Hurricane Milton slammed into Florida less than two weeks after Hurricane Helene, wreaking havoc across multiple U.S. regions. Compounding the Southeast’s recovery from Helene, it also exposed the fragility of modern supply chains. With high winds, torrential rain, and devastating flooding, Milton severely disrupted vital supply chains, paralyzing port operations as well as road and rail transportation. The resulting bottleneck in goods movement sent shockwaves across industries. For retail, it underscored an urgent need to address the escalating threat of natural disasters to global trade.
A perfect storm of disruptions as retail’s peak season approaches
Unfortunately, with peak season on the horizon, retailers are also navigating another perfect storm of potential supply chain disruptions. The recovery of transportation routes in the hurricane-affected areas is expected to be a prolonged process, likely taking weeks. Recent labor disruptions at U.S. ports are adding to the complexity. Some reports suggest that supply chain restoration from these could also take four to six weeks. Black Friday is just three weeks away. With consumer confidence up, interest rates and inflation down, retailers could be dealing with heavy demand. amid burgeoning customer expectations in addition to these disruptions.
Global retail supply chains are not exempt from the chaos. Unpredictable weather events are not confined to North America, nor are labor disputes and shortages. Across the globe, Geopolitical tensions, including the wars in Ukraine and the Middle East, could affect ocean freight just as air cargo capacity winds down for the winter. Both costs are expected to increase in response to demand, with ocean rates expected to climb by as much as 30%.
Risk mitigation strategies are working but resiliency remains an issue
There is good news on the horizon. Many retailers have implemented measures to mitigate some of the risks in their supply chains. Strategies like nearshoring, dual-sourcing, and regionalization have all begun to have an impact on retail supply chains. However, a recent McKinsey survey suggests that many companies may be losing sight of one crucial aspect of the supply chain: resiliency.
Visibility and compliance are two main areas of concern for analysts. The number of respondents to the McKinsey study who said they had deep visibility into their supply chains fell from 56% to 30% over the last two years. This is concerning, given that disruptions often occur deep in the supply chain and can take weeks to recover. Also worrying: Only 9% of respondents to the McKinsey survey said their supply chains were currently in compliance with new regulations.
For retailers, supply chain technology delivers agility and stability
Retailers may not have a choice when it comes to compliance. Regulations, such as the digital product passports in Europe, are increasing. Modern supply chains are complex, and disruptions unpredictable. Addressing that complexity and building the flexibility to meet unexpected challenges is crucial to ensuring a stable supply chain in an increasingly unstable environment. Managing inventory levels and diversifying sourcing and fulfilment strategies is a step in the right direction. However, the need for an agile supply chain that can quickly adapt to consumers’ changing demands and pivot when faced with disruption is more crucial than ever. The question for retailers is how.
Supply chain analysists are touting integrated supply chain technologies with advanced visibility capabilities as the answer. Increasingly augmented with AI capabilities, these technologies can help retailers anticipate risks, identify and rectify inefficiencies, maintain stock levels, and ensure strong supplier and customer relationships.
Most importantly, they can deliver supply chain visibility ensuring clear skies ahead for retailers can meet demand this peak season, no matter what the forecast calls for.
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