Retailers and their suppliers are fighting a battle on two fronts. On one side, stubbornly-high interest rates are putting pressure on borrowing, compelling companies to keep inventories low. On the other side, the enduring drought in the Panama Canal and the escalating conflict in the Red Sea have thrown transit times into chaos – adding upwards of 10 days to journeys from Asia to the East Coast, rising container rates and a shift to more air freight.
As a result, retailers face the threat of higher shipping costs and springtime stockouts on their already-streamlined shelves, while manufacturers are running the risk of production stoppages. Tesla, for example, recently halted production in Germany while the company rerouted vessels carrying critical components to avoid the Red Sea.
Given these challenges, retailers and manufacturers must have an in-depth understanding of their supply chain, as well as the ability to push allocation decision-making as close as possible to the final destination — to avoid potential redistribution costs. Having a detailed view of inventories — fully grasping what is being held onto and where, as well as inventory turnover — can help them track risks. Knowledge of when hot SKUs might run out, such as popular retail items or essential manufacturing components, is critical to avoiding stockouts, shutdowns and, ultimately, lost revenue.
With a SKU-level view of their supply chain at their fingertips, leaders can better map each step in their supply chain process, working backward to understand when items need to be stocked and ready to ship in order to make it to the end customer in time. Here again, leaders must have visibility into when those hot SKUs will reach each step of the journey — and efficient warehouse and yard management is paramount.
Further down the line, awareness of routes plays another critical role. Supply chain leaders must have a full understanding of additional opportunities within their distribution network, including how much safety stock and capacity are available when last-resort rerouting becomes a necessity. When goods are stuck on a ship, plane, or train, it’s hard to change course — but as soon as those goods reach a location within a company’s network, fully-informed leaders will be prepared to make quick decisions, improving the likelihood of on-time delivery.
Of course, smaller businesses with fewer facilities will have a harder time pivoting. Their only options may be to flex employment capacity, or else learn lessons that will help them plan better for next time. But for larger companies with more distribution centers, rerouting these goods — even when it’s a more costly option, such as air freight — might be worth it to meet customer expectations or keep factories humming.
Thankfully, supply chain leaders of all sizes aren’t in this alone: technology is already helping them gain accurate understanding of their inventories, timelines, and routes, while helping enterprise systems to automatically communicate with each other to help prevent long lines of trucks and other inefficiencies. AI is making things even more interesting, processing vast amounts of data to enable leaders to make intelligent, impactful decisions faster than ever.
The first months of 2024 have been eventful, with retailers and manufacturers fighting against both economic and political challenges. But as the saying goes, victory lies in preparation. Having a full understanding of their inventories, timelines, and routes — as well as being prepared to adjust those levers quickly — will help supply chain leaders boost their likelihood of on-time, in-full deliveries this spring.
