Friday September 25, 2020 |Notes

Traditional supply chains are broken

The pandemic has quickly shifted consumers shopping habits. Those changes have put pressure on supply chains that have been unable to respond adeptly in the surge to digital commerce. New habits are being formed, and the uncertainty about the future makes it exceedingly difficult to plan for all scenarios.

In the early days of the pandemic, consumers rushed to buy essential and staple goods, leading to shortages of toilet paper and hand sanitizer. Over the course of the pandemic, the shortages have hit in various other retail categories. Bikes were sold out nearly everywhere in late spring. Then any number of outdoor toys became hard to attain over the summer.

Journalist Amanda Mull wrote about this subject recently in The Atlantic. She delves into the various problems of retail shortages and surmises that these shortages are likely to continue:

And shortages will endure. The United States’ disastrous coronavirus response means the supply chain has scant opportunity to regain its pre-pandemic stability, let alone anticipate and prepare for new changes in a consumer market unique the world over for its enormous per-capita scale and its reliance on cheap foreign labor. There’s no quick fix. Retailers don’t want to stockpile the supplies consumers need, because it’s expensive and they don’t want to be caught on the hook if demand evaporates. Sending the bulk of America’s manufacturing capacity overseas took decades, Rowen said, and bringing a meaningful portion of it back to help shorten shipping times and make the market more flexible would take just as long. In the meantime, he suggested, try to imagine what you might need or want ahead of time. Get those orders in while you can.

Arguably, many of these issues may have been exacerbated by a heavier reliance on local retail over those with stronger supply chains. Regardless, the problems that are leading to shortages will not be fixed in the short term.

Shopping habits have changed and it's not certain how many of these are enduring changes. Manufactures are adapting to changes in markets with more products going to consumers than businesses. Retailers are booming yet hesitant to increase inventory too heavily. The retail shortages will continue until new patterns of predictability emerge.

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