience are going to be necessary. 

Re-thinking antiquated systems

So, what’s been the most dramatic change? The just-in-time inventory model that was perfected in the early 1970s by the automotive industry no longer works in this environment. In the past, retailers could use their own forecasting data to predict immediate and near-future needs and manufacturers could more easily anticipate when they would be able to fulfill those orders. Working together, the two could establish a cadence or rhythm that met everyone’s needs. That’s no longer the case. Now, it’s extremely difficult - or nearly impossible - to foresee the potential delays that can disrupt the cycle. When that happens, there’s a domino effect that impacts every point along the supply chain.

Using future-dated purchase orders may, on the surface, seem like an easy solution, but it presents its own set of challenges. Let’s say a retailer placed an order for 100 units of a product, anticipating being able to sell them relatively quickly and easily. If the manufacturer can’t produce all of them right away or if they are delayed in the shipping process, those might arrive too late. Now what? Does the retailer hang on to inventory that it may have trouble selling? Does the manufacturer accept a revised purchase order for 75 units, but then have nowhere for the other 25 to go? Either way, there can be a significant financial impact that neither the vendor nor the retailer can easily afford. Both are trying to meet their customers’ needs while adhering to good business practices.

It’s more important than ever for teams to combine their prior experience with new technology that will make forecasting easier and more accurate. In some cases, that might mean an investment in new software that can help better analyze the data. Marrying human expertise and intuition with technological innovation is essential in the future.

Commanding communication lines

This scenario emphasizes what we have known all along but has become more evident during the pandemic; a retailer’s relationships with its manufacturers and vendors is crucial. Time and again, our ability to have a frank conversation with our partners has led to a compromise that benefits everyone involved. It’s important to remember the frustrations surrounding supply chain issues are universal and are being felt at all levels. In some instances, we’ve increased the frequency of our communication and have been more intentional about setting expectations (on both sides) so there are fewer disappointments. If we all work together, everyone benefits.

Is there a one-size-fits-all solution as we continue to navigate this new world? Not likely. What will work is out-of-the-box thinking, fresh perspectives and diligence.

Chip shortages, component supply issues, increased costs and growing shipping costs are projected to impact manufacturers, retailers and consumers for most of 2022. The willingness to explore and be open to new possibilities and processes is what will set retailers apart in this changing and challenging landscape. As we enter the third year of the pandemic, those who have failed to adapt have probably felt overwhelmed and defeated. Those who have tackled hurdles with determination, grit, and perseverance will continue to not only survive the supply chain woes but will thrive in spite of them.