HOW TO INCREASE PRODUCTIVITY IN THE E-COMM SUPPLY CHAIN
By now, nearly everyone in the country has been affected by supply chain issues, whether it is stock outs, escalating prices, or a much longer lead time on purchased items. Experts predict the supply chain disruptions will extend well into the summer, probably longer. Some retail and e-commerce companies are coming up with solutions to increase productivity and gain competitive advantage.
FACTORS CONTRIBUTING TO THE SUPPLY CHAIN DISRUPTION
As the pandemic hit, most people were forced to stay home. This increased the demand for electronics, appliances, equipment for home offices, and casual and athletic wear. Retailers and manufacturers were not prepared for these increases. The auto industry has shut down production in several factories because they do not have parts, especially computer chips – for which production was moved to medical equipment and tablets and takes several months to switch back over. In addition, many factories in all industries, both in the US and abroad, have been dealing with employee COVID cases and social distancing requirements. Ports, warehouses, and the trucking industry experienced employee shortages as demand surged.
To make matters worse, a deep freeze in Texas in February 2021 disrupted the production of plastics. Texas is home to the world’s largest petrochemical complex, which turns oil and gas into plastics. This will affect the supply of many products, across numerous industries.
Then, just last week, the carrier ship Ever Green, got stuck in the Suez Canal due to strong winds. This has created a backlog of hundreds of vessels in the Suez Canal, a 120-mile canal which provides a shortcut between Europe and Asia. $10 billion worth of goods pass through each day – about 10% of global trade shipments annually. It is not yet known how long it will take to move the ship. In the meantime, other ships which were planning to use the canal will have to redirect their routes, losing valuable time and money.
In addition, there were not enough containers to meet the demand. According to Forbes, demand for containers has increased so much, that 6 months ago, a container shipment costed an average of $1200. Currently, the cost is $6000. Contributing factors to the cost increase is offshore wait times, a shortage of qualified truck drivers, and the container shortage caused by companies paying for faster delivery. As large companies demand faster delivery, less than full container loads are being sent to locations that do not have products to send back – causing the movements of empty containers and a very inefficient supply chain.
With the demand for faster delivery, an increase in urbanization, competition for warehouse space, labor challenges and the additional challenges omni-channel adds to its stores, retailers are searching for better options in fulfillment. Some retailers are turning to micro-fulfillment centers, which tend to be more cost-effective and flexible than BOPIS.
Some of the advantages include:
- Smaller physical footprint – while traditional fulfillment centers measure 200,000 – 1 million square feet, a micro-fulfillment center is less than 20,000 square feet. They can be housed in a small warehouse or an existing store.
- Closer to the customers – by being smaller and having more fulfillment centers, a retailer can be closer to its customers, providing faster delivery, gaining competitive advantage.
- More flexible automated solutions – micro-fulfillment centers often use robotics and technology to fulfill customer orders, allowing for greater efficiency than BOPIS.
INCREASE PRODUCTIVITY WHERE POSSIBLE
One thing the supply chain disruptions have taught all retailers is that productivity must increase in all other areas of the business. If lead times are longer and the workforce is limited, efficiencies must increase elsewhere.
Here are some ideas to increase productivity in other areas:
- Adding technology to the warehouse, such as robotics and conveyor belts, can help productivity. It also helps with social distancing and reduced labor force.
- Invest in a forecasting system. A forecasting system will bring all your vital sales and inventory data together so you have visibility to your business and can make good decisions.
- A forecasting system provides a financial roadmap – so you can make the right purchasing decisions that will provide inventory optimization. Benefits include a reduction in inventory carrying costs, greater visibility to future needs, so you can plan for longer lead times and reduce the number of rush shipments.
- A forecasting system will also project your production and warehouse labor needs.
- A forecasting system will create efficiencies in your financial reporting.
Hopefully, the supply chain disruptions will not last too much longer. But, in the meantime, it makes sense to make changes to your business that will increase productivity and efficiency. For more helpful insights about how forecasting can help increase productivity and efficiency, contact the industry experts at SAFIO Solutions, or visit our website at: https://safiosolutions.com/