Dealing with Christmas supply chain indigestion


Supply chain managers see Christmas as “pushing the pig through the python”. The seasonal bulge in food, toy and gift purchases — the US National Retail Foundation estimates that around a fifth of all sales are made in the final two months of the year — stretches a system set up to handle much smaller volumes. This year it will be made harder by bottlenecks, partly due to labour shortages and weather disruptions but also to the whipsawing of demand and supply during the pandemic. There are few short-term fixes, but consumers who plan Christmas ahead can smooth spending, making the pig more digestible.

Managers have already had to squeeze several extra animals through the python in the last couple of years. Panic-buying of food and basic supplies such as toilet paper in the early days of the pandemic, as well as consumers switching from eating at restaurants to eating at home, meant much higher demand than normal. Many staff were away, meanwhile, due to illness. Empty shelves were the result. The switch to working at home led to surging demand, too, both for work equipment and consumer electronics for those looking for a distraction.

When economies unlocked, another pig appeared. Consumption fell during lockdown but rebounded afterwards as households spent the savings they had accumulated, at least if they had kept their jobs or had their incomes protected by government programmes.

Car manufacturers, which had cut back orders and production during the pandemic in the belief that the recession would reduce demand for their products, now faced a surge in demand. With semiconductors bought up for electronics there was not enough supply. Used car prices have surged.

Symptoms of indigestion are now most visible at the world’s ports. In September, a record number of ships were waiting for access to the port of Los Angeles, the main entry point for goods from Asia into the US. In the UK, the problems are made even worse by a shortage of lorry drivers to pick up the containers once they unload. At Rotterdam, continental Europe’s major shipping hub, waits can be up to six days. This will make the logistical ballet of ensuring there are enough goods on shelves for Christmas even harder.

One option would be to grow the python. US president Joe Biden has done a deal with workers at the port of LA to keep the facility open for more hours. That might provide some short-term help, but in the longer term a different approach to supply chains may be needed. Instead of cutting the fat and aiming at efficiency, the experience of the pandemic should be a spur to businesses to invest more in capacity — reorganising supply chains around the principle of “just-in-case” rather than “just-in-time”. Existing capacity, too, can always be better managed. A lack of joined-up thinking and a fragmented and siloed industry makes it harder to plan for system-wide shocks. Governments and businesses could, in future, war-game scenarios or stress-test infrastructure; as in the financial sector, concentration on just a few nodes increases the risk of failure.

That is unlikely to save this Christmas. Instead, the best option might be to try to stretch out the pig; those with disposable income can begin shopping earlier than usual to ease the pressure on December supplies. It may be too soon to stock up on turkeys or Christmas hams but classic toys are already available. Another option might be to do a slimmed-down Christmas, focused more on giving experiences and not overindulging at the feast. One way or another, though, the python’s digestive system will be tested to the limit.



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