The supply chain was so problematic in 2021, it made its way into mainstream memes.
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That’s certainly a first for the back office and once back-of-mind underground of consumer goods. But that’s how far-reaching the supply chain’s issues were — and are.
In short, the pandemic prompted factory closures, which led to delays and both supply and worker shortages, which led to port pileups and tied up (and thus, unavailable) containers, which led to soaring raw material and sourcing costs (at times, more than tenfold those in 2019) and congestion that contributed to serious delivery delays (at times, nearly triple the traditional time it takes). Shuttered factories made raw materials scarce, slow to market or sometimes entirely unavailable. Intermittent but ongoing factory closures aligned with COVID-19 case spikes, coupled with no great resurgence of workers and, unfortunately (or, fortunately?) still healthy consumer demand for stuff, continued to worsen the situation.
The year’s goings on have also seen inflation soaring both in the general economy and online, with apparel prices rising a record-high 17.3 percent in November, according to Adobe data.
And the gaggle of tornadoes that recently ripped across parts of the Midwest and southern U.S. added only more bad news. That six Amazon distribution staff died in Edwardsville, Ill., when the warehouse buckled amid the storm was the gravest tragedy of all.
“We’ve seen delays along regional rail lines and operational impacts at warehouses. Local businesses were certainly impacted by these disasters; coupled with supply chains across the country already under strain with congestion at the ports and inland transportation, this will exacerbate those challenges,” said Kaitlyn Glancy, vice president of North America East for freight forwarding company Flexport. “This underlines how critical it is that, as we move through the current shipping crisis, we improve supply chain resiliency and visibility so businesses of all sizes can tackle challenges like these more effectively.”
Now the Omicron variant is adding yet another challenge. So far, the new variant, whose real impact likely remains to be wreaked, has already seen establishments shutter as cases start to spike.
The supply chain was “volatile” in 2021, according to Glancy, “because the challenges in global supply chains aren’t due to a single source but several across the breadth of them.” Those challenges won’t fade into the past when the clock strikes midnight launching 2022 — at this stage, there’s still no telling quite how far-reaching the ramifications will be.
Earnings call after earnings call in 2021 blamed the supply chain crisis for dampened profits and reevaluated guidance.
Gap Inc. said “acute supply chain headwinds” were at fault for its $152 million third quarter loss, though launching the Yeezy Gap hoodie staved off even more outsize blows.
Victoria’s Secret said in November that it’s expecting the fourth quarter to bring with it $100 million in supply chain disruptions. Martin Water, chief executive officer of Victoria’s Secret Lingerie, said, “To go into the season, we ordered around 200 million units of stock and 90 million of those 200 million are delayed. That’s 45 percent of our purchase requirement for the full season delayed.”
(When the cost to ship one 40-foot container from Asia climbed from between $1,600 to $2,100 in July 2019, to the $21,000 to $23,000 range by July this year, the financial impact on retailers, which certainly need more than one container to supply their stores and e-commerce platforms, was staggering.)
Resale, however, whose supply isn’t caught up in the traditional chain, took one great step toward greater marketshare amidst traditional retail’s 2021 entanglements. Rebag, for one, said its business tripled since the start of the pandemic (and the company just brought in $33 million to keep the growth going). This is due in part to an upward trend in pre-loved demand that began before the pandemic, coupled with firmed up sustainability commitments within pandemic year two, which has served to solidify people’s — and proprietors’ — reevaluation of their values.
One word to describe the supply chain in 2021?
In a word, Stanley Szeto, executive chairman of Hong Kong-based manufacturer Leverstyle — which produces clothing for clients from Shein to Theory — would call the 2021 supply chain a “Tsunami.”
He described it to WWD as: “Wave after wave of shocks. Unavailable containers, skyrocketing shipping rates, factory COVID-19 lockdowns in South and Southeast Asia, fabric capacity shortage due to Chinese power outages.”
And that’s just naming a few of the issues.
“Uncontrollable” is the word Luen Thai CEO Raymond Tan would use for this year’s supply chain issues.
“At Luen Thai, we experienced partial/complete lockdown in Philippines and [in] Myanmar political unrest at 1Q21, Cambodia two-month lockdown at 2Q21, Vietnam lockdown and China power shortage at 3Q21 with huge impact on our material supplies,” Tan said of the Hong Kong-based manufacturer. “Throughout the year, logistics cost/time went up for both materials and finished goods, disrupting our operation and customers’ supply chain. All these are out of our control which we needed to manage in 2021 making sure our employees are safe with income to feed their families as well as ensuring our customers get their goods meeting the market demand; at the same time, we also need to invest into our future under this “uncontrollable environment.”
The type of investment needed to get companies through the year’s supply chain crisis, according to Synergies Worldwide CEO Guido Schlossman, was in supply chain management to minimize the impact of the disruptions.
“The connections along the supply chains have been challenged in the year 2021 by various factors such as scarcity of product and freight capacities, increase in cost (logistics, raw materials, etc.), volatile/unpredictable consumer demand, a change of consumer habits,” he said. The solution, he added, demands “better, integrated and coordinated supply chain management among supply chain partners to avoid or reduce disruptions. It needs technology or third-party supply chain managers or a more agile sourcing process and lean, decentralized, empowered organizational structure to facilitate this integration/coordination.”
At Li & Fung, group CEO and CEO of LF Logistics (the supply chain management company’s freight management arm) Joseph Phi is looking at the glass-half-full side of the 2021 supply chain.
His word to describe things this year? Pivotal.
“We experienced a perfect storm in 2021. The trifecta of trade tension, logistics logjam and pandemic uncertainty has wreaked havoc to our normal routine. The ensuing supply chain shock has now reached an undeniable inflection point. There are myriad organizations that lapsed into inertia believing that ‘this too shall pass.’ Well — they are still in a state of limbo,” he said. “There are then the limited few who chose to pivot by diversifying sourcing base, digitalizing processes, solidifying bench strength and incorporating sustainability in their business model. They have built resilience amidst adversity. And they now have gained a second wind and pulled ahead of the competition.”