Today’s obstacles within the global supply chain are wreaking havoc amongst manufacturers, retailers, and consumers alike. The interdependency of all aspects of today's supply chain, combined with a focus on “just-in-time” policies are at the epicenter of today’s global supply chain challenges. As the world has seemingly gotten smaller, and goods are shipped around the world, it is only natural that the intermingling of the supply chain across the globe, and products would occur. Just-in-time policies have also allowed companies to reduce costs and benefit end consumers with lower retail prices. However, throughout the pandemic, cracks in the global supply chain have been made, and this has most significantly impacted Private brand manufacturers due to the complex nature of their business. With rising inflation and thinning wallets, Private brand manufacturers and their retail partners need to plan together to mitigate these challenges to continue to provide quality offerings that allow consumers to stretch their dollars further.
Today’s supply chain is a vast array of networks, all needing to work in unison to create the result: timely delivery of finished goods to their end consumer. If you think of any finished product that is produced by a manufacturer for delivery to a retailer, they all share many commonalities. In general, they require multiple ingredients/chemicals to make the product, proper packaging including bottles, caps, and labels, a box or wrap of some kind to protect the product in transport, a pallet to be stacked on to ease the loading and unloading process, and trucks, boats, or planes to transport the product. In all cases, they also require people; the labor to run machines, load/unload trucks, and drivers to deliver product. As you expand the supply chain, each of those commonalities shares their individual supply chain as well which depends on many of the same factors.
Private brand manufacturers are particularly vulnerable to cracks in the supply chain. They are vulnerable because, unlike most national brand producers, Private brand manufacturers produce a variety of products for a variety of retailers. In some cases, each product is customized in formulation, packaging form, and product design specific to the individual retailer. Conversely, national brands produce one formulation for all retailers, a much less complex and simplified supply chain. The complex makeup of private brand manufacturers' portfolios creates impacts that are felt both earlier, and often to a greater extent when the supply chain is impacted.
For years, manufacturers to remain lean organizationally and limit inventory carrying costs, have dedicated themselves to proper forecasting of raw goods and production to create a perfect state where raw goods come in, they are immediately produced and loaded onto transport, and are sent to their end destination. Private brand manufacturers are no different as they have sought this ideal state. But as we have seen, due to their reliance on a multitude of different formulations, raw goods manufacturers, and packaging forms, their ability to avoid disruptions in the supply chain was seriously impacted. “Just-in-time” has become “just-not-in-time”, quickly impacting Private brand manufacturers, and these challenges persisting today.
Many Hands Make Light Work
The interdependency of our supply chain and pushing the envelope with just-in-time mechanics have played a key role in the current supply chain crisis. However, the critical factor right now globally is not looking backward, but looking forwards to the primary bottlenecks affecting our supply chain and how to overcome them. At the present point in time, labor appears to be the Achilles heel affecting manufacturers’ ability to produce as well as deliver product to retailers.
Job opening rates in manufacturing, trade and transportation remain among the highest among all industries. With separations continuing to rise within these industries, it is unlikely that those rates will drop in the short term. This signals a shortage in the labor force in the critical segments that are involved in ensuring that products can be produced and delivered to retailers for the public to consume. This includes everything from the packaging manufacturer, to the box maker, to the manufacturer of the finished goods. Here again, creates a challenge for many private brand manufacturers. Many are single operation, small to medium-sized, privately-held companies. They do not possess the buying power or the size of the much larger corporations that they compete with. In a tight labor environment with rising costs and shortages of raw materials, they are at a disadvantage. As such, we see fewer employees in manufacturing positions, fewer drivers on the road, and the potential for empty shelves at our stores.
Look to the Future
The cure for the current global supply challenge is not likely to happen overnight. Expanded hours at ports, increased fines for idle shipments, pay raises and bonuses are all being implemented to curb the crippling backlog in the supply chain. There are signs of improvement, with on-time rates for shipping improving, and orders for trucks being booked.
As the world continues to weather this crisis, retailers and manufacturers must collaborate to ensure that the supply chain continues to improve. Whether it is through extended lead times, better forecasting, elevated primary stock levels, or other measures, supply chain impacts can be reduced or mitigated. Those that partner closely together will be the first to improve and likely reap rewards of increased sales and productivity over the coming months.
Learn more about building private brands at Daymon.