When the massive container ship Ever Given turned sideways in the Suez Canal, blocking ship traffic for about a week at the end of March, it represented the latest global trade disruption. Fittingly, the Evergreen ship blockage came approximately a year after the world first shut down from the COVID-19 pandemic. In the interim, there were toilet paper and hand sanitizer shortages and then a massive backlog in the supply chain as demand for freight capacity not only returned but surpassed pre-pandemic levels.
Was the Ever Given the final feather in a year of supply chain disruption? Looking at the history of supply chains, the answer is a resounding no. According to data from Supply Management, in 2001, foot and mouth disease collapsed the European meat and dairy export markets; in 2002-03, SARS caused a 6.3% drop to manufacturing; the bird flu in 2003 to 2005 resulted in a decline in global poultry trade of as much as 1.8%; and in 2008 to 2010, the global financial crisis devastated markets as unemployment around the world spiked.
There have been others as well, including the recent U.S.-China trade war in 2018 that saw automotive-related exports decline by $1 billion.
“All the models we typically used to place orders with manufacturers had to be thrown out the window,” Kunal Chopra, CEO of Kaspien, told Modern Shipper. “We saw increased shipping times, we saw manufacturing factories shutting down. We saw people working from home.”
Kaspien (NASDAQ: KSPN) works with brands to sell on Amazon, Walmart and other marketplaces. The company provides fulfillment operations to over 4,000 global brands across 11 countries. It also supports logistics operations, including securing and maintaining inventory.
Chopra explained that brands need to build flexibility into their supply chains.
“One takeaway from this whole COVID situation that we should all take [notice of] is diversification,” he said. “For brands, figure out what the diversification strategy is and start [moving in that direction].”
That could be selling on multiple platforms and/or sourcing goods or materials from multiple locations. “Get prepared for situations like these,” Chopra added.
Ananth Iyer, senior associate dean in the Krannert School and director of the Global Supply Chain Management Initiative at Purdue University, told the school’s magazine that exact advice in the spring of 2020.
“A company may have chosen one supplier, but many others would have bid for the contract. You have other people on your list who you haven’t contracted with but you know they’re certified; you know they’re high quality, but they just didn’t end up with the right price point, and they might be spread across the world,” Iyer said.
Chopra said to help minimize disruptions, brands should order early. Kaspien is already placing Q4 orders at this point. The other advice Chopra extolled was to take a more conservative approach to inventory ordering.
“Yes, you might run out of stock, you might miss some opportunity for revenue, but by and large, as long as you have a solid plan … you’d rather stay in stock with your plan rather than having [too much] inventory,” he said.
“We have taken a slightly more conservative approach to our plan in general,” Chopra added. “We have assumed in our plan that things will go slightly back to normal … and some of the demand from last year will come [back]. What could happen is we screwed up and demand is as good as last year and we are out of stock [of products]. But we would rather be out of stock [than be stuck with excess stock].”
During the pandemic, Kaspien’s scale helped its brands navigate because of its global supply chain connections, Chopra said.
“There is a lot of coordination that is required,” he said. “At Kaspien, we have the operations in place to manage the consolidation process for companies. But if you are by yourself, it’s hard.”
At the start of 2020, Kaspien had a goal of automating 85% of its orders, but that was quickly scrapped in favor of a more manual process.
“We pivoted very quickly and the first thing we did was we switched over from our data science models to manual ordering,” he said, calling it “old-school buying.” Chopra said balancing automation versus manual is always a challenge, and the unprecedented upheaval in the past year is making it more difficult to predict future demand, so increasing order automation will be a slow go in 2021.
“Yes, we will continue to refine our models, but you can’t be prepared for a Suez channel blockage, so you have to have a small team [to deploy and do it manually],” he said.
Finally, Chopra said brands need to be agile.
“Be ready to pivot and be ready to move in as many directions as possible,” he said. “I’ve worked with a lot of retailers and they are fixed in the ‘it’s my way or the highway’ [mindset], but they need to get out of it.”