Where's all of our stuff?

THIS YEAR'S HOTTEST GIFT WON'T COME WRAPPED

You know the old saying "for every action, there is an equal and opposite reaction? Welcome to the economic reaction phase of the global pandemic, and it's going to have some serious implications for our businesses this holiday season.

If you can remember the beginning of all of this (roughly 20 months back), when news of a global pandemic hit our feeds, pretty much all of us took some pretty significant actions. We knew that travel and hospitality would be deeply affected, and many of us looked back at the last few economic crises to predict what else would get hit. After 9/11 and during the Great Recession, demand for just about everything from cars to couches plummeted, so the logical thing for businesses to do in 2020 was to brace for the same.

In many cases, the opposite was true. While we were stuck at home we looked around and finally decided to update our homes or invest in fitness equipment. Many of us preferred the privacy of our own vehicles, so car sales went up, and as electronic devices became even more important to our lives, we upgraded or added to our collections.

That's good news, right? Kind of.

It meant that many businesses were able to survive or even thrive through the pandemic, but it has also led to a global supply chain crisis at a scale that we haven't seen since WW2.

Here's why:

The anticipated slowdown caused shipping companies to reduce some of their capacity, while the increase in global demand for medical supplies and PPE sent ships to parts of the world that the system wasn't used to. When a ship goes to a new port, there may be people waiting for it to drop off its supplies, but there's likely no one there to load stuff onto the ship and send it back where it came from. The result is that dozens of cargo ships were left sitting in unfamiliar ports, waiting for their next marching orders.

Then, as we all started placing our pandemic-inspired orders, there was suddenly a surge in demand, so the prices that companies were willing to pay for shipping increased enough that all of those ships made empty trips back to China and other manufacturing posts. Once loaded and back out to sea, the race was on to a few major global destinations that would receive and distribute all of our orders, which caused a massive lineup at the ports. Making matters worse, there were significantly fewer truck drivers and other land-based transporters available, further backing everything up all the way to the factories.

Oh, and all while this has been going on, there is an actual pandemic causing a shortage of factory workers, an energy crisis in China which limited some suppliers to reduced hours, and a global shortage of microchips (which are in pretty much everything, it turns out).

That brings us to today, where the massive ramp-up in demand over the holiday season is just about to start while literally every step in the supply chain is jammed up.

So what can we do about it?

• First, if you're selling anything physical this year, make sure you're managing expectations, and doing everything you can to pull orders forward. Nothing will take you out of the holiday spirit quite like spending Christmas Eve apologizing to an inbox filled with disappointed customers
• Non-tangible goods are going to be this season's hottest gifts. Experiences, gift cards, bookings, and anything else that doesn't require shipping will not only provide an alternative for hopeful shoppers, but they may also require less waste and energy, which is a win for everyone.
• Buy local. Look for opportunities to purchase whatever you can from local suppliers. Easy wins are things like client or staff gifts, but you can likely also find supplies that you use in your operations that could be purchased locally. Not only will you be supporting a local business, but you'll also be taking just a little bit of pressure off of that backed-up supply chain.
• And perhaps most importantly, have a bit of patience with your suppliers this holiday season. It took a historical confluence of events to get into this bottleneck, and it will take many months to get out of it, so as we untangle the mess, all that we can all do is the best that we can do.

Written by Conner Galway, Junction Consulting