Supply Chain Concerns Rise As Focus Shifts To Holiday Shopping

For nearly 18 months, supply chain issues have been front and center for retailers — and despite millions of dollars invested to boost overseas manufacturing and to alleviate shipping congestion, the spread of COVID-19 and its variants continue to wreak havoc as retailers prepare for the holiday shopping season.

Jonathan Gold, vice president for supply chain and customs policy for the National Retail Federation (NRF), said it’s likely that these issues could remain a challenge as the holidays approach. Though consumers are busy stocking up for a return to the classroom and college, retailers are increasingly focused on making sure they can meet the looming demand of an extended holiday shopping season.

Last month, Salesforce projected that logistical challenges could pose a $223 billion retail headwind in the second half of the year, with manufacturers adding $12 billion due to the continued risk of COVID-19, stores adding $48 billion because of a severe shortage of employees, and logistics companies adding $163 billion to compensate for a shortage of shipping containers and capacity on ships.

Read more: Retailers Set For Another Unprecedented Holiday Season

Ben Hackett, the founder of international trade consultancy Hackett Associates, said last week that part of the problem is the strain of the U.S. economic expansion, which is putting “considerable pressure on the logistics supply chain.”

“We’re seeing a lack of shipping capacity combined with port congestion as vessels line up to discharge goods from both Asia and Europe,” Hackett said in a statement, noting that delays are beginning to stretch landside as port terminals struggle with a shortage of space. “This part of the recovery is not a pretty sight, and blame is being spread like butter,” Hackett added.

Some companies such as Amazon and Walmart have prebought shipping containers ahead of the holiday season, and Home Depot is renting its own cargo ships. “Retailers are really starting to get scrappy, really trying to get creative,” noted Rob Garf, vice president and general manager of retail at Salesforce.

Children’s apparel retailer Carter’s, for example, is spending “several years’ worth of air freight” because of delays in production, Chief Financial Officer Richard Westenberger said in July. “The increases that we’re seeing in ocean-going freight, those may persist with us for a while, certainly into 2022,” he told analysts and investors on a conference call.

Looking for Labor 

A major part of the issue for both retailers and logistics companies is finding enough people to work. Since February 2020, employment in the retail trade is down 270,000. The transportation and warehousing sectors have for the most part recovered the 575,000 jobs lost during the February-to-April 2020 recession caused by COVID-19, with warehousing and storage companies adding nearly 11,000 jobs in July.

Still, as of June — per the latest available data from the U.S. Bureau of Labor Statistics — 1.2 million retail jobs remain unfilled, as do 460,000 transportation, warehousing and utilities jobs.

Walmart is reportedly offering its warehouse workers weekly bonuses for putting off vacations this month, as the company’s 190 distribution facilities see a high volume of activity in preparation for the holidays. Depending on location and job type, bonuses range from $200 per week to $500 per week.

Companies are also focused on enticing workers to the retail frontlines. Target, for example, last week partnered with education and upskilling platform Guild Education to provide debt-free education assistance to employees; Walmart made a similar move last month, saying it will pay 100 percent of college tuition and books through its Live Better U program.

CVS Health is also raising its hourly minimum wage to $15 per hour and removing education requirements for the recruitment of entry-level employees.

See: CVS Lifts Employees’ Hourly Pay To Combat Labor Shortage

“Obviously it’s a tight labor market, and we’re paying attention,” CEO Karen Lynch told analysts and investors on CVS’ quarterly earnings call. “We’ve got a lot of hiring to do to support growth, and we see pressure, but we’ve been managing through it.”