Consultants have identified five strategies retailers can employ in response to shortages and supply disruption.
Companies must find a balance between short and long-term responses to the crisis – and the price of getting it wrong could be lost margin.
The warning comes as research by Barclaycard shows a third (34%) of consumers have changed their shopping behaviour in the run-up to Christmas.
Of these, half (52%) are buying Christmas gifts earlier than usual, including toys and other child-related items.
Online spend at stores grew 38.4% in October, compared to just 9.9% in September.
Kirsty Morris managing director at Barclaycard Payments, told Supply Management: “Over the last couple of months, it has become increasingly clear that the ongoing shortage of HGV drivers and resulting supply chain shortages are impacting consumer confidence and spending habits.”
Josh Brazil, vice president of supply chain data insights at Project44, a supply chain data company, warned early spending would not be enough to avoid Christmas disruption.
Data from the company showed container ship reliability "continues to decline,” with delays of up to 30 days for ships travelling between China and the EU, and routes between China and the US West Coast delayed by 21.94 days.
Felixstowe port in the UK saw port dwell times peak above 20 days in October, up from 4.5 days in January.
Brazil said: “Retailers are already seeing holiday season purchases picking up. However, continued supply chain issues have some in the industry panicked that this year’s festivities may be impacted.
“These latest numbers are a warning to shippers that they won’t be able to mitigate losses associated with delays and bottlenecks unless they have a complete and real-time view of vessel delays, ports, and carrier performances.
“If these circumstances hold, we’re going to see many more empty shelves heading into the holiday shopping season and beyond.”
Bryan Palma, senior manager, industry and solutions at supply chain planning consultancy Kinaxis, described five strategies to mitigate the impact.
1. Product reduction
Palma explained delays in shipping and logistics have led retailers to reduce their product selection to minimise supply strains.
Palma said: “Especially with port congestion and shipping delays from suppliers, retailers are making reductions in assortment of products to reduce strain on the supply chain, and a change in promotional strategies to prevent selling out too quickly.”
2. Breaking down silos
Businesses need to increase transparency and communication in order to understand risks within supply chains.
“Rather than thinking about supply chain as a set of parts, retailers are seeing the need to gain more transparency across their entire supply chain. Not just within the retailer’s distribution centres and stores, but also transparency with their suppliers,” Palma said.
“Having this transparency leads to better collaboration and can enable concurrent planning which means when a change is made to one part of the supply chain, everyone can see and understand what that means for all parts of the supply chain.”
3. Investment in people-led tech
Rather than looking into technology which replaces the roles of workers, retailers should invest in technology that “empowers” their workforce.
Such technologies would not just benefit supply chain transparency, but also “enable people to run multiple scenarios so they remain agile and respond quickly to unexpected events”.
Palma said: “Especially in times like this, human experience and intuition plays a big role in responding to the unforeseen.”
4. Managing unpredictability of demand
Retailers should remain flexible and be prepared if delays impact product availability and don’t match demand forecasts.
“One major challenge impacting retailers and customers is managing the unpredictability of demand and supply,” said Palma.
“Demand forecasts for the Christmas period are set by now, but the challenge lies in whether retailers will receive the supply in time to meet that demand, and how they will adjust if and when they determine that their demand forecasts were way off.”
5. Balancing short and long-term risks
Palma made it clear businesses should balance both long-term and short-term factors when considering how to mitigate Christmas shortages, or they could face further problems in January.
He explained: “With the disruption caused by the shipping delays and container shortages, there are actions retailers can take to offset the risk in the short term. But the more they lean into short-term solutions, the more likely it is to hurt the business in the long term.
“For example, if a retailer stocks up on a limited-edition product in case there is a huge surge in demand, and the product doesn’t sell as expected, they may be forced to put that product on clearance in January and lose a lot of margin in the process.”
☛ Want to stay up to date with the news? Sign up to our daily bulletin.