Walmart vows to ease supply chain shortages for the 2021 holidays
Despite the economic resilience that the loosening of pandemic restrictions should have brought, no one could have imagined the impact of the global supply chain crisis this year. A survey from NTT Data released in September found that the aftereffects of the pandemic on logistics were significant, with international transportation bottlenecks accounting for 43 percent of the strain.
It might seem easy to place the blame solely on the increase in online shopping. But the fragile infrastructure of global supply chains has been a crisis years in the making—one which has affected non-retail markets. In early October, the shipping cost of containers was up 289 percent from just one year ago, according to an assessment from Drewry’s Shipping Index. The crisis has become so severe that the IMF downgraded its 2021 US Growth Forecast by one point in October, the most for any G7 economy.
For many Americans, it may have seemed like Christmas might be canceled in 2021. Can Walmart help stop the supply chain shortage?
Forecasting the 2021 Holiday Season
Despite initial forecasts of sales growth in the US to exceed $4.44 Trillion by the end of 2021, supply chain issues began affecting US retail as early as December of last year when a record number of import containers filled two of the nation’s largest marine ports to peak capacity. While it was predicted the inventory glut would eventually let up after several months, the trajectory of online sales in the US continued to grow, spurred on by the federal stimulus package.
What would have been great news for the domestic economy became a nightmare for both international logistics and inventory management, with frequent stockouts and delayed reorders becoming regular occurrences. The situation was only exacerbated when deadly floods in China and Western Europe as well as a shutdown of one of China’s busiest ports exposed just how fragile the global logistics ecosystem could be.
In August, the Ocean Shipping Reform Act of 2021 was introduced into Congress. Calling for new federal regulations for the global ocean shipping industry, it seemed like a major step in the right direction. But it was hardly an emergency act which could salvage the predicted Q4 sales boom. Consumer demand may be at an all-time high. But the inventory may not be.
Walmart’s Strategic Action for the Holidays
Earlier this month, President Biden announced he would be meeting with transportation and shipping leaders to address the current supply chain crisis—part of which could constitute the administration’s emphasis on passing the Bipartisan Infrastructure Framework package. But without widespread support from retailers, the likelihood of a resolution being agreed upon prior to this holiday season isn’t particularly reassuring.
In order to meet the holiday demand, Walmart recently announced their own plans to help lessen the impact of supply chain disruption. In addition to adding 20,000 permanent supply chain positions and chartering their own private container vessels, they’ve enhanced both storage and automation capacity in their fulfillment centers as well as continuing a program launched last year establishing eCommerce distribution centers fulfilling online orders directly from physical stores.
It’s an initiative that has already won full encouragement from the Biden Administration, who noted their specific commitments towards working 24/7 for fulfillment alongside FedEx and UPS during a press conference earlier this month. And it couldn’t have come at a better time for the Arkansas retailer. Not only was it revealed in September that consumers are spending more at Amazon than Walmart, but CEO Doug McMillon recently admitted that his own inventory was far too low in both physical stores and eCommerce during a global retailing conference.
It’s possible that Walmart’s strategy could also help narrow the gap in their ongoing battle with Amazon. While they may have seen digital sales grow by 79 percent in 2020, they still lag far behind Amazon in terms of US eCommerce market share by some 37 percent. One thing is certain about the 2021 holiday season, however. Online shoppers might not necessarily be purchasing more, but they’ll likely be paying more. Walmart’s partner FedEx recently announced temporary surcharges on top of their 2021 rate increases just in time to prepare customers for even higher than normal shipping rate changes in 2022.
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