Source: WellPath
Coronavirus increases demand and supply chain challenges for WellPath’s DTC business
COVID-19 has inexorably shaken up the retail world, with every aspect of the industry having to deal with new challenges. While many retailers are struggling with closed storefronts, furloughed employees and decreased sales, my company has been lucky enough to be in the unique position of having more demand for our wellness products. With higher demand, however, come new challenges of keeping up with all areas of the supply chain — everything from sourcing ingredients to production to fulfillment.
For us, specifically, it has been difficult to procure the raw materials for products. One of our main products is made from elderberry, and the global supply chain for elderberry is under extreme duress. We have seen everything slow down as we deal with export challenges and customs being overloaded. Many factories are shutting down entirely or partially. This includes not only plants that make the product but other overlooked aspects, like labels and bottles. Lastly, some fulfillment centers have been shut down because they are not deemed essential. In the case of Amazon.com, deliveries of some products have been prioritized based on perceived need, which has led to unpredictability in delivery.
With all this in mind, here’s how we’ve been able to navigate and try to stay a step ahead of the supply chain challenges we’ve faced.
First, we’ve made sure our supply chain has contingencies in place. We are operating under the assumption that every part of the supply chain is at risk, so we are making sure we have backups for supply, manufacturing and fulfillment partners.
For raw materials, I recommend planning ahead and prioritizing future inventory. If your business has enough capital to commit to meet continued demand for manufacturing and production, you should consider shoring up enough materials to produce extra inventory.
With many fulfillment centers, including Amazon’s, focusing on essential products, now is also the time to research additional distribution channels that will open up once the pandemic ends. Brands that plan ahead will be better positioned for recovery and future growth when that time comes.
Discussion Questions
DISCUSSION QUESTIONS: What do you think are the keys for consumer-direct brands and retailers to navigate supply chain challenges that have arisen with the coronavirus pandemic? What types of supply chain investments being made now do you think will pay the biggest dividends once the pandemic has passed?
Poll
BrainTrust
Ralph Jacobson
Global Retail & CPG Sales Strategist, IBM
Casey Golden
CEO, Luxlock
Now is the time for D2C companies to invest in supply chain technology. Many newer companies leave it for “later” but a streamlined supply chain can drive wins in 2020 and 2021.
Perhaps one of the longer term outcomes from the pandemic will be more vertical integration among retailers who are large enough to support such a plan. This means owning much (or all) of the process, from acquiring raw materials to the manufacturing, warehousing, transportation and then either to the store or directly to consumer. For example, in food retailing, many of bigger players will likely take more ownership in the growing and processing of both protein and vegetables. But it also means becoming less reliant upon non-U.S. sources of product. In hard goods, where Asia and Indonesia have such a big share of the manufacturing sourcing, this transition will take time, be painful and in all cases have an overall effect on the post-COVID global trade ecosystem. I also think that many retailers will have better supply chain contingency plans going forward. In the era of just-in-time inventory, a new mindset may be to have a safety stock of essential items held in waiting when the supply line is disrupted.
There are few ways to address this:
The tactical elements of the supply chain are being adapted as demand forecasting begins to settle down a bit. The main challenge is that demand spiked so unexpectedly a couple months ago, that the best-run logistics partners could not meet the demand… and in many cases are still struggling. Demand forecasting has to be leveraged as soon as possible, once this gets under control.
Even though taking care of yourself should have been part of one’s everyday regimen, I know a lot of people are now starting to take supplements to support good heath in large numbers. D2C companies should take the time now to invest in supply chain upgrades as this increase will remain constant after the pandemic is over.
One important priority for brands and retailers at this moment is to improve efficiencies and transparency within the supply chain. This is not a “nice to have” – it is a “must have” in order to succeed in the future. The consumer will demand it.
The most immediate step is to build a more agile supply chain, one that is not rooted in “single sources” for raw materials. This is, of course, much harder than it sounds. Next, you want to have transparency into your supply chain’s supply chain. Your Tier One suppliers may be fine, but they are dependent on their Tier One and Tier Two suppliers to stay fine. Next it is critical that supply chain technology be as up-to-date as possible. Finally there is the issue of distribution, which is a tough one because that’s the area where any direct-to-consumer (D2C) business generally exercises the least control. Any D2C business needs to radically rethink who may or may not be a potential supply chain partner and explore forming creative relationships with non-traditional partners. Combined, these kinds of investments — some lower in cost than others — will pay dividends for decades to come, pandemic or no pandemic.
On the one hand, assuming that every part of the supply chain could be at risk and creating contingencies needs to be the norm for all businesses. On the other hand, having systems in place to know the location of all inventory in near real time is essential to monitor demand. Then you know what is selling, when and if limits need to be placed on the amount customers can purchase at one time, and which contingency plans need to be used.