Following more than a year of ongoing supply chain disruptions culminating in continued container shortages and shipment delays, virtually every link in the retail supply chain has felt some degree of strain. With little hope on the horizon, managing the problem has replaced the idea of solving it, at least in the short term.
While retailers were undoubtedly hoping that consumers’ healthy appetites might lead to the beginnings of a recovery, their trials appear to be far from over, even with demand returning.
Throughout recent months, retailers have watched helplessly as consumers drifted through their doors, nonplussed by the sparse shelves and racks before them. Meanwhile, their brand partners remain tethered to their phones and email, desperate for news about long-awaited shipments of product that were set to arrive weeks, if not months, ago.
The symbiosis between brands and retailers hinges on their shared goal of getting product into the hands of the end consumer. But in the wake of unparalleled and seemingly relentless headwinds, those partnerships are being tested.
The Retail Value Chain Federation’s (RVCF) April report found that retailers have seen brands of “all size and type” struggle through the same logistical hiccups this spring. Container availability, shipping disruptions and factory-level delays ranked highest on their list of perceived supply chain hang-ups, while problems at overseas outbound ports and U.S. docks were also fingered for their role in holding up commerce, according to the nonprofit, which facilitates partnership and collaboration between retailers and their brand suppliers.
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Counting about 45 retailers including Belk, Nordstrom, Big 5 Sporting Goods, Burlington, Genesco, J.C. Penney, Kohl’s, Target, Saks Fifth Avenue and Zappos as members, RVCF conducted a survey in March aiming to highlight the state of the sector’s recovery from the pandemic, as well as the pain points.
Not surprisingly, sales and forecasting are the two biggest sources of anxiety internally, retailers said. They spent much of 2020 reacting to “extreme changes in consumer purchasing behavior along with hard swings in product availability,” RVCF added, and that volatility continues today. From a logistics standpoint, distribution center receiving and store replenishment came in next on retailers’ list of concerns.
Store chains and e-commerce marketplaces alike most commonly pointed to extending purchase order lead times and increasing communication and collaboration with brands as the tactics they have been using to better the situation. They’ve also worked to deploy inventory differently across their channels, and add additional brand suppliers to their rosters to fill in assortment gaps.
RVCF founder Kim Zablocky told Sourcing Journal that retailers have, for the most part, been understanding of the pressures brands have faced. “Retailers assess and charge suppliers for on-time and in-full [orders], but they understand that on-time and in-full is a challenge at best right now,” he said.
While selling seasons are tightly calculated and brands are accustomed to paying late fees for each day that a scheduled shipment is delayed, most retailers have waived those penalties, Zablocky said. “You’re always going to have a retailer that will stick to its guns and put a lot of pressure on its supplier, because the buyer wants those goods and wants them now,” he said. “But for the most part, there has been a lot of collaboration going back and forth, because both sides understand the dilemma.”
Jeffrey Solomon, director of operations at Dockers, Izod, Chinese Laundry and Rachel by Rachel Roy producer and distributor SGCompanies, said that each week presents a mixed bag of logistical challenges for the firm.
“There’s not just one thing in the supply chain that I could point the finger at that is the issue,” he said, noting that a brand’s individual supply chain, and the unique conditions surrounding it, determine outcomes. “It depends on who you are and where you stand, as to what the biggest problem is.”
SGCompanies produces many of its goods near Shanghai, and while that cargo does not ship out of the recently impacted Yantian port some 370 miles to the south, the container shortages stemming from that event have had an impact on its business, Solomon said. Meanwhile, it also recently experienced a shortage of on the road truckers, which has impeded its last-mile delivery capabilities. “It’s like throwing darts at a dartboard,” he said. “This week you could hit on a shortage of drivers and next week it could be a shortage of chassis.”
Despite continued unpredictability throughout its supply chain, SGCompanies is attempting to preempt problems that could impact future selling seasons. “We’ve worked with our retail partners to try to get ahead of production and make product as early as possible, with the intention of shipping as early as possible,” he said, noting that the firm’s clients include department and specialty stores, as well as e-commerce marketplaces.
While getting those goods on the water from overseas producers remains an issue, Solomon said that his team is constantly placing calls to terminals, brokers, “and anyone who can help” to pounce on any vessel and container availability. Once the cargo arrives at its destination, another struggle begins with making an appointment for a truck to pick it up and deliver it to a warehouse.
“It comes down to relationships, planning and honesty with your supply chain partners,” including both retailers and logistics providers, he said. That means not fighting for every container to be picked up with haste, but prioritizing those that contain time-sensitive goods with the best chance to sell through at retail now. “We will not say that every container is ‘hot,’ because not all of them are,” he said. “You have to be able to say, “If you can only pick up one today, this is the one I have to have.’”
Meanwhile, SGCompanies is managing its business on an “item by item, order by order basis” when it comes to regional distribution and climate, Solomon said. The established fashion calendar would see seasonal goods like swimsuits arrive in stores months in advance of peak summer, for example. But goods arrived late and sometimes in limited quantities this year—and needed to be expedited to destination markets.
For a supplier like SGCompanies and its retailers, dealing with the interruptions to the normal flow of goods depends on maintaining an upfront, two-way dialogue, Solomon said. “As soon as you know something, you have to share it.”
“We all want to hear good news, but even with bad news, you can come up with an action plan on how to fix it,” he added. “No news is the worst news.”
For Canada-based private label company Orchard Custom Beauty, which specializes in products like stone face rollers and masks, along with travel pouches and tote bags, the pandemic’s initial challenges to production have morphed over the course of the past year.
The company, which serves global brands, department stores and specialty stores, has seen manufacturing ramp up over the course of recent months, but not to pre-pandemic levels, according to Audrey Ross, logistics and customs specialist. The demand for product is so great, she said, that the company still faces competition for factory capacity with its China-based suppliers.
Now, though, there’s the added issue of equipment shortages, she said, from containers to chassis and space on vessels. While the company manufactures its wide assortment of products at a number of global sourcing locales, many of those suppliers are dependent on China for materials and components.
“It’s just been issue upon issue, and there’s no room for even one small thing to go wrong,” she said. “There’s just no sort of elasticity or resiliency for any kind of further delay.”
Orchard Custom Beauty specializes in seasonal gifting products—the kinds of goods that might end up in gift baskets or be used as stocking stuffers. In addition to creating private label product for brands and retailers, it also works with pop culture stars on personalized lines of product.
With many goods tied to holidays and exclusive drops, their arrival at end markets is inherently time-sensitive. In a year defined by delays, planning early is of the utmost importance, Ross told Sourcing Journal. This year, Orchard requested brands submit their holiday orders immediately following Chinese New Year in February, about eight months before they hoped to have them on shelves—and she is encouraging them to place spring orders as quickly as possible.
The past few seasons have been filled with so many anomalies that it has made trend forecasting difficult. Consumers have gravitated to items like face masks, stone rollers and bath products during the pandemic, she said, and the company sees those categories as safe bets for the future, as shoppers continue to prioritize self-care.
Tote bags and cosmetic pouches, which the company customizes for brands, are often made with a multitude of different fabrics, linings, zipper treatments and features, Ross said. Orchard has had to work with its clients on revamping designs based on the components that are readily available to manufacturers outside of China. “It’s about trying to see what we have on hand,” Ross said. “We might not be able to do a custom debossed zipper, but we could do a hang tag. These are little shifts in making things customized, but faster.”
When it comes to setting client expectations, Ross said transparency has been key. “Normally they implement chargebacks when you’re late,” she said, though retailers have come to understand the depth and breadth of the issues their suppliers are facing. “You have to be able to say, ‘That thing that you want in three months—it may not happen,’ as opposed to trying to be optimistic and waiting until the last minute to tell them,” she said. “It’s now about over-communication—it’s all chaos, but at least you can get a hold of me, and I’ve given you an update.”
With consumer goods industries across the board facing similar circumstances, Ross said partners have also come to grasp the lack of availability for workarounds. Previously, a supplier might be able to pay a bit more to have something shipped out quicker, or truck a shipment to a different port, and those tactics would all but solve a short-term issue. But the pervasive nature of the delays have leveled the playing field, she said. Now, large, international retailers are even approaching her logistics team, desperate for advice on how to get product out of overseas ports. “They’re asking how we’re dealing with this, and I’m thinking, ‘I ship one-fifth of what you do.’”
“They’ve got shelves to fill and launches that they wanted to happen,” she added, “but in no way are they coming back to us and saying there was something more we could have done.”
“The logistical disruptions after the retail shutdown were the icing on the cake after a hugely uncertain year,” echoed Thayer Sylvester, co-founder and CEO of women’s outdoor lifestyle brand Carve Designs.
Sylvester said the brand first started experiencing shipping delays in November. By December, the situation had become “pretty alarming,” she added, noting that on-water time for shipments increased dramatically, from 90-110 days to up to 160. “We’re talking about 50-percent increases, and with seasonal product, that essentially means you’re missing the window to sell.”
Carve Designs specializes in on-trend but adventure-ready apparel, from swimsuits to board shorts, dresses and T-shirts, and the Sausalito, Calif., label sells to retailers like REI, Title Nine Sports, Sun & Ski and Sports Basement. When Sylvester and her team caught wind of the logistical slowdown, they began communicating with key partners about bringing in product sooner than planned.
“We made the decision that because we were coming out of Covid—and we all bought relatively conservatively because of the uncertainty around the economic rebound—we wanted our product here quickly,” she said. Carve Designs opted to take the financial hit and begin air freighting in much of its spring product in January, with the realization dawning that products shipped by ocean freight might be stuck on the water for months.
Sylvester’s team knew that retailers had a “finite window” to gauge consumer appetites for spring product, and the only way they would be able to gather those insights was to bring in product early. The investment paid off, she said. “2021 business has been much better than anyone was forecasting last year,” she added. By early March, retailers had a decent read on which products were selling through, “and we were able to start chasing business right away.”
“We were able to supply our retailers with up to 30 percent of pre-season reorders because everyone had a sense of performance,” she said.
Making these real-time adjustments to both shipping and production has been an exercise in coordination, the executive added. “We went to our suppliers and said, ‘We grew our business with you in 2021 despite Covid cancellations in 2020, we’re paying in advance to secure production—can you help us with air freight?’” she said. Meanwhile, Carve Designs approached its retailers with requests to adjust margins to account for some of the added costs to the brand.
Sylvester credits her logistics team for seeing the writing on the wall in December and making moves to adjust timelines. The label, which launched in 2004, has managed through other shipping-related challenges, like a week-long port worker and truck driver strike that shuttered the Port of Los Angeles and Long Beach in 2017. “That was hugely disruptive,” she said, as the brand missed the bulk of swimsuit season. “We had goods stuck in [transit] for 30 days, and we lost that business.” It took two years for the brand’s swim program to begin to hit growth targets again after the debacle.
Now, Carve Designs is unwilling to leave anything up to chance, she said. While air freighting goods is “certainly not a long-term model,” due to both expense and environmental concerns, Sylvester credits the decision with saving sales for the year and giving the brand and its retailers a better roadmap for 2022.
“If we hadn’t had the goods in January, we wouldn’t have had the February we had, we wouldn’t have been reordering products for our best retailers in March, and they would have missed their numbers,” she said. “The cascade effect would then go on to sales for 2022, where they would have limited results from 2021 with which to forecast.”
The experience has prompted the brand to reexamine its purchasing calendar for next year to move up production and delivery timeframes as long as the issues persist. These changes, plus an added layer of constant communication, are the tools Sylvester believes will help her brand weather any future turbulence.
“If you have healthy relationships with your suppliers and your customers, and we’re investing in the long term viability of all of our businesses, we can share in the burden of managing through these types of crises,” she said.