AAs the holiday shopping season begins to prepare, supply chain experts are advising customers to buy gifts as early as possible due to traffic jams that are hampering the shipping system.
The COVID-19 pandemic has created unprecedented grunts in the supply chain, and these jams, characterized by rising shipping costs, clogged ports and insufficient store inventories, are still very much present. As the United States draws closer to the holiday season and rising spending, the strained supply chain is sure to threaten the delivery of merchandise meant to be giveaways.
Bobby Harris, founder and CEO of BlueGrace Logistics, told the Washington Examiner in an interview that the global supply chain is strained “in a way we haven’t seen in decades” as Thanksgiving, Christmas and Hanukkah are looming.
âThe year we’re in right now is unprecedented for sure,â said Harris.
Harris said he believed that, compared to last year, when supply chains were also stretched to their breaking point, more people realize there is a risk of delay.
âWhether it’s ordering ahead or just managing their expectations,â he said, âI think you’re going to see buyer behavior change a bit, and yet you’re still going to see people who usually wait a bit late in the season are going to suffer the most because there will be no turning back for them.
The CEO, who oversees some 500 employees, advised U.S. consumers to buy and send gifts before Halloween, about two months before Christmas. If it’s not before October 31, the gifts should definitely be ordered before the end of the first two weeks of November, he said, adding that people shouldn’t wait until Black Friday this year.
Clogged ports are a major constraint on supply chains. The Port of Los Angeles, the busiest port in the United States, has been in the throes of congestion for much of this year and often has dozens of ships waiting to unload cargo, much of which are imports from China. While port officials say no more trucks are necessary to help clear the backlog, truckers say the port is not moving fast enough to unload.
China, where many toys and gifts are created, has also been rocked by power outages as the country suffers from an energy crisis. These outages affect production in factories and will invariably lead to more supply chain disruptions.
China has also taken a much stronger stance against COVID-19 outbreaks than its Western counterparts, even to the detriment of its businesses.
The Chinese government recently frozen all incoming and outgoing transactions in a crucial terminal of its port of Ningbo-Zhoushan. The Meishan terminal, which serves shipments to the United States and Europe, has been suspended until further notice after only one worker there contracted the virus. More port closures due to virus outbreaks around the holiday season would lead to even more unraveling of supply chains.
âIf there is a stoppage, even a small stoppage, the ripple effect will be huge,â said Harris. He said if a port or part of a port were to close even for a week, it would be “extremely difficult” on top of the existing shipping and logistics issues.
While the demand for goods has increased significantly since the low point of the pandemic last year, due to labor shortages, there are far fewer workers to handle this growing demand.
It is also likely that more goods will be ordered than last year.
Production has skyrocketed as the economy rebounded from pandemic shutdowns. Gross domestic product grew at an annual rate of 6.3% in the first quarter and then 6.7% in the second quarter.
While conventional wisdom was that after the pandemic restrictions were lifted there would be a massive boom in the service and travel industries and not necessarily in consumables, Harris said instead, the demand for travel and consumables had exploded. The economic gains are expected to have a direct impact on the supply chain, as more items will need to be shipped.
âThe amount of consumption is something quite staggering,â he said. “You see a lot more money in everyone’s pocketsâ¦ there’s no doubt that will have an effect.”
Prices will also be higher for those looking to shop for gifts this holiday season.
In addition to the searing US demand for consumer goods driving up manufacturing and shipping costs, energy prices have skyrocketed. The price of natural gas has increased by about 180% over the past year, the cost of crude oil has more than doubled since the same period last year, and coal trades three times as much until the end of 2019.
Higher energy prices translate into higher prices for consumer goods, as the increased costs have to be offset in some way or another, which ends up coming back to the sticker price of consumers. goods shipped.
With vaccinations in full swing, this year will be the first since 2019 that many families will be able to celebrate the holidays in person. For families keen to redeem gifts this holiday season, the best advice from supply chain experts is simple: buy sooner rather than later.
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Original author: Zechariah Halaschak
Original location: Supply chain growls threaten holiday shopping