Supply Chain Crisis Forcing Re-Evaluation
In early November, the prevailing concern across the shipping and retail industries was would products arrive on shelves in time for the holidays. For the most part, it appears stores will have some goods for Black Friday, Small Business Saturday and Cyber Monday sales. It was an extremely close call, though, as there are still major backlogs in ports around the globe, including here in the United States.
This holiday scare is the latest in a series of post-pandemic aftershocks that are forcing companies to re-evaluate the way they order and stock inventories. Do you increase your back stock in order to prepare for another supply chain crisis? Or, do you shrink your inventory and rely on hyper-efficient supply chains to return to pre-pandemic speeds?
Re-Thinking the Supply Chain
The debate between “Just in time” (JIT) and “Just in case” (JIC) inventory levels has been in existence long before the onset of the Covid-19 pandemic. However, while supply chains were susceptible to vacillations in the global economy, there was never quite a shock to the system as far-reaching and long lasting as the one that kicked off in March 2020.
“Many clients previously had a dependable supply chain,” says Andrew Ciccarone, President of Sheltered International. “In the last few weeks we’ve seen boats in LA taking an extra month to dock. Now that inventory which should already be shipping for the holidays is still at sea, so we are helping them to rethink models for the post-Covid environment.”
Cost of Doing Business
For most companies, cost is the biggest factor, but relying completely on JIT inventory can leave a company susceptible to massive profit losses as we have seen over the last year. The decision is not an easy one.
For those focused on JIT inventory, it is important to consider extraneous factors that can potentially make JIT more expensive than JIC inventories. In October 2021, the annual inflation rate of the USD blew past projections to reach a two-decade high of 6.8%. This historic inflation rate, along with other considerations, led to the highest average gas prices since 2014. These increases in immediate costs for companies fully reliant on JIT inventory compound on already lost profits from an inability to provide goods to consumers. Companies who made decisions to stock JIC inventories may have had to spend more money upfront, but they have the potential to come out ahead in turbulent sectors like Q3 and Q4 of 2021.
Make A Strong Plan to Manage Inventories
Photo Courtesy of Mak.
The reality of our new situation is every company needs a plan. Fortunately, the Chinese New Year can serve as a real-world testing ground for a post-pandemic world. It may seem a little out there, but the effect the annual holiday has on Chinese exports (over a short period of time, granted) is not dissimilar to the effects of port and factory closures from the Covid-19 pandemic.
Instead of ordering goods a week or two in advance based on current demand, take the time to analyze sales patterns of previous years to forecast how much inventory you will need for any given time. Additionally, with proper planning, you can make sure to take advantage of the best shipping rates with strategic booking from a platform like SiShips.
It’s also important to remember to plan for after any disruptions. As we are seeing now, ports take a long time to reduce backlog once it begins to pile up and, at the beginning of the supply chain, factories take time in order to ramp up production to pre-existing levels.
If we have learned anything, it’s that there are no longer any guarantees in the shipping industry. But, with proper planning and reasoned foresight, you can still maximize your time and profits.
Sheltered International combines expertise with state of the art software to bring you quality domestic and international shipping solutions. SiShips puts the shipper in control, offering efficient and cost effective ways to ship your product.
How SiShips Gives You The Advantage
Sheltered International combines expertise with state of the art software to bring you quality domestic and international shipping solutions. SiShips puts the shipper in control, offering efficient and cost effective ways to ship your product.
To learn more about managed transportation with SiShips, or to view a demo of our software, contact us today.
