CSA Exclusive: EY insight on supply chain issues, near and long-term
There are a variety of causes for ongoing global supply chain disruptions, and consulting firm EY recommends several remedial strategies.
Chain Store Age recently spoke with Jay Camillo, global operating model effectiveness leader at EY, about different actions the U.S. retail industry can take to overcome global supply chain disruption in time for the holidays, and to mitigate its long-term impact.
When asked what he believes is causing the ongoing supply chain disruption affecting U.S. retailers, Camillo cited a number of contributing factors.
“Depending on the particular item in question, the cause for disruption ranges from raw material shortages, like the spikes in lumber prices over the summer, to logistical difficulties.”
According to Camillo, these logistical difficulties include port congestion, as is being seeing at the Port of Los Angeles and the Port of Savannah, Ga. as well as a lack of twenty-foot equivalent unit (TEU) shipping containers.
“There are also subassembly shortages for things like semiconductors,” commented Camillo.
Fortunately, Camillo offered advice for retailers seeking to overcome the effects of supply chain disruption, both in the short and long terms. To ensure they can meet holiday demand, he said retailers should consider increasing lead times.
“Moreover, retailers can also seek additional modes of ocean shipping, such as chartering ships, or considering onshore or nearshore sources of manufacturing,” Camillo stated.
Looking ahead to the post-holiday longterm situation, Camillo urged retailers to turn their attention inward to resolve supply chain disruption-related issues.
“Retailers should seek to understand the vulnerabilities within their supply chains,” he said. “For example, these vulnerabilities could include overconcentration of suppliers in one country. Having multiple vendors for each particular item, ideally located in diverse geographies, can help too.”
In addition, Camillo recommended that retailers should also reconsider their inventory policies as part of a longer-term supply chain remediation strategy, as well.
Camillo also offered some thoughts as to whether the global COVID-19 pandemic has permanently altered the retail supply chain. He feels that retailers will not face a single, industrywide impact on their supply chain operations from COVID-19.
“It depends,” said Camillo. “Supply chains must balance cost, risk and service levels. Ultimately, consumers have budgets and have traditionally sought out the lowest prices which favors traditional supply chains. Those supply chains, however, are high-risk and cannot guarantee services levels.
“Overall, I think we’ll start to see a new supply chain balance emerge,” concluded Camillo. “One with more resilience in terms of vendor lists, inventory policies, and geographic diversity of supply.”
Some of Camillo’s advice was similar to insight recently provided to Chain Store Age by Ken Morris, managing partner, Cambridge Retail Advisors. Morris also recommended that retailers consider “nearshore” options for sourcing products that make them less dependent on China, in combination with investing in advanced transportation management solutions.
“You can go back through the supply chain and understand where everything is in real time,” he said. “You can change a shipment from a boat to a plane, identify bottlenecks, and react in real time with notifications by phone, text or email.”