Tugba Sabanoglu
Research lead covering Non-food CG & Retail
Just as the 2021 holiday season approaches, and people are starting to get into the festive spirit, supply chain issues may play the role of the Grinch that stole Christmas. Shopping events such as Black Friday and Cyber Monday draw in huge numbers of shoppers looking for deals and searching for gifts for loved ones, relatives, and themselves. However, many consumers may find that they are faced with empty shelves, or big delays in shipping.
On top of the supply and demand disparity, there are disruptions in the supply chain itself, especially in North America and Europe. Thanks to the interruption of trading at the height of the pandemic, shipping companies sent out fewer ships. Different countries also closed and opened their borders at different times. This disrupted the constant supply cycle, meaning empty containers were left where they should not be. This has been exacerbated by a labor shortage. In many countries there is a lack of HGV drivers and port workers, partially due to the effects of the coronavirus, but also due to poor pay and unattractive working conditions. As containers stack up in ports and there are not enough workers to move them on, the port becomes congested and other ships cannot enter to unload their goods, leaving them floating outside the port, or redirected to another. Between July and September 2021, the number of ships waiting outside some American ports more than doubled. Mobility restrictions and new covid measures also play a part in slowing the movement of goods.
All these factors together have resulted in huge delays in the movement of goods around the world, with schedule reliability sharply decreasing.
With Christmas retail spending set to rise , even against 2019 levels, this has left shoppers in the UK fearing big delays in their parcel deliveries this Christmas and facing the prospect of stock-outs for their Christmas shopping. The stock-out rate at one of the largest toy stores was consistently over 30 percent from July to September 2021.
What is causing the shortages?
The delayed supply chain is a result of a combination of factors. Like many issues in recent months, the pandemic has played a large role. In 2020, many industries were either forced to holdback on production due to lockdowns and illnesses, or chose to reduce production, expecting lower demand. This led to a huge drop in industrial production. Whilst industry has since recovered, the knock-on effects are being felt in the supply chain. Supply problems have been compounded by power outages in manufacturing powerhouse China, and shortages of key materials, such as semiconductor chips. However, as many countries are emerging from lockdown, demand is increasing as people are ready to spend over the holiday season, with budgets expected to exceed pre COVID-19 levels.On top of the supply and demand disparity, there are disruptions in the supply chain itself, especially in North America and Europe. Thanks to the interruption of trading at the height of the pandemic, shipping companies sent out fewer ships. Different countries also closed and opened their borders at different times. This disrupted the constant supply cycle, meaning empty containers were left where they should not be. This has been exacerbated by a labor shortage. In many countries there is a lack of HGV drivers and port workers, partially due to the effects of the coronavirus, but also due to poor pay and unattractive working conditions. As containers stack up in ports and there are not enough workers to move them on, the port becomes congested and other ships cannot enter to unload their goods, leaving them floating outside the port, or redirected to another. Between July and September 2021, the number of ships waiting outside some American ports more than doubled. Mobility restrictions and new covid measures also play a part in slowing the movement of goods.
All these factors together have resulted in huge delays in the movement of goods around the world, with schedule reliability sharply decreasing.
Problems in the United Kingdom
The situation in the United Kingdom is worse than most. This is because, on top of the problems posed by coronavirus, the impact of Brexit can be seen as well. Many workers from the EU have returned home and are unable to re-enter the UK due to new immigration rules. This has been the case with HGV drivers. Over the last few years, tens of thousands of UK heavy goods drivers left their job. Combined with the existing supply chain issues, this has greatly increased the cost of transportation. 75 percent of retail and wholesale businesses say costs of imports have increased, which over half of UK retailers named as the biggest challenge they face in importing goods.With Christmas retail spending set to rise , even against 2019 levels, this has left shoppers in the UK fearing big delays in their parcel deliveries this Christmas and facing the prospect of stock-outs for their Christmas shopping. The stock-out rate at one of the largest toy stores was consistently over 30 percent from July to September 2021.
