Supply Chain Highway Robbery
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I used to say that in the retail industry, the merchants were the dog, and the supply chain was the tail, and the tail doesn’t wag the dog. Well, that was then. Now, the tail is flinging retailers and their merchandise vendors around like a top. And laymen who wouldn’t have even known the phrase in the past are talking about “the supply chain.”
Yesterday I was watching Ida churn her way onto the shores of Louisiana on CNN. Across the crawler came the words, “The price of a container of goods has gone from $3,000 to $30,000+ in one year as goods sit at the port in China.” It also included the thought that “Piles of goods are sitting at China ports, waiting for non-existent containers. Holiday season is at risk.”
I spent some time researching that quote, and while I couldn’t find anything precise, there’s no doubt we have a serious mess on our hands. As Freight Waves put it in a succinct subject line: Shipping chaos gives top importers ‘massive competitive edge.’
The largest importers are paying far lower freight rates than smaller importers, the playing field is becoming increasingly uneven, and foreign ocean carriers are in position to pick the American import sector’s winners and losers.
No matter if you’re big or small, I can guarantee you’re paying more for a container than you did a year ago, by a factor of ten or more, and I’m not convinced you’ve got keen visibility into what you are going to get or when it’s going to actually arrive at its final destination. Based on the prices I’ve been reading, that’s highway robbery.
According to Forbes, “In terms of logistics, ocean-going freight rates have skyrocketed over 460% in the last 12 months.” Man, that’s a lot. And it’s not like the carriers are losing money. They’re just raking it in. I get zero sense of urgency.
Yesterday I went looking for water filters for my refrigerator. I finally found them at a company I’d never heard of. Everyone else was out. I went to buy baby food for my cats. Amazon had cases on Prime. Cool, I thought. Two days. Nope, Prime = the second week of October now. We had to go from store to store to find enough to tide us over – the cats are quite old and as such, are indulged to keep their tummies quiet. How can this still be happening?
Well, clearly investors are asking themselves the same thing. I used Google News and picked the topic, Supply Chain Management. I found everything from acquisitions, to new venture-backed supply chain companies, to explanations for CIOs in CIO Insight Magazine called “What Is Supply Chain Management?” In other words, it’s a hot space, and not just because Omnichannel became more omni than ever during the pandemic and legacy systems can’t get by on DTC being “just another store” anymore. It’s hot because we have really become slaves to our supply chain carriers, and it just must stop.
Back to “What Is Supply Chain Management?” At first, I thought it must be an article for laymen. But then I saw the magazine. it’s Once again, I’m feeling old. Do CIOs really need a primer in SCM? Can that be true? I hope not. What about merchants? Has retail become so siloed that one hand really doesn’t know at all what the other is doing? I can’t believe that. If you’re a retail or brand CIO and you need to read that article, you probably shouldn’t be a CIO. No offense, but business knowledge is a must. Supply Chain is a basic business function.
However, I bring you some good news. We are launching our latest Supply Chain Benchmark, on creating a more agile Supply Chain. You can put your own thoughts in here, or you can wait for the resulting report to come out in a month or two. I can’t promise we’ll give you a primer on Supply Chain Management. I can promise we’ll give you an objective, unvarnished look at the Supply Chain union in retail, and how the best and brightest are using new technologies to improve this once very unsexy topic.
In the meanwhile, I would encourage our retail trade groups to get on with some lobbying. This is not a COVID-related problem. This is a supply vs. demand problem, and the problem is with containers, not product. We have been through some serious traumatic times here lately, and consumers really do crave some sense of normalcy. Shopping – even with a mask on – is a sport here in the US. It’s a sport that ultimately impacts 67% of our GDP. If lack of containers, or crazy high prices are dampening that demand by decreasing supply or causing inflated prices, it’s got to be fixed. Software makers are rushing to improve Supply Chain offerings. Now we must put the pressure on those who transport our goods to push the “go faster” button. Now.