What’s the mood of global supply chains? That sounds like a funny question, I know. We don’t typically think of supply chains as having a mood, but it might be appropriate after everything we’ve been through recently. As the months go by, we continue to see a dramatic, atypical drop in global trade. We haven’t experienced the seasonality we’re used to. Winter melds into spring; spring melds into summer—but the mood is steady and colorless. There isn’t any change. We’re not even seeing the shifts in trade volumes and seasonal demand and supply that mark the usual passage of the year.
In April 2023, Oxford Economics projected a 0.6% reduction in global trade this year, pointing out that many industries are struggling to overcome pandemic-era disruptions and shortages, consumer confidence levels are low, major economies are experiencing inflation, labor shortages have led to higher shelf prices, and a shift from heavy reliance on Chinese manufacturing are all weighing heavily on this scenario.
The back-to-school, back-to-college, Halloween, and gift-giving holiday surges toward the end of the year are just around the corner. Maximizing sales during the peak (or holiday) season is critical to meeting annual revenue goals in the retail and consumer industry. The season starts with an appetizer in July and August in some regions for back-to-school supplies, and the main entrée is served from October to December. Now is the time for supply chain leaders to check on every function in their supply chain to be sure they are ready for the peak season.
In this blog series, we will explore some of the new preparation strategies that can help your company sail through these periods successfully.
How to prepare your supply chain for peak season
By now, retailers have forecasted their revenue for the holiday season. Whether brick-and-mortar or selling wholly online, the supply chain process remains the same. They have found finished goods suppliers and placed orders that ensure they have the correct quantity of the right product at the right time. This is how business works…in retail.
But what if you are upstream of this retailer buying frenzy? As a brand owner, the picture is quite similar, but it has been set in motion for some time now. The brand owner has already anticipated what orders they will receive from the retailer, and they have processed this forecast into a supply plan that allows them to build the finished goods in time for the shipment to retailers or on an even earlier timeline for businesses like distributors and other sales channels.
In many cases today, brand owners have outsourced the building, assembling, and production of the goods they sell. Many do this to provide supply diversity, and others do it to take advantage of trade agreements and tax advantages. However, it comes at a cost: visibility, quality, and control of these external operations. Ensuring they have the supply needed to start production is more important than visibility into these contracted operations. This can be a daunting task, but clarity is key. By collaborating with their supplier’s suppliers, the brand owner can establish a three-way trading scenario that not only enables a new revenue stream but drives increased confidence in knowing their contracted manufacturers will have the supply they need to produce their goods on time.
All of the potential disruptions a business can face at this stage have a decent amount of lead time with the right level of visibility, and most can be avoided by simple collaboration and coordination with supply partners, even across supply tiers. So, what happens when the brand’s biggest competitor announces a new product planned for the holiday season?
How forecasts and projections drive supply chain agility
Most businesses, from retailers to distributors, would adjust their forecasted revenue, meaning they expect to sell less of their brand’s product than they previously forecasted. This translates into the need for the brand owner to adjust the plans and orders already set in motion.
To do this, they must develop a new supply plan and execute all the changes required to adapt the existing operations and orders to meet the latest forecast. Here is where ‘what if” scenario planning can provide a significant advantage to the typical benchmarking and assumptions that must be made to navigate the change in the market.
Many disruptions and market changes can prompt a change in the supply plan. Brand owners can experience challenges with a specific part or material shortages, large-order cancellations, and even geographical issues like labor, politics, and finances. All of these require the ability to sense and react.
Seeing what is happening requires listening to new sources and combining previously disparate information to see the changes that are happening and impacting a brand’s ability to remain profitable. Once brands can see the wave coming, they must also understand how to get out of the way and avoid being washed aside. Doing so requires collaboration on orders, inventory, and forecasts with suppliers and even their suppliers. Finally, brands must act upon this new insight, and despite their best intentions, this action must still be complete and address the entire supply chain already set in motion.
How to minimize risk with visibility and control
E2open can help brands find opportunities and mitigate risk in their supply chain. With a fully connected, end-to-end supply chain platform, brands can react faster than businesses that have disjointed and siloed supply chains. They can respond to near-term supply and demand signals indicating an impending shortage or increase in a specific product’s demand.
E2open’s supply suite has been designed to connect these functional silos through collaboration, insight, and action. Brands gain a significant competitive advantage when they react to disruptions at any stage of their supply chain. The ultimate goal of supply collaboration is for brands to ensure all internal and external production is fed with the supply needed to produce the goods ordered. From a supply order perspective, brands gain agility with their ability to react to a new supply plan and put it in motion at any time, especially as an update to existing orders already in action.
From a supply inventory perspective, brands can optimize their inventory and control carrying costs by seeing the impact of near-term supply and demand signals by way of collaboration with suppliers across supply tiers. From a supply forecast perspective, brands can share their forecasts with suppliers and collaborate to identify risks and opportunities.
Finally, the e2open Manufacturing Collaboration application gives brands visibility into production status and quality control across all facilities. This allows brands to adjust current production to meet demand shifts or manage constrained supply, including production outside your four walls.
If there is one thing that last year taught us, it’s that past performance is not indicative of future performance. That disclaimer is typically used for financial investments, but 2023 has already proven it can also be true for the supply chain.
E2open provides the network and solutions that help brands reach their goal of a connected, sustainable, and resilient supply chain. To view other blogs in this series, visit our blogs section.