Director’s Note–Summer 2020 The Chain
In supply chains, everything is connected. My nearly 85-year-old Mom, cat food, $1 trillion and Christmas. They’re all connected too. Wait, I can explain.
Early in the pandemic, it was difficult to convince my Mom to buy her groceries online rather than going to the store and interacting with people who could infect her with Covid-19. She took our warnings to heart but somehow devised a strategy of going to a Kentucky Fried Chicken Drive-thru as a substitute for grocery shopping. But, and this may say something about her priorities, she did learn to shop online for cat food for her two cats. This food was delivered safely to her doorstep. If even my Mom learns to shop online in new ways, then the world is rapidly changing.
Of course, in past years she purchased gifts online for Christmas but the pandemic has accelerated the trend of online shopping with all of us adding to the e-commerce coffers over the past five months. But even though summer finally came to Washington last month, if you’re part of the supply chain you’re already thinking about Thanksgiving and Christmas. That’s because in a normal year retailers would already have put their orders in by late June and July for inventory to arrive for the holiday season. But, of course, although 2020 is many things, it is most certainly not normal. The pandemic has added a bounty of uncertainty into business decisions.
With the pandemic, consumer appetites are uncertain, like one of my Mom’s finicky cats. It’s impossible to know what the economy will be like come Thanksgiving and Black Friday. At this point, we’re not even sure we can predict what this Friday will look like. Consumer spending increased in June but is still down by $1 trillion year over year. What Congress does this month in appropriating additional aid to businesses and individuals is likely to have a large impact on holiday sales. In addition, a locally headquartered company’s decision may have a large impact on holiday supply chains. Amazon did not hold its Prime Day in July as usual. There are reports it may instead occur in October which might move up holiday shopping.
The supply chain is having to evolve to accommodate all of this uncertainty. Sayama Meagher, chief retail strategist of Scaling Retail, notes in a column in Forbes that holiday “orders simply aren’t being placed now, thanks to a perfect mix of financial fear and lack of financial means.” These retailers may wait to order until much closer to the holidays. Production times will probably be normal—it’s difficult to make goods faster–which means delivery times will be shortened.
There are also challenges in the production side. Demand is down globally and capacity has adjusted to meet this lessening demand. Some are worried that there has been so much consolidation and scaling back that if the economy comes back quickly, there will not be the supply capacity to meet the demand. But, of course, for the economy to return, the virus must be contained. Containing the virus is the most important economic measure we can take.
All of these calculations and uncertainty have a large effect on the 100,000 people working in supply chain companies in Washington State (see the story below by Spencer Cohen of Community Attributes for all the numbers in our updated economic analysis of the global trade and supply chain sector).
Our state’s freight forwarders, air and marine cargo workers, drayage personnel and all the rest of the labor force of the global trade and supply chain sector will be watching closely what retailers are doing about Christmas, Amazon’s decision on Prime Day and whether more people like my Mom increasingly turn to online shopping. Whether you are ordering cat food, that perfect sweater for your aunt, or Kentucky Fried Chicken, the coming months will be interesting.
