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Open Letter from Casey Adams: COVID-19 Impact on Supply Chains & Mitigation Strategies

To our valued customers, thank you for allowing Visible SCM to be your supply chain partner during these uncertain times. As your partner, we feel it is important to keep you informed of how the COVID-19 pandemic is reshaping the logistics landscape, from changes in carrier policies to the rapid growth of ecommerce. We have also compiled strategies to help you strengthen your supply chain, mitigate risk and deliver a positive experience to your customers with the full support and commitment of our team.

And to all of you who have undoubtedly experienced the unprecedented impact the pandemic has had on the global supply chain, please allow me to explain what has happened, where we are now and where we go from here.

– Casey Adams, President of Visible Supply Chain Management

 

Pre-COVID Conditions

Prior to the COVID-19 pandemic hitting the United States, the year started off largely as predicted. January shipments consisted primarily of peak season clear-outs, holiday shopping returns and orders from New Year’s sales, with weather being the only major expected cause of shipping delays. Shippers had just experienced the standard General Rate Increase imposed by carriers annually, and no Peak Season Surcharges were in effect for small parcel shipping. Carriers offered money-back guarantees or guaranteed service refunds on shipments delivered later than their commitment time.

 

Early COVID-19 Impact on Transportation & Logistics

In late January and into February, news came that China extended their Lunar New Year holiday due to the coronavirus outbreak. In March, COVID-19 was declared a pandemic. Transportation and Logistics was identified as a critical infrastructure sector that should continue to operate, and workers in this sector were deemed essential. And in the wake of these events, global supply chains around the world were completely upended.

Between the shutdowns, immense surge in demand for essential items and workers falling ill, the pandemic has had dramatic ripple effects across all aspects of logistics, creating massive disruptions and drastic capacity constraints. Airports experienced congestion, ocean carriers announced blank sailings and stores struggled to keep essential products on their shelves.

Here is a high-level look at how the pandemic affected transportation and logistics:

  • Thousands of boxes piled up at ports like Shanghai and Ningbo as truck drivers, crane operators and other workers contracted the virus or were quarantined.
  • As stores across the U.S. shut their doors and stay-at-home orders were implemented, consumer demand collapsed. Ocean carriers blanked (cancelled) record amounts of capacity, and businesses tried to slow their supply chains by canceling or delaying overseas orders.
  • Air cargo became one of the most volatile shipping modes of the year. Airfreight rates fluctuated due to canceled passenger flights, a significant decrease in capacity and the rush to ship personal protective equipment (PPE).
  • Warehousing companies added thousands of new hires to keep up with demand.
  • Trucking capacity tightened as retailers and manufacturers hustled to replenish stores and distribution centers cleaned out by shoppers stockpiling food and sanitizing supplies; drivers faced new restrictions at receiving docks if they had been in states considered coronavirus hot zones.

 

The Shift to Ecommerce

COVID-19 accelerated the growth of ecommerce significantly. Business-to-consumer deliveries skyrocketed as brick-and-mortar stores closed their doors and people began staying at and working from their homes.

Online sales of essential items like cleaning supplies, toilet paper and groceries spiked, and businesses pivoted to adopt models like click-and-collect curbside pickup, allowing shoppers to collect their purchases without leaving their cars. By April, essential categories and some non-essential categories were struggling to keep up with demand.

Ecommerce sales also rose in a category referred to as “new essentials”—products like office supplies, exercise gear, housewares, home improvement-related items, cosmetics and toys/hobby supplies—that make staying home and working from home more comfortable.

According to Adobe Analytics, online sales grew more slowly in July than in June but were still up 55% compared with July 2019, and the holiday season is on the horizon. While increased demand is a good problem for most businesses to have, the rapid ecommerce adoption has caused fulfillment bottlenecks, and carriers continue to experience severe capacity constraints and other challenges.

 

Carrier Impact and Response

Since the pandemic started, carriers have communicated disruptions in domestic and international supply chains. Cleaning times at hubs were extended, last-mile deliveries reached peak-season volumes that carriers were unprepared for and workers contracting the virus led to staffing issues. As a result of the demand increase and added expenses, carriers have taken measures such as:

  • Indefinite suspension of service guarantees, guaranteed service refunds and money-back guarantees
  • Implementation of Peak Season Surcharges on both domestic and international shipments, which typically does not occur until the traditional peak season (end of November through December)
  • Volume restrictions
    • Capped number of trailers available for pickups
    • Implementation of new efficiency guidelines (e.g., cutting overtime)
    • Turning away additional volume or new shipper volume
  • Imposing surcharges for new volume
  • Announcing temporary price increase on commercial parcels (USPS, effective Oct. 18 through Dec. 27)

On-time performance for the major national carriers has fallen, largely due to the increase in parcel volume. Delays and extended transit times are now the norm, as illustrated by the graphs below that show the increase in transit times in July compared with earlier this year.

 

% of Shipments > 7 Days in Transit

 

% of Packages Delivered by Transit Days and Month

 

How Your Supply Chain Choices Are Impacting Your Outcomes

Online shoppers want to be in control of their order delivery options, and supply chain managers want the control to ensure these delivery expectations are met. Although the pandemic has served as a reminder that we cannot control everything, it is important to remember that you have access to options through Visible to help you deliver the best possible service to your customers.

 

Online Shopper Expectations

Online shoppers have high expectations for information and service. Prior to purchasing an item online, shoppers want to know what their total cost will be (including taxes and shipping), where the seller is located and as much about the product as possible. They do their research, like reading return policies and product reviews.

In addition to information, online shoppers want control over their delivery day, time and location, and they want to own the decision between shipping cost and speed. In fact, sellers find that providing a balance between cost and choice creates the best shopping experience. While some shoppers opt for a slower, less expensive delivery option, others will pay extra to get an order delivered more quickly.

 

Service Level Options

Visible offers various service level options to help shippers meet their clients’ expectations. While some options are costlier than others, they present a lower risk in terms of delivery and service. The chart below provides an overview of carrier services and their associated cost and risk.

 

How to Improve the Customer Experience—And How Visible Can Help

As your supply chain partner, we want to ensure we are doing everything we can to support your business. Our team of experts has put together a list of strategies and options to help you mitigate the impact of COVID-19 and deliver the best possible experience to your customers.

  1. Communicate with your clients to manage delivery time expectations. We know that your priority, like ours, is to deliver outstanding service to your clients, which means avoiding surprises. One way to accomplish this is by proactively addressing and being transparent about the current situation and what customers can realistically expect in terms of delivery. While carriers are working to resolve delivery issues and minimize disruption, consumers should be aware that transit times may be longer than normal. Sharing the possibility of delivery delays is a good way to manage expectations, build trust and earn customer loyalty. A few ways to accomplish this:
    • Address known issues. Add a banner to your home page or a note within the shopping cart letting customers know your company is experiencing higher than average order volume, which may result in delays
    • Add a note to transactional emails, such as order confirmations and shipping confirmation emails
    • Set up emails to let customers know a delayed order is still on its way

    Visible is committed to supporting these efforts by ensuring tracking information is available and that clients have visibility throughout the life of each order.

  2. Build a multi-carrier strategy. Having options helps mitigate risk. Maintaining carrier diversity is a great way to get around capped volume and capacity constraints. Plus, splitting volume between carriers can help avoid the surcharges that apply to shippers who send a certain number of parcels per week. Visible has an extensive network of reliable partners to support clients’ multi-carrier strategies.
  3. Use multiple fulfillment centers to mitigate cost and improve transit times. There are several advantages to having strategically located fulfillment centers, which benefit both you and your customers. First, it improves transit time by bringing the supply chain closer to customers. Second, with inventory stored at more than one location, product can be shipped from the location closest to the consumer and reach them faster without incurring expedited delivery fees. Third, having distribution centers across the country gives you options if a facility shuts down for several days in the event of a crisis, such as a coronavirus outbreak.
  4. Optimize your packaging. Packaging doesn’t just protect products. It reinforces your brand and affects the customer’s overall experience. Consider evaluating whether you are using the right materials—and the right amount of materials—for maximum efficiency. Reducing the size/weight of your packaging and eliminating excess materials can create savings and allow more orders to get loaded for delivery.
  5. Take advantage of technology. Visible’s systems and processes work together seamlessly and efficiently to deliver optimal service to you and your customers. We optimize clients’ shipping processes using proprietary technology with high levels of automation and full transparency. Our scan and pack verification system adds an extra layer of accuracy and quality control to our fulfillment process, ensuring the right products get delivered to the right place as timely as possible. In addition to integrating with clients’ systems for efficient data transmission, Visible provides tracking information through its 24/7 customer web portal and customized reports.

 

Looking Ahead

Although COVID-19 has created supply chain disruptions on a global scale, it has also created opportunity. Companies are reevaluating their supply chains, finding ways to increase resilience and efficiency and build customer loyalty. Visible clients are equipped with options and a dedicated partner for support every step of the way, from strategy development to execution.

We appreciate your business and are committed to helping you deliver the best possible service to your clients. Please contact your account representative if you are interested in exploring service level options or fulfillment strategies. We are here to help.

 

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