Gift giving time! And why you should buy your gifts THIS WEEK!
Happy Monday. Because it is two months before Christmas on the day this goes up, I figured it would be a great time to talks about: GIFTS! By the way, I realize not all of my readers celebrate this specific holiday; but also realize that the end of the calendar year and start of the new is a time for celebration for many!
So! Whether you are gift giving because its been two years since you’ve seen anyone. Or maybe you have a few birthdays (mine is near Christmas) or maybe you love gifting for the new year?! Either way, it is time to start purchasing or creating now!
As many of you know, my day job resides itself in the supply chain. At this time, we continue to wade through the effects of the pandemic and the supply chain is taking heat for being too slow. From a consumer perspective, it may seem strange or unclear as to why shipments are experiencing delays.
So today, let’s talk supply chain and do a basic 101 lesson! Keep in mind, the sooner you order the better, and don’t expect to get things as fast as you previously would, pre-pandemic.
From my perspective, there are two major things causing these delays:
- Heightened demand. Yes, even with inflation, unemployment and other factors, people continue to purchase and in massive amounts. In the beginning of the pandemic a few industry took a hit (such as apparel), however as we slowly but surely come out of this strange time, people are buying more.
- Resource constraints. The second item is broader: all resource constraints. Resources being: raw materials, employees, transportation carriers, containers and physical spaces in warehouses.
If you’ve ever taken a supply chain course or even something like economics, you most likely already have some of an understanding of supply and demand. When supply is high and demand is low, prices typically are reduced. When demand is high and supply is low, prices are increased.
So what happens when demand for each step of the supply chain is high, and supply is low? Increases in prices go from beginning to end: by manufacturers, brands and of course, eventually, the end consumer.
Let’s explore this further:
Supply Chain Steps (Basic)
- Step 1: Raw Materials & Component procurement: The manufacturer must purchase the raw materials to then process into their own product. In the example of apparel, this often includes: yard, fabric, dye, buttons and zippers. These raw materials and components are then sent to a centralized manufacturing center to be made into a product.
- Step 2: Manufacturing of product: In factories all over the world, raw materials create a finished product. If clothing is being made, knitting and sewing are involved. A car, on the other hand, is welded, fabricated and computer systems installed.
- Step 3: Transport & distribution of finished goods. Some manufacturing plants are close by the region they distribute to. In modern times, this is considerably less likely. More likely, manufacturing occurs outside of the selling region; and transport occurs in the air or over the ocean. Perhaps you’ve heard of merchant marines? Once through the port system and customs, distribution of product through warehouses and on trucks. Arriving either directly at your door or at a retailer shelf.
- Step 4: Consumer purchase. Here is the fun part! This is where you as the shopper makes a purchase. In most cases here within the United States a shopper purchases items which are already in local inventory – either already in the Amazon warehouse, or on a store shelf. In instances where the retailer is online only, that product is sitting in a warehouse *usually* within the United States.
- Step 5: Final mile delivery to shoppers home or brick and mortar store. This last step of the supply chain to get things to you, is also experiencing issues. You may remember the troubles the postal service had last year. In addition, common parcel carriers (also known as small package), such as UPS and Fedex are having trouble moving product. This is mostly due to the amount of volume moving through their networks. This goes back to the resource constraints of space and people.
Lean & Just in Time
Over the course of time the concept of lean manufacturing becomes popular. This concept is to help eliminate any type of waste in the supply chain, including time. Thus, “just-in-time” manufacturing gained momentum. JIT means less products are stored or waiting to be assembled, and instead things arrived ‘just in time’. *This is one main ‘blame’ for what is currently happening: because it created limited ‘safety stock’ in raw materials, combined with heightened demand, product just can’t be made fast enough.
While all resources are experiencing some sort of constraint at this time, keep in mind that each step of the supply chain requires people! Although the industry has come a long way with automation, machines and robots; the fact is people make things flow. This of course is good from an employment perspective; however when the pandemic hit, people had to safely space apart, someone had to take care of the children and as you can imagine people were getting sick. Even if all shifts were open for business, there simply weren’t enough people to keep things running smoothly. And still aren’t. Driver shortages are rampant, port congestion is a problem. And still, others are fighting for the right to more fair and better working conditions.
This brings us to one way to counteract some of the issue. Buy local. Buy small. If you go back to the steps above you can recognize that buying from smaller sellers or buying local sellers reduces much of the problems found in the supply chain. If you buy on Etsy, you will of course need to allow for a longer transit time for the final mile.
The lesson here
Hopefully you have learned something new about how product gets from one side of the world to the other, or at the very least a bit more about what I do during the day :). If you are a student reading this, please feel free to reach out for more detailed information about supply chain. I’ve worked end to end – mostly on the technology side of things and secondly on the strategy side. I have lots of fun experiences I can share too!
For those of you who are simply shoppers and gift givers, the lesson is to BUY THIS WEEK. Have as much as possible done before November 1st rolls around.
See you soon for a post about the history of gift giving and some gift ideas!