In the subtle words of The New York Times, “Chaos Strikes Global Shipping.” What do they mean by that exactly? Swing by your local department store, grocery store, or electronics store, and you’re bound to notice empty shelves.
While previously the blame was pointed towards pandemic-driven panic buying for necessity goods like toilet paper and water bottles, this new situation is driven by supply-side shortages stemming from reduced manufacturing output, decreased labor, and most importantly, enormous shipping delays.
As a result, consumers are seeing widespread shortages of goods ranging from shoes to cars to everything in between. In this post, we’ll take a closer look at the empty shelf crisis, explain what industries are being impacted the most, and address what the future may hold for the shipping industry.
Why are there so many empty shelves?
The global pandemic has had a destabilizing effect on the worldwide shipping industry. According to Bloomberg, the current crisis comes with a side of irony, because while consumer demand and spending has increased during the pandemic, supplying these demands has been a significant challenge.
While the pandemic has served as the ultimate cause of shipping delays, these other immediate factors listed below have directly impacted the industry.
Recent shortages of shipping containers have driven up the cost of goods delivered from China. CNBC reports that this has caused shipping costs to rise by 300%, and logistics companies are struggling to keep up with shifting demands.
For example, the Apple iPhone would generally ship by air, but the container shortage has forced suppliers to ship these products via sea containers. Multiplied across industries, the shift to sea has congested sea routes, and the Suez Canal (see below) certainly exacerbated things.
Human Resource Shortages
The pandemic has resulted in a smaller number of dockworkers and truck drivers, which has caused massive delays in getting products into the hands of consumers. As a result, the gig economy has seen a boon in warehouse and fulfillment center work for temporary and part-time gig workers.
Products and Material Shortages
One of the more talked-about shortages has been the microchip shortage, limiting the manufacture of new cars and many electronic devices.
However, other product and material shortages due to the pandemic, such as a recent deficit of aluminum, has impacted the domestic transport of canned food and soft drinks.
Suez Canal Blockage
The Suez Canal blockage is actually more of a symbol for the industry’s problems as a whole. According to Bloomberg, the lack of available workers has caused many loading docks to become overwhelmed, resulting in massive shipping delays.
Who’s Paying the Price?
🎶Well, it’s you. And me. And all of the people. And I do know why, high prices are coming for you.🎶
These shipping delays are wreaking havoc with the retail industries’ ability to fulfill their e-commerce order. Many American companies are paying up to ten times the usual price of shipping products across the ocean. These shortages make it difficult for domestic shipping companies and 3PLs to provide order fulfillment for their customers.
The following industries have seen the most impact:
While this doesn’t impact your local shelves per se, the automotive industry is being hit hard by a lack of available materials, most specifically the microchips used to control the fuel injection system, cruise control, and other electronic systems aboard today’s automobiles.
As a result, car dealers have struggled to maintain inventory, and consumers are seeing the price of used cars increase as a result.
The chip shortage has also impacted electronics companies, including Sony, Apple, and Microsoft. A recent fire at a Japanese plant has only added to this chip shortage, meaning we may see a deficit of electronic merchandise for the foreseeable future.
Additionally, the lack of reliable containers has prevented popular electronics companies from reliably shipping products such as laptops, flat-screen TVs, and even cell phones. Since Americans couldn’t go on vacation, they sank their money into fancy new entertainment systems. The industry did its best to keep up, but ultimately the laws of supply and demand collided at the port.
Both Steve Madden and the Crocs companies have expressed concern about the supply chain bottlenecks rising from this global shipping crisis. Nike usually pays $2,000 to ship a 40-foot container of sneakers. Now, this same container costs $15,000 to $20,000.
Canned Foods and Beverages
The pandemic has also affected aluminum manufacturers, which has prevented them from producing familiar brands of canned fruit and soft drinks. What’s more, with transportation and logistics problems slowing down domestic shipping, many grocery stores won’t have their popular canned goods for the foreseeable future.
Naturally, the pandemic had us all reaching for the hand sanitizer. While the shipping issue doesn’t directly impact these products, it could still be a while before the cleaning industry recovers from the demands it experienced during the height of the pandemic.
America hasn’t been uniformly affected by the current shipping crisis. That means you might find yourself surprised to learn what’s absent from the shelf of your local supermarket on a weekly basis. And many online are freaking about the Great Ammo Shortage of 2021.
What to Expect for the Rest of 2021
Industry leaders are uncertain as to when the shipping crisis will be resolved. Some problems, like the microchip shortage, are simply matters of production. The availability of shipping containers and reliable companies may take a bit longer to sort itself out. So what can you expect while suppliers sort themselves out?
Unfortunately, consumers can expect to pay more for the products they’ve come to rely on. Automobiles, electronics, and particular brands of shoes may be harder to come by, and when you do, you may find yourself paying a higher sticker price.
For retailers, this highlights the need for a reputable logistics company. Because shortages can play havoc with your inventory, you need a 3PL that can help you with warehousing and inventory services so that you can stay on top of product levels, re-ordering schedules, and more.
The right company can ensure that you keep your word to your valued customers, providing order fulfillment during a time of increased economic instability.
Preparing for the Holiday Rush
Many retailers are giving careful consideration to how to handle the 2021 holiday rush. The time to build inventory is now. That way, you can be fully prepared when the season comes. Our retail ecosystem is bound to look different, but if companies are diligent, they can ride out this storm and come out the other side stronger than ever.
Focus On Supply Chain Resilience
Supply chain resilience refers to a company’s ability to conduct normal business operations despite sudden disruptions or unexpected events that negatively affect supply chains and order fulfillment. Resilient supply chains are also able to quickly recover from outages and achieve pre-disruption levels of functionality.
As an example, many FBA merchants use ShipHero for FBM to avoid stock outs, maintain emergency inventory stockpiles, and provide diversified fulfillment options.
Check out our previous blog for best practices on building your resilient supply chain.
Wrap It Up
Suppliers have had issues both producing and transporting goods over the past year, and events like the Suez Canal blockage have only added to the “chaos”. Consumers should expect shortages of automobiles, canned produce, cleaning supplies, shoes and more. In these uncertain times, it’s vital to have a robust and resilient logistics and fulfillment network to keep your consumers’ trust.
From ShipBob Blog