Post-Pandemic Supply Chain Challenges Increase the Pressure
The pandemic has left global supply chains in a state of flux. With shipping containers in incorrect locations, a lack of truck drivers and ever-rising costs, supply chain challenges are not going away any time soon. These challenges force pressure on the people who work for businesses involved in supply chains, e.g, Manufacturing, Logistics, Retail and so on.
As an ERP provider, we know that your end-users consist of the people working for these businesses. Therefore, we would like to highlight to you what your customers are currently going through now and in the foreseeable future. Alongside this, we will bring to you the direct pressures that result from these supply chain challenges.
Why are we highlighting this to you?
As your customers are key to your business, it is crucial to understand their pain points and how you can help support them in their future success. After all, it is their success that contributes to yours! So, let’s dive into what your customers are going through in today’s climate.
Increasing costs and consumer demands
With 96% of SME manufacturers in England and Wales struggling with rising costs in their supply chain ², it is apparent that the long-term focus of cutting costs and being as efficient as possible is not an option with the market as it currently stands. Over half of the retailers, manufacturers and brands (56%) represented in a 2021 survey, said that their number one business goal is to reduce logistics costs.⁵ Therefore, many businesses, that are your customers, will be struggling to meet this goal.
In addition to this, consumers are expecting the same supply and costs, whilst suppliers are expecting to charge more for their products, for example, UK supermarket prices ‘to rise by 5%’ as supply chain costs increase.³ This is increasing the pressure on your end-users who are trying to cut their costs whilst uncontrollable external factors are increasing their suppliers’ prices. This means they either take a hit on profit and sell their product for the same price, or they increase the price of their products to reflect the current market.
“A rise in cost will generally have the greatest impact on low-margin companies, which tend to be found in sectors such as transportation, general retail, construction and autos.” ¹Invesco’s chief global market strategist, Kristina Hooper
Some might want to be able to offer their product for the same price, but it simply isn’t a viable option for the majority of businesses. This will leave them with no option but to up the price of their products and potentially lose some customers to their rivals! Those rivals could be ‘giants’, like Amazon, which we will expand on later.
Are your customers in the Automotive industry?
Suggested reading: Discover the top challenges your automotive customers are facing in this blog: 5 Automotive Supply Chain Challenges Facing the Industry
Where are these costs coming from?
Problems in Freight
Thousands of containers have been stuck in the wrong place making it feel like there aren’t enough goods to meet demand. Even though it may feel like there aren’t enough containers to go around, it isn’t the case. If you think back to the Grand Suez Canal incident in March as well as ports in China being shut down across spring-summer time which lead to an estimated 350,000 containers sitting at docks¹⁰. These events have led to a backlog, thus containers are not where they need to be now.
With containers now costing more than double what they were worth in 2016 ⁹, it is clear that there is still a high demand for freight logistics, even as we remove lockdown restrictions and come out of the pandemic. Many are now saying that online shopping is here to stay, so this could be why!
Truck Driver shortages
There is a shortage of truck drivers, and this issue stretches across the globe. In the UK, a Road Haulage Association (RHA) survey of its members estimates there is now a shortage of more than 100,000 qualified drivers.⁷ Whilst in the US, Walmart plans to offer them an average salary of $87,500, double the median salary for the industry⁸, in an attempt to get enough drivers to fulfil demand.
In addition, LSPs (Logistic Service Providers) noted that the top challenges faced by their customers were forecasting (23%) and visibility (18%).⁴ So your manufacturing customers that need to transport their goods, need these capabilities to succeed.
Suggested reading: Find out more about how you can help your customers overcome these forecasting and visibility challenges in this blog: Supply Chain Flexibility: Why your customers need it
There has been a lot of advice on how to ensure you can get everything for Christmas this year, and that’s due to the state of global supply chains. Phrases like ‘get your orders in early’¹² have been making an appearance in the news.
Coming back to an earlier point on ‘it will be the giants’ who will remain strong contenders in the market. Amazon has said it will spend several billion dollars to manage labour shortages and supply chain issues in the run-up to Christmas.¹¹ The larger businesses can afford to throw money at the problem to keep their customers happy and Amazon is just one of those examples. However, this does not ensure that all demands will be met this festive season. For example, Apple has said a shortage of semiconductor chips had cost it $6bn (£4.35bn) in lost sales.¹¹
How does all of this increase the pressure on ERP end-users?
The supply chain pressure will continue for the rest of this year as 67% of Americans plan to increase online orders in 2021⁶. On top of this, 68% favour brands that offer sustainable packaging choices at checkout⁶, proving that the strain on supply chain businesses is not just for Christmas. It will continue well into next year and beyond, especially when it comes to being sustainable.
These challenges will be imposed on supply chain businesses way into the future. Your customers will need the capabilities to survive these challenges.
We have covered only some of the supply chain challenges that your customers are facing, all of which put a monumental amount of stress on your end-users. This stress forces intense pressure on the people who run these businesses. They are the ones who have to overcome the supply chain disruptions that can even appear overnight.
These pressures come from items such as:
- Delayed deliveries
- Fines for not meeting deadlines
- Not enough supply to meet demand
- Change in demand
How to support your end-users
With all of these challenges and pressures looming over your customers, you must be thinking ‘how can I help?’. By providing your customers with an end-to-end solution you can offer them:
- Enhanced visibility: Greater data visibility to improve reporting and enabling them to act on real-time data.
- Reduced costs: With more visibility comes proactiveness and informed decisions which lead to less fines thus saving time and money.
- Access to trading partners: Give your customers the ability to trade with thousands of different businesses.
- Fast trade partner onboarding: They can quickly and easily get new trading partners connected up enabling them to be agile.
- Increased efficiency: Eradicating manual processes and freeing up resource leads to efficiencies gained.
- Reduced risk: Having visibility of trading partner data ensures they to chose the best performing partners to work with. This reduces the risk of delays and other issues.
By adding EDI to your portfolio you can offer an all-encompassing solution that meets your end-users needs and alleviates the pressure.
Suggested viewing: Take a look at our QAD Video Case Study. An ERP business that has provided its customers with many benefits, including improved visibility.
Overall, there is an abundance of changes occurring around the globe which makes the supply chain environment resemble quicksand. The pandemic has caused gaps in supply chains which are now just starting to show the cracks. Trade agreements are constantly changing, as well as the UK leaving the EU, plus many sustainable initiatives being put into place like the 2030 EV deadline, it’s no wonder these businesses are feeling the pressure – how on earth are they meant to keep up?
The pandemic has indeed accelerated many preexisting trends, and the supply chain is no exception: 64% of surveyed supply chain executives say digital transformation will accelerate due to the pandemic.¹³
Whether your customers are delivering to businesses within the supply chain or the end consumer themselves, they will be feeling the pressure to meet their expectations. It’s time to relieve that dead weight off your customers’ shoulders, by providing them with an end-to-end solution.
Supply chain pressures are here to stay and with digital transformation in acceleration, it’s time to take action and advantage. Act now and provide your customers with what they need whilst reaping the rewards.
1CNBC: Supply Chain Chaos is hitting global growth and could get worse 2CIPS: Supply chain costs threaten SMEs' pandemic recovery 3The Guardian: UK supermarket prices ‘to rise by 5%’ as supply chain costs increase 4Ranpak’s First Annual E-Commerce and Packaging Trends Survey 5Reuters Events: Retail Supply Chain & Logistics Planning Report 2021 6Reuters Events: 67% of Americans plan to increase online orders in 2021 and 68% favour brands that offer sustainable packaging choices at checkout 7BBC: How serious is the shortage of lorry drivers? 8Become a truck driver: Truck Driver Salary – Ultimate Guide 9Wall Street Journal: Where did all the shipping containers go? 10Wall Street Journal: Chinese Port Logjam Threatens Christmas Shipping Rush 11BBC: Amazon to pay billions to prevent Christmas shortages 12Good Housekeeping: Everything you need to know about shortages this Christmas 13EY: How COVID-19 impacted supply chains and what comes next