Logistics is facing a very special challenge during the Christmas season. To ensure that the Christmas magic is upheld, gifts have a special significance in almost all families. This year in particular, however, Christmas brings home to us that supply chains that we thought were secure are less stable, raw materials and intermediate products are subject to strong price fluctuations, and the dependency on supply chain partners can be enormously high.
Will all the gifts that are high on our children’s wish list be under the tree this year? We don’t know. The long-awaited presents for which we are rewarded with shining eyes and heart-warming smiles usually have a long way to go. Since presents are unfortunately not made in the Secret Santa workshop after all, and Santa Claus does not deliver all the gifts in one night by reindeer sleigh, we are particularly in demand in logistics to provide the right goods at the right time in the right place.
Will there be a Christmas tree despite the shortage of timber?
We can hardly imagine Christmas without a Christmas tree. The most popular conifer in our living rooms is and remains the Nordmann fir. Germany itself cannot satisfy the demand of this Christmas tree and has been importing a large part of the Nordmann fir for years. Many raw material prices have become very expensive this year and especially the shortage of timber has gained our attention. First the shortage hit the construction industry, but now many other industries are also reporting critical inventory levels and indefinite delivery times due to the raw material crisis.
While safety buffers in the warehouse have been increasingly reduced in recent years for cost reasons, procurement logistics in many companies are under observation. Procurement prices, transport and storage costs are the adjusting screws with which manufacturers are now trying to secure production and delivery promises.
For manufacturing companies in the Christmas business, it will be particularly important in the future to keep an eye on market prices and availability and to prevent impending shortages of raw materials with safety stocks. After all, the Christmas elves have been showing us how it’s done since the beginning of time, producing the most wonderful gifts with what they find.
Will unstable supply chains affect gift-giving this year?
It remains exciting to see whether the gifts at the top of our children’s wish lists will be under the tree this year. Many retailers had already warned in the fall that many a gift might simply not be available for Christmas shopping. Global supply chains that are out of sync are to blame. Many of them have not proven resilient enough.
Initially, border closures in Europe have had an impact, followed by temporary plant closures and temporary labor shortages. The triggers have had a domino effect on many sectors. The logistics industry had to adapt to the new circumstances and there has been a change and reduction in the flow of goods, which continues to this day.
Let’s look at the tech industry: no game console, no cell phone without microchips. Both are popular wishes for children and young people at Christmas and here the demand can certainly not be fully met.
Supply bottlenecks, the shortage of raw materials and the resulting price increases have long since triggered a location discussion that extends far beyond Christmas.
he large number of participants in the supply chain – up to 25 in number in some cases – makes it so difficult to maintain smooth operations – even more so across several different modes of transport up to the last mile.
The question is whether supply chain stability will be more important than the cost argument in the future. A shift in thinking towards local production sites and the promotion of recycling will keep us busy in the coming years in order to cut Europe’s “Chinese umbilical cord”.
And who knows, maybe there will be some more homemade gifts under the Christmas trees this year – that would be nice too, wouldn’t it?
How do the presents get from A to B?
Today, four out of five toys are manufactured in China and shipped by container. Now these in particular are not available everywhere in sufficient numbers, however. It’s true that we’ve been seeing an imbalance for many years, with boxes often being shipped full from Asia to Europe or America and then having to be returned empty. But even today, ships are often waiting in front of clogged ports, still working through pandemic-related deferred workloads.
This is particularly noticeable in the toy industry, which does not sell evenly throughout the year. In addition, the demands of the recipients of goods have increased enormously. Orders are becoming increasingly small, expectations of planning accuracy are higher, and expected delivery times are becoming shorter. There are even signs of a trend toward goods recipients increasingly wanting to plan shipments themselves. In this way, they retain the decision-making power over transport routes and can exert influence if the worst comes to the worst.
Logistics service providers are currently facing major challenges in planning the circulation of loading equipment. Freight rates in maritime transport have recently risen sharply. As a result, the share of logistics costs in the product is increasing. It will be interesting to see to what extent the price increase will be reflected in the end product and how “Santa Claus” can cover his increased costs.
Does Santa need an end-2-end perspective?
How can Santa’s many hurdles this year be transferred to the global business world?
To meet the many challenges, it is certainly not enough to simply analyze one’s own processes and improve them where necessary. In most cases, the root cause is a lack of collaboration or information.
Supply chain transparency, information sharing and collaboration along the supply chain are essential to address such issues in the future. The key is to understand supply chain processes holistically. One basis for collaboration, i.e., the exchange of process-relevant information such as delivery quantities, transport status and deadlines, is digitalization. This is the only way to identify bottlenecks and implement early warning systems. In this way, transparency can be created and it is easier to respond to disruptions in the supply chain.
In the process, boundaries must be overcome, be it cultural differences, system interfaces or barriers in the minds of the disciplines involved, such as production, warehousing and transport. Only if everyone pulls together and keeps the common goal of a resilient, multi-stage supply chain in mind will we be better able to deal with crises in the future – so that Christmas 2022 will hopefully run more smoothly again.
Merry Christmas from leogistics
We hope that, despite everything, you can celebrate a Merry Christmas with your loved ones. And if there is an alternative gift or a voucher under the tree here and there, this will certainly not stand in the way of a contemplative celebration.
We are very much looking forward to meeting your individual challenges in the field of logistics together with you in the future. Have a good New Year!
Your leogistics team