Back-to-School Supply Chain Blues

Executives are now demanding more resilient supply chains that can sense, absorb and respond to these risks and come back stronger.

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Have you finished your back-to-school shopping?

Or if you haven’t started, the last-minute dash for school supplies is met with picked over or even empty shelves.

And, this year, the rush for sneakers, backpacks, calculators and other necessities might be worse than ever.

As schools look to return to full capacity for the first time in almost two years, the National Retail Federation is estimating that the average shopper in the United States will spend $850. But, with new Coronavirus disease (COVID-19) outbreaks in countries such as Bangladesh and Vietnam causing more factory shutdowns, many retailers across the globe could be faced with a supply and demand imbalance due to low inventory levels and delayed shipments. This inability to replenish the shelves for the back-to-school surge could result in shortages and increased prices for clothing, shoes, stationery and supplies.

The search for everything from sneakers to school supplies

A recent report from Panjiva says there could well be a shortage of sneakers as the spread of COVID-19 has recently halted production in several Vietnam suppliers.

The risks of a global economy have been exposed in the past 18 months due to such closures that have been compounded by shortages of cargo containers, port congestion and closures and labor shortages. This fragility was also highlighted when the EVER GIVEN collided with the banks of the Suez Canal in mid-March, blocking the channel completely for over a week, causing a major disruption.

And, due to the global nature of supply chains for clothing, backpacks and stationary, this could just be the tip of the iceberg.

The electronics challenge - Not enough chips to go around

What will be in that new (or potentially old) backpack? According to a recent Deloitte back-to-school survey, spending on technology products such as personal computers, smartphones and tablets are projected to increase 37% from 2020 to $11.8 billion.

However, these electronics are already in short supply due to the global chip shortage triggered by an enormous spike in demand for consumer products as the nation worked, studied and entertained at home during the pandemic. This, along with the resurging demand in the automotive industry and the influx of smart products, has caused a supply and demand imbalance in the semiconductor industry.

What can businesses learn from the back-to-school challenges?

Visibility across the business network into both supply and demand are key. On the demand side, in addition to tracking what customers are buying through point-of-sales data, you also need to know what they are thinking of buying by tracking market and customer sentiment analysis of what is “hot.” Visibility and collaboration on the supply side is equally important. Which shipments are at risk due to plant closures or restrictions? Which deliveries are facing delayed in-transit? Having good plans based on an accurate view of demand is important. But, equally important is the ability to respond to the expected and unexpected changes in supply and demand. This requires business systems and business process with the agility to respond to these changes.

The new 3 R’s – risk, resiliency and responsiveness. It is critical to design your supply chain to withstand disruptions and take advantage of opportunities. This requires having plans in place with the resiliency to sense and respond to supply chain risks. What are the alternate sources for a product if a supplier fails? Do I have a local supplier I can turn to? Should I keep additional inventory of key products closer to the source of demand? Can I trigger a rush delivery by air?

The pandemic has taught that the globalization of supply chains, while reducing costs, have also increased risk. Executives are now demanding more resilient supply chains that can sense, absorb and respond to these risks and come back stronger.