As you prepare your e-commerce business for the holiday season, you’ll likely find yourself up against a familiar and complex challenge: Global supply chain delays.
Over a year and half has passed since the March 2020 lockdowns rocked the global supply chain. But similar challenges are still presenting themselves this year, which will only be exacerbated by the increased demand of holiday shopping.
While many were hopeful that these issues would be resolved by now, there doesn’t seem to be an end in sight for the disruption.
New outlets are urging consumers to purchase their products now to ensure they arrive before Christmas, but the current state of the global supply chain is making it difficult for e-commerce businesses to meet these changing demands.
COVID-19 And Changes In Consumer Demand
In the early days of the COVID-19 pandemic, both consumers and laborers were ordered to stay home. As uncertainty of the future resulted in changes in consumer behavior, a few things happened simultaneously.
- Manufacturing decreased
- Unemployment rose
- Shipping decreased for certain items and increased for others.
Later, when stimulus packages were implemented and people had more money to spend, online shopping continued to grow.
The manufacturing and shipping sectors were not prepared for these changes in consumer habits and spending to say the least, especially when faced with worker shortages and other logistical disruptions.
They say that a chain is only as strong as its weakest link. But for the global supply chain, every link has been affected by COVID, and it appears this will continue to be the case this holiday season.
Shipping By Sea Is Becoming More Costly
The first link in the global supply chain delays can be found on the seas.
Shipping products across the world primarily occurs through cargo ships because it is the least expensive method of shipping, but COVID-19 has resulted in increased costs of this method.
The first of those increased costs can be attributed to a shortage of containers. During the early days of the pandemic, many containers were filled with items such as masks, gloves, and other items that were sent to places around the world such as South America and Africa.
But many of those containers were left behind and remain empty due to carriers prioritizing shipments to Asia, North America, and Europe. This means less containers in circulation which means the value of containers has gone up.
Carriers are trying to retrieve empty containers across the world but, that brings on another issue altogether: Less ships delivering actual cargo.
More ships are currently being built, but due to the size of the ships, they take a long time to build. These new ships aren’t expected to start operating until 2023.
But even if they were operational now, they would only add to another current problem: Sea Port Blockage.
Sea Ports Blocked
March of 2021 came with its own supply chain challenges. A cargo ship by the name of “Ever Given” blocked the Suez Canal, which is a vital route for ships traveling from Asia to Europe. The blockage caused approximately $9 billion held up in global trade a day.
Many ships stood idle as they waited to pass through the canal, and a similar issue is happening in major ports all over the world.
For example, in the Port of Los Angeles (the busiest port in the U.S.), ships are sitting anchored for 2.5 times longer than they were before the pandemic began.
The reason for many traffic jams at the seaports come from another issue.
Not Enough Truckers
Just like the automotive industry, the trucking industry is feeling the effects of the computer chip shortage. This is causing a rise in the costs of buying freight trucks. The average difference in truck price is close to 20,000 from 2020 to 2021.
The trucking industry is dominated by independent trucking companies who only own a handful of trucks and are forgoing the cost of purchasing more trucks. The other problem is that even if they did purchase more trucks, there aren’t enough drivers to man them.
Like other industries such as food and hospitality, many truck drivers who were furloughed or laid off in 2020 have found better working conditions and pay in other industries.
Wages are rising in the trucking industry and more truck drivers are being hired, but not at a pace to be able to keep up with the backlog of orders.
Less Commercial Flights
While it may seem like the answer to fix supply chain delays is to travel by air, there are a couple of factors that make it more difficult.
The lockdowns in the early days of the pandemic came with countries closing their borders. What normal air travelers might not have realized is the fact that most cargo is actually transported with passenger planes. Less people traveling also meant less cargo moving from country to country.
While countries have opened their borders now and air travel is becoming common again, there is another factor that prevents more air freight: the cost.
According to worldbank.org: “The demand for air freight is limited by cost, typically priced 4–5 times that of road transport and 12–16 times that of sea transport. Air freight rates generally range from $1.50–$4.50 per kilogram, while the value of air cargo typically exceeds $4.00 per kilogram.”
Labor Shortages Across Supply Chain
Labor shortages can be found at every point in the supply chain. Whether that be at ports men unloading cargo ships or truck drivers delivering products, down to the carriers who finally deliver your products to your customers door steps.
According to the U.S. Chamber of Commerce: “More than 90 percent of state and local chambers of commerce say worker shortages are holding back their economies, and more than 90 percent of industry association economists say employers in their sectors are struggling to find qualified workers for open jobs.”
Open positions are slowly being filled, but that process still can’t quite keep up with demand. Workers will also still need to undergo training which can slow down their overall production in the short term.
Warehousing Storage Shortage
The increased demand for e-commerce products that began at the start of the COVID-19 pandemic has meant that e-commerce merchants need to keep an increased amount of inventory.
But with every e-commerce merchant aiming for that strategy, there’s now a shortage of warehouse space. If you want your products stored at a warehouse you could be charged more due to the limited space.
If there is no space at all, those containers just keep getting circulated and add to the container problem described above.
What Supply Chain Delays Mean For Your E-Commerce Business
It is almost inevitable that e-commerce merchants will feel the effects of the global supply chain delays this holiday season, if they haven’t already.
With goods stuck at various points in the supply chain it could affect your ability to stock up on inventory to match your forecasted sales.
The delays could also prevent your from being able to receive gifts in time for Christmas. It will be crucial for your online business to be transparent with delivery times and shipping deadlines.
On top of all that, the increased costs in warehousing and peak season shipping can affect your ability to offer the discounts you wanted to give your customers to generate sales.
How To Cut Costs Shipping During The Holidays
Despite what it may seem like, there can still be some holiday cheer for your e-commerce business and your customers.
Major carriers are expected to reach capacity this holiday season, so having access to as many carriers as possible will help with finding the most cost effective option for your business.
With Shippo, you have access to more than 85 carriers spanning regional, national, and international services. You can compare discounted shipping rates and transit times across carriers all in a single interface.
Join Shippo for free to instantly get access to the most carriers at the best rates this holiday season.