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Supply Chain

Viewpoint: 4 steps to make your supply chain climate-resilient

To ride out all these supply chain disruptions while preserving customers and profits, shippers should consider four major factors: inventory positions, risk tolerance for specific commodities, transit times and associated costs.

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This commentary was written by Glenn Koepke, senior vice president of customer success for FourKites. The views expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.

By Glenn Koepke

The summer of 2021 will be remembered for shattered records. Not to be outdone by pole vaulters in Tokyo or new variants of an unending pandemic, our climate is going above and beyond in asserting its dominance over human life — and the global economy.

Hurricane Ida’s devastation from New Orleans to New York and the Caldor fire’s carnage in California have made July’s Pacific typhoons and German floods seem like ancient history. All the while, a question nags at us: “What on earth is coming next?”

It’s become increasingly clear these past months that extreme weather is on the rise — and in order to survive, businesses have no choice but to adapt. For the shipping industry, this means accepting extreme weather events as the status quo and integrating them into strategic planning from end to end.

While most companies will develop new strategic plans and review their supplier networks every three to five years, the reality of our current environment means that, regardless of when plans were last made, companies should be having these conversations today — and they should be having them often.

To ride out all these supply chain disruptions while preserving customers and profits, shippers should consider four major factors: inventory positions, risk tolerance for specific commodities, transit times and associated costs.

Taking stock

In recent years, many companies have edged out the competition by engaging data science and automation to better anticipate customer demand, thereby reducing the amount of inventory sitting idle in a warehouse. This delicate balance of supply and demand depends on precise transit time estimates so customers aren’t left waiting past their expected delivery date.

Unfortunately, a single storm can throw these estimates to the wind. We know that even a minor disruption at one end of the supply chain can result in extreme delays at the other end, in a phenomenon known as the Bullwhip Effect.

When you tie in the freight capacity market, think of a giant Slinky that is pulled in different ways. As capacity shifts from one area to another, rates, availability and dependability all vary. When you tie in larger events, these are more impactful to the capacity market.

In the wake of Hurricane Ida, the number of loads delivered in Louisiana declined by 28% in the week of Aug. 30. After Typhoon In-Fa thrashed coastal China, the Port of Shanghai’s container intake dropped by 52%, and those containers took twice as long to reach unloading.

And the last mile is no better off.

During the Caldor fire in California, officials evacuated cities and shut down 50 miles of highway traffic for a month, resulting in gas and grocery shortages in the Tahoe basin. Note that these statistics were collected during those specific periods of disruption; but given this is an asset-driven capacity model with constrained capacity, it takes time to recover once an event has occurred, and the impacts are felt well beyond the event’s initial geographic scope.

In the face of this new reality, companies must consider the inventory tradeoff, i.e., the value of holding more safety stock in anticipation of weather-related delays. For example, a customer who sees that Company A’s product will arrive too late may choose a similar product from Company B, just for the quicker delivery window – even if Company B’s product is more expensive or lower quality. Next time, Company A might be willing to lose the inventory battle — keeping more items in stock, ready to ship, at a higher cost — in order to win the war for customers.

Considering commodities

While it’s impossible to predict exactly when and where the next Ida will hit, we do know there are seasons for everything. Hurricanes form in the Atlantic between July and November — just as we know that wildfires sweep the West every summer and snowstorms bury the Midwest every winter. We also know that these regions are known for certain products and commodities — oil and gas in the Gulf of Mexico, for example.

Knowing that these events are likely to occur with greater strength and frequency, companies should weigh their sourcing options for the commodities specific to those regions during the above seasons. Companies might be able to source critical products from more stable regions at different points of the year. Some lower-value products might not be worth sourcing at all during some of these extreme events. While complicated and potentially costly, this kind of product-specific evaluation is essential to strategic planning in today’s environment.

Weighing cost vs. time

We know that extreme weather events can slow down or cut off the supply chain, from production to distribution to the “last mile” of delivery. Hurricane Ida slowed shipments for a thousand miles, with on-time shipments declining 14% in Louisiana and 10% in New Jersey, and dwell time increasing 14% in Delaware.

With this knowledge, forward-looking companies would be wise to calculate their tolerance for longer transit times if it means getting their products to their final destination safely and predictably.

While longer routes and lead times sometimes equal higher costs, they may be the answer to protecting profits. After all, that same customer who chose faster shipping could very well return to reliable Company A if the shipment from Company B was delayed in transit by an airplane-grounding blizzard, a traffic-stopping wildfire or other factors that could have been avoided by climate-centric planning.

Companies should be reevaluating their networks, as well as their locations of sourcing, manufacturing and shipping, all with climate events in mind. Alternate seaports might be considered for import or export — for example, avoiding Shanghai during typhoon season or favoring Long Beach over Houston when hurricanes are in the forecast.

Whatever the business decisions, companies should reach them by weighing the cost impacts of shifting sources and routes against the predicted savings realized by customer satisfaction and retention.

Looking forward

As the sun sets on a record-breaking summer, the holiday season looms — accompanied this year by shipping delays, capacity shortages and sky-high freight costs. Throw in a few extreme weather events, and we’re looking at a season for the record books.

Companies that hope to ride out the storm are already ramping up their holiday production. But companies that want to thrive must go far beyond that, taking a hard look at their inventories, sources and routes not only for this year, but for a predictably unpredictable future.

Glenn Koepke has a proven track record of aligning solutions to customer supply chain strategies and objectives for global organizations. Prior to joining FourKites, Koepka served in a variety of roles within the logistics services industry and worked extensively in EMEA and North America. At FourKites, he leads the Network Enablement strategy, which is focused on scaling its industry-leading visibility solution to capture end-to-end supply chain visibility.

It’s become increasingly clear these past months that extreme weather is on the rise — and in order to survive, businesses have no choice but to adapt. For the shipping industry, this means accepting extreme weather events as the status quo and integrating them into strategic planning from end to end.

Source: https://www.freightwaves.com/news/viewpoint-4-steps-to-make-your-supply-chain-climate-resilient

Supply Chain

Supply chain issues ‘driven by three key variables,’ Veritiv CEO says

Businesses across industries are feeling the pinch from supply chain bottlenecks and labor shortages. The same scenario’s playing out at one packaging and publishing company, according to its chief.

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Businesses across industries are feeling the pinch from supply chain bottlenecks and labor shortages. The same scenario is playing out at one packaging and publishing company, according to its chief.

The intense crunch felt by Atlanta-based Veritiv (VRT), which sells packing and paper products, is “really being driven by three key variables,” CEO Sal Abbate told Yahoo Finance Live (video above).

#1: Unprecedented demand

“First is just the unprecedented demand,” Abbate said. “We’re just seeing record demand across many of our products… [from] the packaging products in particular [to] even our print business, which has been in secular decline, is actually booming right now.”

The “unprecedented demand” is not only a result of pent-up demand after millions of Americans spent many months in quarantine during the COVID-19 pandemic but also the e-commerce boom, he added.

Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, California, U.S., October 1, 2021.      REUTERS/ Alan Devall

Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, California, U.S., October 1, 2021. REUTERS/ Alan Devall

#2: Raw material shortage

Meanwhile, the surge in demand is matched with a shortage in raw materials.

“Resin-based products, obviously paper corrugated, we’re seeing escalating prices,” Abbate said.

Other firms have also reported supply chain challenges for getting required goods due to congestion at U.S. ports.

Many expect the flow of goods to continue to be slow and backlogged into next year. According to a recent survey by Oxford Economics, out of the 56% of businesses affected by the supply chain crisis, 64% expect the crunch to end only after mid-2022.

Worker Martha Escobar sorts products after they've been labeled with the help of a Rapid Robotics system at Westec Plastics Corp warehouse in Livermore, California, U.S. on August 19, 2021. Picture taken August 19, 2021. REUTERS/Nathan Frandino

Worker Martha Escobar sorts products after they’ve been labeled with the help of a Rapid Robotics system at Westec Plastics Corp warehouse in Livermore, California, on August 19, 2021. REUTERS/Nathan Frandino

#3: ‘War on talent’

And to make matters worse, labor is also a key problem area that’s keeping Veritiv from meeting the surge in demand, the CEO said.

“The most significant is the labor shortage,” Abbate said. “You know, with 2.7 million people still short in the workforce, the number of people per open jobs [is] at half of its normal rates.”

The challenges Veritiv is facing is in its supplier base, Abbate explained. At its manufacturing facilities, the company has had to offer sign-on bonuses and really ramp up offers in order to be “ultra-competitive for the war on talent out there, particularly in those frontline jobs.”

Abbate expects this crunch to persist through the first quarter of 2022.

A container truck arrives at the Long Beach Container Terminal at the Port of Long Beach on November 12, 2021 in Long Beach, California. - The shortage of truck drivers is exacerbating the supply chain crisis in the United States, with a report released last month by the American Trucking Association estimating the industry is short 80,000 drivers, a figure which can double by 2030 as more retire. (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)

A container truck arrives at the Long Beach Container Terminal at the Port of Long Beach on November 12, 2021 in Long Beach, California. (Photo by FREDERIC J. BROWN/AFP via Getty Images)

Barclays estimates that supply chain bottlenecks have shaved around 50 basis points off of global GDP growth, according to a Nov. 18 note.

Meanwhile, inflation in America reached a 30-year high in October: The Consumer Price Index (CPI) increased by 6.2% in October as compared to the previous year, the largest 12-month increase since November 1990.

Leaving out food and energy prices — both considered to be more volatile — the index rose by 4.6% over the same duration and saw the biggest jump since 1991. Retail sales also rose in October, and electronics and appliance stores saw a big increase in sales.

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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Container ships wait off the coast of the congested Ports of Los Angeles and Long Beach in Long Beach, California, U.S., October 1, 2021. REUTERS/ Alan Devall

Source: https://finance.yahoo.com/news/supply-chain-issues-three-key-variables-veritiv-ceo-134932560.html

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Supply Chain

Global supply chain delays colliding with holiday shopping season

With inflation already causing a pain in the wallet, the frustrations of empty shelves could become very real for millions of consumers.

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CHICAGO — For months, economists have been warning that supply chain delays were on a collision course with the holiday shopping season. But a new survey reports which retail businesses will be hit hardest and what that could mean for consumers.

Right now, products remain trapped at ports with docked ships unable to unload goods as they wait for truckers to keep the supply chain moving.

The bottleneck means retail businesses are waiting to fulfill increasing demand as the holiday shopping season gets underway.

“Prices are going to skyrocket. They are going to go up,” said Dennis Consorte, a small business consultant with Digital.com. He says specialty stores and grocery stores will be the hardest hit with 3 in 10, predicting 60-90% less inventory than usual.

“There’s going to be shortages of inventory. There are going to be shortages across all different sectors of the economy, and ultimately, we’re going to pay for it,” he said.

As a result, most retailers say they will be forced to pass those costs on to consumers already dealing with the largest rise in inflation in three decades.

According to a recent Digital.com survey, 53% of small business owners anticipate inventory shortages through the 2021 holiday shopping season. As a result, 58% of retailers say they plan to raise prices by 40% or more.

“For example, chicken breasts, instead of maybe paying three or four bucks a pound, you might be looking at four or five six bucks a pound,” said Consorte. “So, start thinking about what this means and start budgeting accordingly.”

There are a couple of things you can do: shop early before demand overtakes supply, and consider gift cards instead of products.

“Buy the gift card and give it to somebody. They can hold on to that until the prices come down and then they’ll get more value for that money,” Consorte said.

But that may not help when it comes to sticker shock on certain products. The onset of the pandemic set off a panic buying spree. Everything from toilet paper, gaming consoles, organizing supplies and air fryers were wiped off the shelves.

“Those prices are going up to where instead of spending maybe $10 a month on toilet paper, you could be spending $15-$20 bucks a month on it. Diapers, same thing, and groceries are going to be going up, too,” he said.

Consorte says retailers have to take an active role in fending off a frenzied shopping season.

“Start thinking about sourcing domestically because then you don’t have to deal with all of the international supply chain issues that may actually be solved and start thinking about where else you can source,” Consorte said.

With inflation already causing pain in the wallet, the frustrations of not being able to find what you need on the shelves could become very real for millions of consumers. So, as always, it’s best to plan ahead.

Copyright 2021 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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As a result, most retailers say they will be forced to pass those costs on to consumers already dealing with the largest rise in inflation in three decades.

Source: https://www.wtxl.com/news/national/global-supply-chain-delays-colliding-with-holiday-shopping-season

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Supply Chain

Wine fanatics beware: Supply chain problems put the squeeze on this year’s eagerly awaited Beaujolais Nouveau haul

This year, American oenophiles woke up to a Beaujolais Nouveau market hampered by supply chain problems that have become all too common in today’s economy.

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Bottles of the 2016 vintage Beaujolais Nouveau wine are displayed at a countdown event in Tokyo on November 17, 2016.

Yoshikazu Tsuno | Gamma-Rapho | Getty Images

WASHINGTON – Every year on the third Thursday of November, at exactly 12:01 a.m., the French release their celebrated first wine of the harvest — the crisp and fruity Beaujolais Nouveau.

This year, American oenophiles woke up to a Beaujolais Nouveau market hampered by supply chain problems that have become all-too-common in today’s economy, particularly driver shortages and other shipping issues.

And all of that translates into cost increases for suppliers and consumers alike.

“There are definitely issues with the supply chain. There’s always a problem with containers and there’s always a problem with space on ships, but it’s been really difficult this year,” said Dennis Kreps, co-founder of importer Quintessential Wines, which is based in California’s Napa Valley.

The market was already at a disadvantage due to climate problems. Beaujolais Nouveau production was down nearly 50% this year because of spring frost and hail, followed by a drought.

“It’s kind of a phenomenon that’s happening worldwide right now,” Kreps said. “I know some of the numbers in France specifically are down dramatically across all regions. Beaujolais was one of the hardest hit.”

Delicate grapes, tough problems

Kreps, the exclusive U.S. importer of prominent wine merchant Georges Duboeuf, coordinates with a small team on the colossal logistics of distributing the wine to American retailers on the precise French schedule.

In Beaujolais, considered a subregion of Burgundy, vineyards carpet approximately 42,000 acres of low granite hills north of Lyon in eastern France.

Here is where thin-skinned magenta gamay grapes are queen and Georges Duboeuf is king.

Duboeuf, affectionately called “Papa of Beaujolais,” has the gamay grapes hand-harvested in September. Then follows a quick fermentation and bottling in October.

A picker cuts grapes at a vineyard in Beaujolais, eastern France, on early September 3, 2018, during this year’s first Beaujolais’ harvest.

Philippe Desmazes | AFP | Getty Images

The Beaujolais Nouveau wine – typically light in body with a juicy fruit-forward palate – is then shipped around the world and staged for its November debut.

First, Beaujolais suppliers needed to secure containers to begin shipping. Then they were concerned about delays at the ports.

“You can’t control the backlog at the ports,” Kreps said.

One ship was rerouted from New York to Norfolk, Virginia, due to a major backup, he said. The ship destined for New York typically carries the majority of the wine meant to be distributed across the country, Kreps added.

“We then had to reroute all of the drivers and the trucks from New York down to Norfolk and then get the containers off the ship and get those guys rolling to the West Coast immediately,” Kreps said.

They also had problems hiring qualified drivers due to a labor shortage, he said.

“We’ve never had an issue before, but one truck had a flip over so everything on that container was lost,” he said. “So, unfortunately, all the wine for Arkansas was lost, most of the wine for Memphis was lost, and I think a large portion of the wine for West Virginia was lost.”

Beaujolais grapes lie in a basket in the “Moulin a Vent” vineyard, near Chenas, Beaujolais, eastern France on August 26, 2015, after this year’s first Beaujolais’ harvest.

Jean-Philippe Ksiazek | AFP | Getty Images

Yet even with all the supply and production problems – freight costs have tripled and the cost of the fruit itself was significantly higher, as well – a bottle of Beaujolais Nouveau will sell this year for only a slightly higher retail price than usual, Kreps said.

“We had already committed to pricing to all of our wholesalers, the wholesalers call the retailers, the retailers had then committed quantities,” he said. “Now’s not the time to go back to them with a cost increase. So we worked with the winery and ate the cost.”

Kreps did have a positive message for the people who are able to get their hands on a bottle of Beaujolais Nouveau: Despite all the difficulties with the supply chain and the small harvest, he said, “the quality is fantastic.”

Source: https://www.cnbc.com/2021/11/18/beaujolais-nouveau-wine-hit-by-supply-chain-problems.html

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