Disruptions Continue to Shape Supply Chain Strategy

Pandemic-era disruptions continue to influence supply chain leaders. The lessons learned from Covid will shape strategies for the foreseeable future.

In January, Flexe hosted a webinar with supply chain experts from Prologis, Columbia Sportswear and Uber Freight to discuss 2023 supply chain trends. And the panelists spoke about key logistics challenges—and solutions for navigating them.

Disruptions transform supply chains #

Disruptions hit businesses at record speed. On average, supply chain disruptions lasting a month or longer now happen every 3.7 years. Fifty-six percent of retailers agree that supply chain disruptions occur more frequently. These frequent disruptions shape and transform industries.

“We’re witnessing an evolutionary process called punctuated equilibrium,” Jason Trusley VP, Consumer Strategy, Columbia Sportswear, said during Flexe’s webinar. “We see these periods of status quo interrupted by rapid periods of change. Now, these periods of rapid change are much deeper and closer together.”

Businesses faced both supply and demand disruptions since the pandemic. Freight capacity reached all-time lows when the economy reopened.

“We went from the most undersupplied market to the most oversupplied market in a matter of weeks, and prices were at record highs,” explained Mazan Danaf, Senior Economist at Uber Freight. “Then suddenly, we saw the most violent drop on record.”

Similarly, warehousing endured a capacity crunch in 2022 as the vacancy rate hit an all-time low. While these strains were temporary, similar disruptions could happen in 2023. As a result, leading shippers prepare for future uncertainty.

Forecasting now more of a challenge #

Due to these disruptions, forecasting is more challenging than ever. The pandemic and subsequent marketplace shifts wreaked havoc on recent yearly plans.

The average forecast error rose to 54% in 2020. Businesses exposed to extreme forecasting error jumped 38%, up more than one-third from the 2019 baseline of 27%.

Though some organizations’ supply chains reverted to pre-pandemic era trends, forecasts are still at risk.

“Consumers' needs, wants, desires continue to evolve,” Karl Seibrech Karl Siebrecht, Co-founder & CEO, Flexe said. “When you pile that on top of core supply and demand disruptions, it gets incredibly difficult to forecast.“

Tail events linger, compound challenges #

Additionally, other disruptions remain on the horizon. These can derail forecasts and create unforeseen challenges.

“2023 geopolitical risk is extremely high—the Russian energy crisis and single-sourced manufacturing threaten supply chains,” said Melinda McLaughlin, SVP, Global Head of Research, Prologis.

Whether or not large-scale disruptions manifest this year, leading brands prepare their supply chains. Many nearshored parts of their operations and diversified their suppliers to avoid fallout from unforeseen disruptions, which cost 6-10% of average annual revenues for companies that fail to execute key deliverables.

Capitalize on Covid-era channel expansion #

Despite unprecedented supply and demand disruption, many companies found growth opportunities amid the pandemic.

Consumers demanded new ways to purchase products during the pandemic. Channels like buy-online, pick-up in-store (BOPIS) exploded. Its penetration grew 500%.

New channels remain critical for brands. Forty-two percent of shoppers abandon shopping online if retailers limit shipping options or in-store fulfillment. And 59% of consumers expect BOPIS as an option.

These factors allow brands to shape consumer demand. Shoppers are much more likely to engage with a company that provides them with their preferred buying experience. For example, 85% of BOPIS shoppers make unplanned purchases when picking up orders.

“The focus is now on the consumer deciding on the product, the brand and the shopping experience,” said Trusley. “It’s up to the company to use this reality to shape demand.”

Leverage supply chain flexibility to adapt, capture market share #

To thrive, leading businesses build flexible supply chains to meet potential disruptions and consumer needs.

“Agility is the answer to most modern challenges,” Trusley explained. “Investing in the front end of the supply chain is important because we don't know what we don't know.”

Flexibility also enables businesses to create innovative solutions and maintain market share. Leading companies leverage their logistics function to meet crucial delivery promises that increase customer satisfaction.

“Don't forget to play offense,” Seibrecht continued during the webinar. “Agility helps businesses prepare for uncertainty. It helps companies test and experiment with something new that consumers may want (new products, sales channels, delivery times, etc.).”