Attention holiday shoppers! Attention holiday shoppers!\images\insights\article\conveyor-belt-christmas-gifts-small.jpg October 20 2021 October 20 2021

Attention holiday shoppers!

Aisle 3 is already sold out and it’s only October.

Published October 20 2021
My Content

It’s not surprising that a global pandemic would have such a massive impact on global supply chains. A perfect storm of disruptions has coalesced as never before. Consumers with cash to spend and pent-up demand are up against unprecedented Covid-19-related manufacturing shutdowns, labor shortages, clogged ports and delivery bottlenecks. To make matters worse, headlines about the “global supply chain nightmare” are driving even more panic buying and hoarding.

So, what about impacts to holiday shopping? Although supply chain concerns weren’t widely appreciated by the public prior to the pandemic, most retailers and e-tailers already were aware of risks to the delicate balance between supply and demand—albeit not to this magnitude. Many have planned appropriately, taking measures to mitigate the issue. For example, numerous big box retailers have secured their own ships and cargo containers to bolster capacity. To circumvent trucking delays, some are pivoting to air freight. Also, companies that have better visibility about purchasing patterns for certain products, such as their core product lines, are more likely to have more of those items in stock. Nonetheless, while parents may find sought-after toys in short supply, this may be the year when adults will welcome gift cards to their favorite stores so they can take advantage of post-holiday sales when items may be back in stock.

Companies with the financial resources and/or pricing power to manage these added costs are certainly in better position to ride out the situation, as are those that have diversified their manufacturing facilities across multiple geographies. Nonetheless, when even globally positioned, successful companies such as Nike are warning about product shortages and shipping delays, it’s clear this evolving, multifaceted problem will take time to untangle.

Opportunity arises out of just about every crisis. No doubt lessons learned during this one will result in manufacturers, suppliers, retailers and distributors taking a hard look at what worked and what didn’t. The need to manage not just complexity but also unexpected volatility requires a more nimble, responsive supply chain. Along with more geographical diversification, we expect greater investments in cloud-based technologies and artificial intelligence to support more precise forecasting and coordination of the many players and processes required to get products on shelves or to customer homes. It also will require a renewed focus on such old-fashioned concepts as collaboration, communication and relationship building that can help weather challenges when there is no playbook.

Tags Equity . Markets/Economy . Consumer Spending .

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Federated Global Investment Management Corp.