“It’s simple project management,” Wilson said. “You have to reverse engineer [the supply chain]. You take a Gantt chart, and you work back from delivering to the customer. You check every step.”
In 2020, global shutdowns meant to “flatten the curve” slowed or stopped manufacturing the world over.
Concerns about the economy gave way to supply chain worries.
Pandemic
In February 2020, for example, U.S. retailers held approximately 43 days of inventory, according to an article from the White House citing data from the U.S. Census Bureau. By June 2021, retail inventories had fallen to about a 33-day supply, the lowest in 30 years.
If manufacturing is vulnerable, a merchant might purchase earlier, hold more inventory, or promote relatively less. For example, a retailer without adequate holiday inventory could avoid offering Black Friday discounts and, instead, sell available stock at full margin.
The combination of pandemic lockdowns and rising freight prices has forced some companies to focus on supply chain vulnerabilities.
At first, there was a sense of the unknown.
“It is hard to take yourself mentally back to a place in time, but if you reflect back to March 10 through April 30 of 2020 … we were worried that our merchants might go out of business,” said Wilson, adding he was concerned the entire worldwide economy would suffer.
Lockdowns
Thus businesses should think about the manufacturing facilities they depend on, including the risks of further lockdowns and other pandemic-related disruptions.
“Just this past week, I got some really bad news. One 40-pound container going through Surabaya, Indonesia, used to cost ,000. It’s up to ,500,” said Kyle Tortora, owner of Lotus Sculpture, an Oceanside, Calif.-based retailer of artisan-made Hindu and Buddhist statuaries.
The factors driving the increase are complex but likely include pent-up demand, the March 2021 Suez Canal blockage, and overworked ports in California and China. Regardless, the effect is painful for commerce companies.
“You cannot assume that [your supply chain] is going to work the way it did in years past,” said Rick Wilson, CEO of Miva, the SaaS ecommerce platform.
Slowed manufacturing is not the only potential supply chain problem. Worldwide container shipping costs have quadrupled in the past year, according to The Wall Street Journal. Some container prices have risen more than 50% since May 2021.
Soon, however, the effect on ecommerce became clear. Sales soared. Wilson’s clients experienced Black-Friday-like revenue in the middle of summer.
Tortora generally purchases garden statues from artists in Indonesia, buying a container load every month or so. This year he took a different approach, placing a massive five-container order but not shipping it immediately. Instead, his suppliers are holding the goods in the hope that container prices will fall in the coming months.
Freight Challenges
“Indonesia is typically the most expensive place I ship from, but this is way too cost-prohibitive,” said Tortora, “so I changed my plan.”
U.S. retail inventory levels were at a 33-day supply in June 2021, the lowest level in decades. Source: WhiteHouse.gov.
Businesses with similar vulnerabilities may want to evaluate supplier and transport options. If no meaningful alternatives exist, raising prices now — well before the holiday shopping season — is likely prudent.
Not surprisingly, inventories began to shrink.
Lotus Sculpture has had to change its purchasing and inventory practices in response to supply chain challenges.
Wilson’s company witnessed the pandemic’s impact across thousands of commerce businesses.
