Ravi Anupindi
The end-of-the-year holiday shopping season is off to a rocky start, with a shipping crisis causing products to be delayed, unavailable or more expensive. Then, there are the truck transport shortages, slowing the movement of goods already here.
What are the present realities and prospects for the second holiday shopping season affected by the pandemic? Discussing it all are Ross School of Business professors Ravi Anupindi and Jun Li. Anupindi is a professor of technology and operations as well as founding faculty director of the Center for Value Chain Innovation, and Li is an associate professor of technology and operations.
Jun Li
What exactly is going on as far as supply chains and shipping problems, as it pertains to consumer goods?
Anupindi: On the supply side, there are disruptions due to a multitude of factors, including shortage of raw materials, components, labor, congestion in shipping lanes, shortage of manpower in domestic transportation and logistics. On the demand side, we've already entered into high season even in normal times (holidays) but now (in 2021) exacerbated by businesses ordering more to replenish inventories, hedging by over-ordering due to longer supply delays and disruptions.
Consumers, flush with money they did not spend last year, want to splurge. This is the classical bullwhip effect that ceases to stabilize as the supply chain is being subjected to multiple shocks.
Li: The global supply chain is experiencing problems everywhere. We are seeing significant supply chain delays caused by supply shortages, transportation delays and demand swings. Manufacturing activities have slowed down worldwide during the pandemic.
Adding to the problem are port worker and container shortages, straining transportation capacity and causing significant delays. It now takes twice as long, or even more, to ship from Asia to the United States, as compared to the pre-pandemic time (over two months vs. a month). Further adding to the chaos, retailers are all trying to restock the inventories depleted during the pandemic in preparation for the holidays, tying up vessel capacity and further pressuring the already fragile supply chains.
So both the current picture and predictions are, to say the least, messy for holiday shopping as far as availability and pricing of products. Are those concerns overblown, understated or spot on? Is any progress being made?
Anupindi: It's not overblown. We're already seeing higher prices in general and especially for hard to find popular products. I think it is going to get worse as we approach peak holiday shopping. Let's wait to see what happens during this Thanksgiving weekend.
