First, it was COVID. Then trade tensions. Then winter storms and international power outages. Then ships stuck in canals and an unprecedented labor shortage.
All news became supply chain news in 2021, as the global economy looked to rebound and rebalance in the wake of the pandemic.
“At the beginning of the pandemic, the concern was in shifting the go-to-market strategy, learning to sell online, and finding a direct-to-consumer fulfillment solution,” Samantha Smith, Director of Revenue and Growth at UPS-backed startup Ware2Go told Hypepotamus. “Once merchants mastered e-commerce and marketplace sales, they resurfaced to find their supply was limited as the next wave of shutdowns halted manufacturing in China. They found that if they could get a replenishment order in, they would be paying hand over fist for containers and would face crippling delays at the ports.”
Supply chain issues have not only been pain points for small businesses, enterprises, and consumers, they have showcased the general inefficiencies in our global rail, air, cargo, and shipping spaces.
But these issues have also sparked new innovation and brought attention to the Southeast’s thriving supply chain and logistics startup ecosystem.
As companies gear up for the holiday season and a busy close to the year, combating supply chain issues, lack of inventory, and increasing freight costs are top of mind. We spoke with a few Southeast supply chain leaders to better understand the landscape and what businesses can expect as we round out 2021.
State of Southeast Supply Chain Innovation
“Everyone saw the headlines of unprecedented growth in the e-commerce industry in 2020,” added Smith. “Although the shift to e-commerce was one we had all been expecting and predicting, no one expected the ten years of growth that were crammed into three short months due to COVID-19 shutdowns. The effects of that rapid growth were felt all the way down the supply chain to the final mile.”
No doubt pandemic-induced supply chain stressors and e-commerce growth propelled some of the larger startup headlines of the year in the Southeast. Atlanta-based Stord cemented its unicorn status last month as companies looked for omnichannel fulfillment options. A focus on last-mile delivery helped hyperlocal delivery startup darling Roadie catch the eye of shipping giant UPS, leading to a major acquisition.
On the venture side, Engage portfolio company Verusen landed $8 million in Series A funding at the beginning of the year to help materials companies better predict inventory levels, while startups focused on e-commerce and warehousing, like Arkansas-based Ox and Atlanta-based Saltbox, also raised impressive venture rounds.
But recent supply chain challenges also highlighted the traditional gaps found in logistics innovation. “Supply chain technologies have really failed their users and created a pretty poor customer experience… and that’s where we are in the situation where no one knows where to [get supplies] quickly enough,” Verusen CEO Paul Noble told Hypepotamus. “Leaders everywhere are in a relative form of chaos.”
A report out this week by Verusen suggests that a key tension between cost reduction and operational risk reduction is continuing throughout the industry, making it difficult for companies to get the product and materials they need.
“Whereas lean and just-in-time supply chain dominated everything leading up to, Q1 of 2020, Agility is now the priority….we’re seeing companies spend more money on inventory to help build trust. Everyone wants to know ‘what I need, where I need it, and when I need it,” Noble added.
“Leading up to the pandemic, everything was lean, and [companies] would be okay losing sales because you can save so much working capital by not inventorying. As things became less predictable off of historicals and whichever one planned off with historicals and still does very much from a, from an overall capacity. They’ve started saying we can’t take that risk.”
This has led upwards of 43% of materials management companies to intentionally inflate their inventories to protect against further disruptions and build customer trust.
“If 2020 showed us anything, it’s that we can’t predict the future,” added Smith. Her experience at Ware2Go has given her unique insights into how businesses of all sizes can prepare for supply chain uncertainties moving forward.
A focus on agility, not leanness, will help businesses navigate the busy holiday season.
“Merchants simply can’t hedge all of their bets on the next “big thing” in the supply chain. They must prioritize resilience and agility with an on-demand, asset-light, technology-focused supply chain solution. They should be having serious discussions about defining their risk tolerance on the procurement side and must have a fulfillment partner in place that can pivot with them when the next big hurdle does come.”
That focus on agility has led 63% of merchants to buy holiday supplies by August, according to data collected by Ware2Go. 44% of merchants also planned to order more inventory than previous years, whether because they are bullish on consumer spending habits or fear potential backlog on key items.
Smith added that merchants who have not yet ordered for the holiday likely will need to find alternative supply options to round out the rest of the year — or even start re-thinking their product catalog to meet consumer demand.
That demand, she adds, is driven largely by how accustomed consumers have become to 2-day shipping.
A recent Ware2Go consumer survey suggests 42% of all consumers expect 2-day shipping to be available for all things ordered online.
“I think most merchants have learned two important lessons over the past 18 months: that the final mile should not be an afterthought and that supply chain strategy should be flexible enough to adapt to consumer behaviors. At the end of the day, consumer behavior is what drives revenue. You can devote plenty of time and energy building efficiencies into your supply chain, but if those efficiencies aren’t driving top-line revenue growth, they won’t drive any real value for your business,” she added.