Despite Supply Chain Issues, Shoppers 'Won't Go Home Empty-Handed'

BY JONATHAN GOLD

EVERYWHERE YOU LOOK NOW, stories are being written about supply chain disruptions. Many are asking what the impact of these disruptions will be for retailers. Will there be products on store shelves or available online when consumers want them? Will the disruptions lead to higher prices for consumers?

These are certainly the right questions to ask. Supply chain disruptions happen all the time. However, we have never seen disruptions of the degree and duration we are witnessing today. Throughout the pandemic, the supply chain has been stressed with demand far outpacing supply. That applies not just to finished retail merchandise but also the inputs and raw materials needed by domestic manufacturers to produce their products. Moreover, there are shortages of labor and equipment as well as limited capacity on ships, rails, and trucks to move merchandise goods and materials through the supply chain. Many of the operational challenges our ports and other parts of the supply chain are facing existed well before the pandemic, but COVID-19 brought these issues to the forefront and further exacerbated an already complex system.

Despite these challenges, retailers worked around the clock to ensure that products were available during the holidays. With consumer demand remaining strong, NRF expected another record-setting holiday season with a forecast that sales would grow between 8.5 percent and 10.5 percent. That is certainly good news for retailers and a clear sign that the economy is continuing to recover. Consumers seemed to have received the message, with a record number of 49 percent started shopping before November and more than a third saying they did so because they didn’t want to miss out on key holiday items.

The obvious question is what can be done about the disruption issues, and many ask what the government can do to “fix” the problem. Unfortunately, there is no easy solution for the disruptions, which experts agree will continue through the first half of 2022.

It seems as if every segment of the supply chain is facing a challenge, which in turn impacts the other segments of the chain. There continue to be production shortages overseas because of labor and capacity issues. There is a shortage of empty containers overseas as well as vessel space. There are ongoing port congestion issues, specifically at the Ports of Los Angeles and Long Beach, which account for 40 percent of U.S. imports and where over 70 ships are waiting to berth and unload thousands of containers at already full terminals. The terminals, in turn, are full because retailers and other cargo owners are not able to get their containers. Part of that is because of a lack of chassis to carry the containers, a nationwide shortage of truck drivers, and difficulty with returning empty containers. Retailers also have challenges with full warehouses and labor shortages of their own.

The administration is certainly paying attention and trying to figure out what they can do, as evidenced by the appointment of a port envoy and holding a White House supply chain summit where NRF shared retailers’ concerns about the ongoing challenges. The administration must continue to bring stakeholders to the table to develop creative solutions that will not only address today’s disruptions but focus on creating a truly 21st century global supply chain. Physical infrastructure investment is key, but there must be a focus on information technology investment as well. A national freight data portal that allows stakeholders to better share information throughout the supply chain would enable partners to better plan and prepare for future disruption events.

In terms of specific legislation, the bipartisan infrastructure bill just passed by Congress will bring long-needed improvements to highways, bridges, ports, and other key infrastructure retailers rely on. The bill also includes a pilot program for younger truck drivers that NRF supported through the DRIVE Safe Act. We now need Congress now to pass H.R. 4996, the Ocean Shipping Reform Act of 2021, to address longstanding unfair business practices by ocean carriers and port terminal operators.

There will be many lessons learned throughout the pandemic, especially on supply chain operations. When the pandemic finally subsides and we get back to “normal,” we can’t just return to pre-pandemic operations. Retailers have been evaluating their supply chain operations from end-to-end and will continue to look at creating more stability and resiliency for the future.

Jonathan Gold is vice president for supply chain and customs policy at the National Retail Federation.