The 2021 holiday peak season was a harrowing one for retailers as they tried to navigate congestion at the ports, transportation capacity constraints, inventory and labor shortages, and rising inflation. Yet, in spite of these challenges, retail finished the year strong. According to Mastercard’s Spending Pulse, holiday sales rose 8.5% year-over-year. Furthermore, analysis from the logistics software company ShipMatrix, indicated that more than 90% of deliveries to residential addresses were on-time this holiday season.
What’s the outlook for the retail supply chain for 2022? Will the challenges of 2021 continue to dog retailers into the new year? According to Jess Dankert, of the Retail Industry Leaders Association (RILA), there are three main trends to watch this upcoming year:
- Network reassessment: Don’t be surprised if many retailers start ripping apart their existing supply chains like knitters who have noticed a flaw in their work. The disruptions of the past two years are forcing many retailers to reassess their supply and demand networks, according to Dankert. They will be analyzing whether they have the correct number of facilities in the correct locations, looking at diversifying their suppliers and their transportation providers, and re-examining whether they have the correct balance between just-in-time and just-in-case inventory. To perform these assessments, many companies are looking to advanced analytics to help them with scenario planning and conducting “what-if” style analyses.
- Workforce constraints: Like many other industries, retailers have been facing a tight labor market the past couple of years and expect to continue to do so into the new year. Smart companies are looking for workarounds, including implementing more automation in their distribution centers that will help their associates fulfill more orders faster, Dankert said.
- Sustainability. In the wake of the United Nations’ Climate Change Conference (COP26) in Glasgow, more and more retailers are issuing climate change and sustainability goals. As a result, expect to see a greater focus on identifying how the supply chain can help companies meet those environmental, social, and corporate governance (ESG) priorities. Additionally, Dankert says she expects that major retailers will be open to sharing their best practices with others.
Relief ahead?
In terms of transportation congestion and capacity constraints, Dankert says she expects to see more capacity come online as the year progresses, particularly in terms of the ocean sector. However, RILA will be keeping a close eye on the upcoming contract negotiations with the International Longshore and Warehouse Union (IWLU), which represents 22,400 dockworkers along the West Coast. The last time the contract was up for negotiation, the affected ports saw disruptions and shipping delays.
In addition to collaborating with retailers, government officials, ports, and other transportation partners to mitigate the effects of disruptions in the near term, RILA is also working on long-term solutions. “We are looking farther down the road to address underlying systematic issue that predate the pandemic and that the pandemic shined a light [on], so that we don’t find ourselves in a perpetual ‘Groundhog Day’ situation where we are constantly reliving the same disruptions. Instead, we want to address some of those underlying challenges.”
These challenges include improving the infrastructure at the ports, data infrastructure, and data standardization. Dankert says she is hopeful that these improvements can be made as part of the Infrastructure Investment and Jobs Act, which was passed in November 2021. “But I think it’s essential that major users of that infrastructure have a role in saying where and how to best spend that investment for maximum impact on freight fluidity,” she said.
RILA’s upcoming supply chain conference, Link2022, in Dallas from Feb. 20–23 will look to help attendees gain a deeper understanding of these issues and facilitate collaboration on solutions to these challenges.
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