COVID-19 / Economics / Guest posts / Jobs

The global supply chain meltdown, ecommerce spike, 2021 holidays and you

Yes, the pandemic is still wreaking havoc on the economy — and consumers will continue to feel it this winter. Here's one startup's view from inside the logistics industry.

In the warehouse. (Photo courtesy of Shipmate Fulfillment)
This is a guest post by Bill Carlin, chief marketing officer of Shipmate Fulfillment based in Northeast Philadelphia. A version of it originally appeared on Shipmate's website and is republished here with permission.
As a warehousing and logistics company, we’ve experienced the annual rush of holiday shopping firsthand. However, this year we’re preparing for something we believe many people will not be prepared for.

In 2020, shipping delays were rampant and product stockouts were widespread. You’d think with another holiday season on the horizon, the various lessons learned from last year would prompt sweeping changes in businesses and major shipping carriers that experienced unprecedented online sales growth.

Yet we expect things to be much worse in 2021.

The United States has experienced unprecedented ecommerce growth due to the threat of the coronavirus. With many shoppers turning to their computers instead of in-store purchases, online order volume reached an all-time high. Over the course of 2020, ecommerce sales grew by a record 32.4% that many retailers, warehouses, and shipping carriers struggled to keep up with. At the peak of the holiday season, many packages arrived late, which means loved ones had to forego opening a present under the Christmas tree only to receive their brown box in the mail two weeks later, creating a massive backlog of returns for small businesses.

From this experience, sellers, warehouses and shipping carriers implemented plans to increase their capacity to be able to keep up with the growing demand for ecommerce prompted by the coronavirus pandemic. Yet due to pressures on the labor market and a shortage of many supplies commonly used in warehousing and logistics such as pallet or cargo containers, there have been minimal gains in capacity across the logistics industry. If you go on any job board around the nation you will see countless posts begging for warehouse labor, delivery and truck drivers, and package sorters and processors. The growth in logistical capacity is being yet again outpaced by the growing demand of ecommerce.

Increase in demand has placed undue strain on ports across the world.

So far in 2021, we have seen shortages of everything from lumber for pallets, corrugated material for boxes, chips for automated equipment and forklifts, and a lack of available shipping containers or chassis to carry them from port. The price of sending a container from Hong Kong to New York has increased over 500% in the last year; what used to cost an importer a few thousand dollars in transportation now costs tens of thousands of dollars.

This increase in demand has placed undue strain on ports across the world. If you are an importer and were able to afford the elevated transportation costs for ocean freight, you are then faced with the issue of getting your container to port in a reasonable amount of time. Today we are facing unprecedented wait times at ports. This is creating even more strain on the availability of containers and trucks and chassis to move them. Additionally, many ports around the world can be closed at a moment’s notice due to coronavirus outbreaks.

How this will affect you this holiday season? Many retailers may not get the inventory that they expected to have for the big sales such as Black Friday or the week before Christmas. On top of this, we may see elevated prices as importers are paying significantly more for the capacity that they are able to get their hands on. We should see some of these costs pushed to the consumer overtime as more expensive stock reaches our shores. If you wait until the last minute to purchase a gift, the post office, UPS, FedEx and any other carrier will most likely fail you. And many warehousing companies and shipping carriers are putting in place heavy peak season surcharges that will affect how much money an online seller or importer pays to send their good to the end customer.

As somebody with an inside view of the problem, I see shortages and shipping delays as a guarantee rather than a possibility. I expect this year to be worse than last year in terms of delays. Holiday shopping right after Halloween may feel uncomfortable to many consumers, but it may be the only way to guarantee that you not only get the product you want, but that you have it in time to give to somebody else. There is no guarantee as to what products will be affected by future stockouts and shortages as well as no guarantee on what gifts will be delayed in the mail.

And as pressures mount for the holiday season, we could see major failings of the US logistics systems and shortages occur in things other than gifts as capacity is moved around to accommodate those who can afford to pay for any available capacity.

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