December 2022

Where do the goods customers order come from? In the past, U.S. stores have largely been stocked by supply chains that flow through the West Coast. However, the early days of the COVID-19 pandemic highlighted some of the weaknesses of the existing system.

Delays at ports have been some of the most significant and most persistent supply chain stories throughout the pandemic. While administrative efforts have helped clear the backlogs, shippers and the organizations that rely on them will remember what it felt like to have goods languishing at the Ports of Los Angeles and Long Beach.

Shipping organizations are realizing that port infrastructure represents a potential bottleneck in their operations — the question is what they will do about it.

Companies look east

The Wall Street Journal recently reported on some of the methods companies are using to diversify their supply chains and make themselves less vulnerable to congestion at ports. Namely, they are looking to East Coast ports such as The Port of New York And New Jersey.

The WSJ explained that companies such as Abercrombie & Fitch have begun to move a larger percentage of their goods through the East Coast. While the breakdown was previously 90% west and 10% east, the East Coast now accounts for 25% of the brand's imports.

The factors behind such decisions go beyond the desire to avoid further slowdowns in Southern California. The Panama Canal has widened in recent years, helping shipping to the East Coast, while companies have begun to import more goods from Europe, as opposed to relying so heavily on China.

Another company that has shifted east is Newell, the brand behind diverse products such as Sharpie markers and the items from Yankee Candle. The company, seeking to reach the eastern U.S., has opened a Pennsylvania distribution center and intended to add another in North Carolina.

Cranes unload cargo from a ship.Companies are rethinking their import shipping strategies.

Backlogs: Not just for the West Coast

Of course, moving operations away from the ports that suffered backlogs in 2022 is not a cure-all for shippers. As of mid-December 2022, the Port of Savannah in Georgia was struggling to clear a queue of its own, according to Maritime Executive.

With Savannah seeing the same increased activity as other major ports in 2022, it's perhaps inevitable that a backlog would take shape at the southern port. Diversifying points of entry for imports is an important way to add strength and resilience to supply chains, but organizations and port authorities will have to work together to make the new operations work.

Maritime Executive reported that administrators are hoping to solve the problem with a twofold approach. In the short term, the port will get ships moving as container volume normalizes, while in the long term, Savannah will add two large berths and additional container yards in areas now used for breakbulk.

Increased volume is a factor that affected ports around the U.S. in 2022, for better and for worse. Looking to 2023, shippers are naturally considering new ways to mitigate the disruption they felt throughout the year.

Maine's official nickname may be the Pine Tree State, but given its proximity to the coast and its abundance of sea life, it might as well be called the Lobster State. Employing an estimated 5,600 independent lobstermen, harvesting over 100 million pounds of the crustacean annually and contributing over $1 billion to the state's economy per year, according to industry data, the nation's lobster supply chain largely runs through Maine. 

Despite its prominence, one of America's largest grocery chains will stop buying lobster caught off Maine waters until further notice.

Whole Foods Market told Grocery Dive that it will "pause purchasing" Maine lobster upon receiving word that the Marine Stewardship Council has suspended the state's MSC certificate.

Named after the Marine Stewardship Council, MSC certification is a status symbol and a designation that tells buyers — such as grocers or fish markets — that fisheries support and implement sustainable fishing practices. To obtain this certification, fisheries must demonstrate how they're adhering to the sustainability protocols established by the United Nations Food and Agriculture Organization, such as by maintaining a clear chain of custody, guarding against overfishing and implementing other best practices.

But MRAG Americas, the body charged with monitoring fisheries' conformance with the MSC Fishery Standard, has stripped Maine of its certification due to a change in third-party verifications and ratings on the part of MSC as well as the Monterey Bay Aquarium Seafood Watch program.

In a statement obtained by Grocery Dive, a Whole Foods Market spokesperson said the suspension on buying from Maine is primarily due to the company's commitment to sustainability.

"[W]e only sell wild-caught seafood from fisheries that are certified by the Marine Stewardship Council (MSC) or rated either 'Green' or 'Yellow' by the MBA Seafood Watch program," the spokesperson emphasized. "These third-party verifications and ratings are critical to maintaining the integrity of our standards for all wild-caught seafood found in our seafood department."

The right whale is an endangered species, with only 350 believed to be remaining in the world.The right whale is an endangered species, with only 350 believed to be remaining.

Fishing practices called into question
The impetus for pulling Maine's certification, aside from the ratings change, appears to be related to certain fishing practices off the Gulf of Maine that may be compromising right whale migration patterns. An endangered species, the right whale is one of the rarest on Earth, with an estimated 350 left in existence, according to the National Oceanic and Atmospheric Administration. This past September, MRAG Americas determined from an investigation that Maine was no longer in compliance with the MSC Fishery Standard, which is designed to protect the species and other endangered ocean life. 

This marks the second time in two years that Maine has lost its certification and over a similar issue.

Maine officials, including Governor Janet Mills, recently expressed their objection to the suspension, noting that not a single right whale has died in the past 150 years due to Maine lobster gear or vessels.

"Despite this, the Marine Stewardship Council, with retailers following suit, wrongly and blindly decided to follow the recommendations of misguided environmental groups rather than science," Mills said in a statement, along with Maine Senators Susan Collins and Angus King.

Lawmakers went on to urge both Whole Foods Market and the MSC to reconsider their actions.

From personal protective equipment like N-95 face masks to vitally important medical devices like ventilators, product shortages were a common occurrence throughout the pandemic. While supply chain issues for some essentials have since been resolved, other shortages remain problematic for hospitals and physicians, as well as patients throughout the country. The devices that remain rare to this day include external defibrillators, chest drains, suction canisters and a number of dialysis products.

It appears that yet another medical device is quite scarce and it may be due to a deficiency of certain raw materials that are used in the manufacturing process.

The Food and Drug Administration maintains a regularly updated list of medical devices that are in limited quantity. Its latest entry concerns intra-aortic balloon pump devices, otherwise known as IABP. Made by the manufacturer Getinge, a long-standing medical technology company headquartered in Sweden, IABP devices are primarily used by cardiologists to help patients deal with health effects impacting the normal function of their hearts by providing temporary support to the ventricles. The ventricles serve as a muscular chamber and help pump blood from the heart out into the rest of the body's cells.

As with most medical devices, the IABP requires a variety of supplementary materials to be assembled and made ready for use. That's why in November, Getinge informed healthcare providers of how broader supply chain challenges were compromising its ability to produce items and meet orders.

"You should know that ongoing supply chain issues have significantly impacted our ability to build intra-aortic balloon pumps (IABPs), intra-aortic balloon catheters (IABs) and spare parts due to raw material shortages," wrote Jennifer Paradise, a Getinge product representative, in a letter obtained by Medtech Dive.

Supply chain issues are affecting the availability of heart-related medical devices.Supply chain issues are affecting the availability of heart-related medical devices.

Combination of factors plaguing production
While the letter doesn't state which specific raw material is compromising the manufacturer's ability to produce at a higher volume, it does cite other factors contributing to the issue. These include higher-than-normal demand for the device and the limited availability of a "component, part or accessory of the device." 

The missive also did not predict when Getinge would be able to ramp up production but did point out that it continues to fabricate the IABPs, just not at the pace it would like to in order to meet the growth in demand. The FDA, meanwhile, says that the shortage will persist into next year.

As for potential workarounds, Paradise noted that it would provide guidance for proper maintenance to ensure that IABPs will operate properly and avoid the potential of malfunction. The FDA made mention of what it's doing to improve the situation on its website, adding that it will continue to monitor the latest development and will report any updates on an as-needed basis.

This isn't the first time Getinge's proprietary device has made headlines. Last year, the FDA issued a recall for intra-aortic balloon pumps after being advised by the Swedish manufacturer that the battery could fail, compromising the safety and welfare of patients. At the time, the recall affected over 4,300 devices in the U.S. that were manufactured sometime between early March and late October 2021.

It's difficult to pinpoint the most important department when it comes to everything that goes on in the warehouse but a case can be made for fulfillment. During the pandemic, when lockdown measures created staffing shortages just as demand for consumer goods skyrocketed, fulfillment was overwhelmed with orders, creating shipping delays that persisted for months.

Automated fulfillment is helping to improve operations and right size inventories. Here is a brief breakdown of what automated fulfillment is, what businesses are using it for and the benefits of the strategy that have taken the related technology to new heights of utilization and popularity.

What is automated fulfillment?
As its title suggests, automated fulfillment refers to the implementation of technologies that automate fulfillment. When a warehouse receives an order from a customer, a multitude of actions take place for the desired item to be selected, handled, packaged, placed and shipped to the buyer. Instead of each of these processes being done manually, automated fulfillment leverages technology to perform them all faster, more accurately and with greater efficiency. Some of these technologies may include — but aren't limited to — robotics, conveyor belts, rollers, optimized sortation systems, pickers, mechanized arms and much more.

What companies are using automated fulfillment?
From Amazon to Walmart, e-commerce and big box retailers are among the most well-known users of automated fulfillment, each of them using the technology to varying degrees. Some organizations have dipped their toes in the automated fulfillment waters, testing some of the systems out first before investing in expansion.

A company that is in the midst of expanding its automated fulfillment network is Chewy, an e-commerce retailer specializing in pet supplies. After opening its first automated fulfillment center in Pennsylvania in late 2020 — the same year as the COVID-19 outbreak — Chewy's chief executive officer announced the company will grow it further, as reported by Supply Chain Dive.

Automated fulfillment resources help to hasten delivery while lowering costs.Automated fulfillment resources help to hasten delivery while lowering costs.

Speaking during a December earnings conference with investors, Chewy CEO Sumit Singh said the technology has proven particularly effective from a cost standpoint, noting outlay has diminished rather appreciably. In addition to its Archibald, Pennsylvania facility helping to reduce its expenses, Singh noted costs are also lower at Chewy's Reno, Nevada facility, which opened earlier this year. Filled volumes from there were roughly 20% cheaper relative to the company's non-automated network, Singh further explained.

"We're still ramping volume into the third fulfillment center, so there is incremental volume leverage that we expect to gain, and we're still continuing to scale our costs," Singh said.

As to the more recent expansion, Singh noted plans are underway to build two more automated fulfillment centers, with the first one scheduled to open as early as next year.

Here a few additional advantages of using automated order fulfillment as a product-based business owner:

Improve customer satisfaction
Businesses are constantly trying to up the ante when it comes to getting goods to customers faster, as much of their satisfaction hinges on speed of delivery. Automated fulfillment helps to get items out the door more quickly by doing in seconds what manual processes take minutes to perform.

Seamlessly respond to market shifts in customer demand
Underestimating demand proved to be a major supply chain dilemma for businesses during the pandemic. But through demand forecasting, a complimentary tool of automated fulfillment systems, your business can get a better sense of what demand will be like at any given time, allowing you to diminish, increase or maintain your inventory needs accordingly.

These are just a few of the reasons why investing in automated fulfillment can be a wise supply chain management decision. 

Amid rising mortgage rates triggered by the Federal Reserve's attempts to cool white-hot inflation, both home sales and housing starts have dwindled across the country. Indeed, existing-home sales in the U.S. have slipped for nine consecutive months now, according to the National Association of Realtors, and single-family home construction dipped by more than 6% in October, the National Association of Home Builders reported. That puts single-family home project activity 7% behind last year's pace through 10 months.

While the higher price of borrowing money is largely to blame for the sales decline, the drop in starts has also been influenced by how much more it's costing contractors to build. And it appears high prices for materials like concrete, drywall and cement will continue for the foreseeable future. 

According to the analysis of Turner & Townsend, a global real estate and infrastructure consultancy, residential building materials as a whole are expected to cost 7% more in 2023 than they did this year, Supply Chain Dive reported. They're also poised to climb again in 2024, but to a smaller degree, up 2.7%.

Michael Hardman, vice president of the United Kingdom-based real estate research firm, said that it's the recurrent nature of escalating prices for construction materials that is a major challenge for the industry's supply chain.

"[B]y 2024, we will have seen three years of dramatic price escalation," Hardman told Supply Chain Dive. "If projects — and compounding effect — are true, we will see material prices approximately 25% to 28% higher than they would have been by equivalence in 2020."

Builders have felt the effects of inflation, which has impeded home construction.Builders have felt the effects of inflation, which has impeded home construction.

Home affordability at its worst since 2012
These market factors have also contributed to ever-escalating home prices, even though demand among buyers has trailed off considerably. In October, for example, the median price among existing homes was $379,100, according to the National Association of Realtors, despite sales falling 5.9% that month. The year-over-year increase marked the 128th consecutive month in which selling prices rose among all housing types, single-family, condo and otherwise. It comes as no surprise that housing affordability has reached a decade-long low point, based on analysis done by the National Association of Home Builders.

For the past several years, lumber has been the primary building material experiencing price growth, influenced largely by shortages as well as tariffs. But now that the cost of lumber has come down, prices for other key materials are on the rise. These include substances that are vital for foundations, like cement and concrete. According to Linesight, prices for these materials were up a combined 14% during the third quarter.

Robert Dietz, chief economist at NAHB, said that as a result 2022 is on track to be one of the quietest times in recent memory for homebuilding activity.

This will be the first year since 2011 to post a calendar-year decline for single-family starts, Dietz warned. "We are forecasting additional declines for single-family construction in 2023, which means economic slowing will expand from the residential construction market into the rest of the economy."

Limited inventory, fueled by the steep cost of building, is keeping home prices in elevated territory and budget-minded buyers on the sidelines.

The vegetable responsible for giving salads, sandwiches and other common dishes their signature crunch is experiencing a supply chain crunch — and restaurateurs are warning customers it could crimp some of their menu offerings.

Due to a variety of environmental factors — such as drought, stifling temperatures and crop disease — lettuce availability has slipped, as growers have been hammered by uncooperative weather for the past couple of years. Indeed, in 2021 lettuce production fell 11% compared to the previous year, according to the United States Department of Agriculture. It isn't just one kind of lettuce, either — from romaine to bib to iceberg and more, the leafy green shortage is widespread. As a result, it's pushed prices northward, up almost 18% in October compared to 12 months earlier, USDA reported separately. This compares to a dip of 8% over the same period for fresh vegetables as a whole.

Since lettuce is a staple ingredient in a host of restaurant offerings, quick-serve entities have warned some of their customers about the lack of lettuce. Some of the fast-food chain franchises that have issued statements about the shortage include Taco Bell, Subway and Chick-fil-A. On its website, the eatery famous for its chicken sandwiches informs visitors that their menu selections "may be unavailable or prepared differently" for the foreseeable future, Parade noted.

Restaurants that specialize in lettuce, or for whom changing the vegetable would compromise quality or customer satisfaction, are issuing surcharges on lettuce, but informing buyers of their temporary policy through signage, Restaurant Business Online reported.

Iceberg and romaine lettuce growers were ravaged by inhospitable conditions in 2022.Iceberg and romaine lettuce growers were ravaged by inhospitable conditions in 2022.

Shortage blamed on extreme heat and blight
Major lettuce suppliers, meanwhile, are well aware of the lettuce crisis. Speaking to the issue during a quarterly earnings conference, Dole Chief Operating Officer Johan Linden attributed the problem to an unusually bad stretch for harvesting. For example, iceberg lettuce production is down 40%, which Linden said has been mainly due to extreme heat in states like California and Arizona, Supply Chain Dive reported.

Another contributor to the shortage is disease. As noted in Salinas Valley Agriculture, a publication produced by the Grower-Shipper Association of Central California, a virus called Pythium wilt has plagued growers' fields since 2015, becoming particularly pervasive in 2020 and persisting since. The disease, which causes lettuce to wilt and rot prematurely and is caused by water mold, primarily affects green leaf lettuces, as opposed to red leaf.

Impatiens Necrotic Orthotospovirus, otherwise known as INSV, has also ravaged growers and cut into their profits.

While food prices in general have experienced some of the biggest increases in prices fueled by inflation, the cost of lettuce has grown exponentially over the past several years. A box of iceberg lettuce on the open market cost $14 in 2019, according to Restaurant Business Online. Today, it's $63 per box, a near 400% increase. 

Suppliers remain confident that the lettuce deficit shouldn't last much longer, with Dole anticipating improvement within the first month of the new year. Prices may come down by then as well, depending on the degree to which supply normalizes and demand softens.

With crippling inflation taking its toll on Americans' budgets, consumers have been tightening their belts to save where they can. But they haven't let that belt tightening sap their holiday shopping appetite — and on Thanksgiving weekend, no less.

Over the five-day Thanksgiving holiday — running Thanksgiving Day to the following Monday — nearly 197 million U.S. consumers spent at least a portion of it shopping, according to newly released statistics from the National Retail Federation. Not only was that figure higher than last year — when inflation wasn't as pronounced — it was an all-time record, amounting to an estimated 76% of consumers. That's up from 70% in 2021.

Cyber Monday sales were particularly brisk, with an estimated 77 million individuals hitting the e-stores, NRF data showed. Combined with those in brick-and-mortar stores, the shopper total was just shy of 100 million.

The flurry of shopping activity comes as a surprise to some economic observers, especially given the degree to which inflation has occupied the nation's attention. According to a Gallup poll, approximately 1 in 5 Americans believe inflation is the biggest problem facing the United States, more than crime, climate change, border security or other common challenges respondents cite as important.

Matthew Shay, president and CEO of the National Retail Federation, noted that holiday shopping regulars and revelers got more creative with their spending to maximize their dollar's value.

"As inflationary pressures persist, consumers have responded by stretching their dollars in any way possible," Shay explained. "Retailers have responded accordingly, offering shoppers a season of buying convenience, matching sales and promotions across online and in-store channels to accommodate their customers at each interaction."

More Americans shopped for the holiday online, saving themselves on gas.More Americans shopped for the holiday online, saving on gas.

Buyers taking advantage of convenience shopping
In some respects, the growth in spending and shopping activity makes sense — particularly as it pertains to the uptick in Cyber Monday buying. With gas prices still uncomfortably high across the country — averaging more than $4 in several states — shoppers are turning to their laptops, desktops and mobile devices to shop, avoiding the drive to stores. In terms of actual spending, sales topped $11 billion, based on initial performance results reviewed by Adobe Analytics. That's a near 6% surge from 2021. At one point, online users were spending roughly $13 million per minute, Adobe revealed.

Additionally, retailers incentivized shoppers to log on by offering doorbusting deals, done in part to dwindle excess inventory.

Vivek Pandya, lead analyst at Adobe Digital Insights, noted that this strategy paid off — quite literally.

"With oversupply and a softening consumer spending environment, retailers made the right call this season to drive demand through heavy discounting," Pandya told Retail Dive. "It spurred online spending to levels that were higher than expected, and reinforced e-commerce as a major channel to drive volume and capture consumer interest."

Black Friday was also a strong day for retailers, surpassing Cyber Monday in consumer traffic. Over 87 million took to the stores on the day after Thanksgiving, according to the NRF's data. Almost 73 million leveraged Black Friday deals via online means.

Prior to the pandemic, just-in-time inventory — the supply chain management strategy of keeping "just enough" inventory in stock to satisfy expected demand — was considered conventional wisdom. But in the aftermath of COVID-19 and the product shortages that were omnipresent, organizations are reconsidering that erstwhile best practice. Indeed, according to a recent survey conducted by SAP, close to 66% of organizations are adopting a just-in-case approach to inventory and supply chain management.

What is just-in-case inventory?

At its essence, just-in-case inventory is the inverse of just-in-time. Instead of maintaining the bare essentials in terms of product offerings to fulfill sales goals or to avoid shelves emptying prematurely, just-in-case prioritizes having a surplus of inventory — "just in case" demand for merchandise exceeds supply. In short, it's an "everything and the kitchen sink" approach to inventory management.

What are the business benefits of just-in-case inventory strategies?

1. Increase competitiveness
When items are out of stock and customers are unable to purchase what they're looking for, it represents a missed sales opportunity. That's because buyers know that if they can't find a given product, they won't stop searching; they'll try to buy elsewhere — and will likely be successful. That lost sale may not be one-off instance either, if the alternative suppliers' good are of higher quality or sell for a more reasonable price.

Just-in-case inventory helps to keep loyal customers loyal by ensuring they'll come to you first for items they need to have, and can potentially get buyers to switch if their go-to supplier is experiencing sourcing issues.

An excess inventory strategy may be the new best practice for supply chain efficiency.An excess inventory strategy may be the new best practice for supply chain efficiency.

2. Add demand forecasting flexibility
Just-in-time inventory advocates laud this strategy for its cost savings since it lessens the risk of having to absorb the expense of buying excess product. But this approach can make demand forecasting more challenging since there is so little room for error between what is enough and what is too much for merchandise. Just-in-case leaves more wiggle room for demand forecasting since the strategy presupposes that demand will fall short of supply. Just-in-case inventory also makes planning simpler for other affiliate suppliers who have their own production costs to arrange.

3. Leverage bulk discount offering 
There's a reason why "buy one get one" offers are as popular as they are: Bulk buying saves money for consumers — and for businesses. It does so by allowing companies to make more efficient use of their resources, saving time on production processes and cutting costs associated with packaging and receiving.

Adopting a just-in-time inventory strategy also adds flexibility to how you go about selling your products. If you wind up selling substantially less than what you have in inventory, you can review what it will cost you to reduce the price of certain products while still turning a profit or make a BOGO offer of your own to stimulate buyer interest.

4. Avoid supply chain snags
While supply chains are operating more nimbly, the bottlenecks haven't entirely cleared. Close to 50% of respondents in the SAP survey said they anticipate more raw material shortages in 2023. Continually shoring up inventory can help you avoid production hitches when supply chain snags occur.