How to Succeed in a World Gone Supply Chain and Logistics Crazy!
by Bonnie Janzen
How can your organization manage the craziness in this world, given all the supply chain and logistics challenges? It seems like nearly everything has been impacted, from lumber and chip shortages, to chicken and ketchup wars. So how is a business supposed to succeed in the midst of all this chaos?When you get beyond one crisis, there appears to be three more right behind it!
Almost like a “perfect storm,” many of our clients are experiencing all-time demand peaks while simultaneously being handed historic supply chain shortages, as well as logistical complications. The demand peaks have been driven by COVID-19 lockdowns, layoffs, at-home work, remote learning and panic buying; in addition to the various ways that consumers have attempted to establish a safe environment, some normalcy, and some fun family time together.
The supply chain challenges are driven by raw materials being completely unavailable (even from various countries); and even if you can find the materials, the costs are skyrocketing. This goes beyond the well-known computer chip shortage. Speaking of which, because many products are considered “smart” and require sophisticated technology for our homes, autos, and personal electronics, the computer chip shortage has impacted many companies. Frequently, these products require components from multiple countries that are assembled and shipped to showrooms or distribution centers, and then on to customers. In fact, General Motors announced it would temporarily close six North American factories in early September 2021 due to the computer chip shortage.
Lumber is another commodity currently in short supply. If you happen to be in the market for a home, or are renovating a home, you know about the lumber shortage. There has been a massive sevenfold gain in costs from its lowest point in early April 2020. That's significant because lumber is the most substantial product that home builders need. In another aspect of the economy, there are the “chicken wars” between KFC, Wingstop, and Buffalo Wild Wings, all of whom are paying steep prices for chicken. There are shortages of ketchup; in particular, the ketchup packets given out in drive-thru and take-out orders. Consequently, Heinz recently announced "a 25% increase in production in the U.S., totaling 12 billion ketchup packets a year."
In addition, ports on most continents are backed up for weeks, while many ships, trains, and trucks are overbooked and in the wrong place and at the wrong time. There are also trucking and air cargo challenges once companies get through the supply chain challenges. Trucking capacity has been dramatically reduced since the start of the pandemic because many of these companies simply closed their doors due to economic hardships.
The global air cargo sector has been affected and is flying planes at almost 90% capacity, a record high, as recently reported by The Wall Street Journal. The trick is to deliver goods to consumers who appear willing to spend and to manufacturers who are needing parts. Flying goods by plane is the last and most expensive option for many manufacturers and retailers who are struggling with seaports closed by the pandemic, as well as labor shortages. As a result, the share of global airline industry revenue for freight traffic has now doubled, compared to pre-pandemic levels.
Given all of these outside “unusual demands and supply chain constraints” on business, over-delivering on the customer experience can really pay off. Here are a few ideas to help you surprise and delight your customers during these times.
- Pricing Research to optimize pricing for the products you have been able to deliver to customers is very important. It is common for manufacturers and retailers to increase prices to offset some of these supply chain and logistical challenges, but the trick is how to implement some increases without alienating customers. We typically recommend a trade-off analysis, such as a choice modeling survey with a realistic competitive set. This is important because you can simulate the expected price increases from competitors also. Respondents make purchase selections across several survey “screens or scenarios” which include your products and competitive products. The methodology provides an understanding of price elasticities and preferences for brands and product features relative to the others. A simulator is developed, allowing you to see the impact of pricing changes beyond the day the research is conducted.
- Product Testing can help you and your R&D team if you have to utilize new ingredient suppliers or component manufacturers because either your usual suppliers are unavailable, or they are unable to get your supplies in time to meet the demands of customers. When you find yourself switching suppliers, but you would like to ensure product quality, product testing is your best tool for doing so. It can also be utilized to help understand the impact of packaging changes (which can also be driven by a need to reduce costs per product) on perceived product performance as well as many other aspects of your product. Another aspect of consumer behavior that the pandemic has fueled is frequent switching between brands due to out-of-stocks. So, if your previously loyal customers have tried several competitive brands in the past year or two, this is the perfect time to ensure your product performs as well as you believe it does versus the competitors in a head-to-head monadic product test (typically done via a home-use test if the product is easily shipped and used in consumers’ homes).
- Qualitative Depth Interviews conducted with your most important customers (your largest or longest-served customers) will help you understand how these new supply chain and logistics challenges are affecting them specifically. This works well if you are a B2B or B2C company. Then, you can be prepared to address these issues with messages that are more relevant to their struggles and with solutions that would be most helpful. This is something your team could do themselves, or you could hire an outside consulting or insights firm to assist you. An outside firm would provide more objectivity and can offer some anonymity that your internal team cannot. Either way, your internal team or an outside team can deliver learning to improve your processes and ensure that customers are least amount possible by these supply chain and logistics challenges.
- Innovation around both new product development/new service development, as well as messaging, could be a very important next step once these issues are identified in the qualitative research. Your business may already have solutions to address these customer problems, but if there are questions about what might be most helpful or if there’s a lack of ideas overall, innovation and ideation with your internal team, as well as with customers and potential customers, will lead you to highly effective ideas that will turn the business around. It will also lead you to highly effective ideas that could minimize the downside risk to your business as you work through these supply chain and logistics issues. This might also include specific messages from your organization and who should be the person/entity to deliver them to the company (if B2B organization). Once you have developed some ideas to help your customers during these supply chain and logistical challenges, you can identify the best method for communicating with them. Should it be by app, email, phone, or all of the above? It is important to find the messaging that resonates best with your target audience, and to communicate through platforms where your messaging will be heard.
In summary, you can conduct pricing research, product testing, qualitative depth interviews, and innovation work around new products/services and messaging for your customers. Finding ways to surprise and delight your customers, even in these supply chain and logistically challenging times, will pay off. Also, we would love to hear your ideas about how to use customer insights, innovation, and analytics to improve business despite your challenges, if you would like to share.
Here’s hoping your supply chain and logistics are running more smoothly in the near future and that you can continue to surprise and delight your customers!
About the Author
Bonnie Janzen (firstname.lastname@example.org) is an Executive Vice President at Decision Analyst. You may contact her at either 1-800-262-5974 or 1-817-640-6166.
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