More than memes: The reality of the ocean supply chain delays

Analytics, visibility, and strategic planning are tangible first steps for organizations facing shifts in supply chain expectations.

Craig Russell

Craig Russell

Director Advisory, C&O Commercial, KPMG LLP

+1 313-230-3529

We’ve all seen it: photos of freighters anchored outside the Port of Los Angeles and memes about Christmas present delays. It can be easy for consumers to joke about these hold-ups, but for leaders facing bottlenecks, that frustration rises to the surface. Why does this delay exist, and what does it mean for your organization? And what are some tangible next steps you can take around logistics and distribution?

The reality is that there has been a paradigm shift around what and how we purchase as a society. As the pandemic changed our daily routines, it also changed our expectations as consumers.

  • E-commerce: Global e-commerce sales accelerated significantly from a Pre-pandemic projection for 2025 of $3.453 trillion. To a recent updated projection for the global e-commerce sales in 2021 to reach $4.921 trillion. This new 2021 projection is higher than the previous 2025 projection. This change occurring in the middle of a pandemic is significant in the sense that the over all infrastructure could not adjust at the same rate to support the increase. As example we’ve offloaded more containers in 2021 than in 2020 in the US ports, and significantly more than pre-COVID 2019. More trucks are on the road today, just as there’s more ocean shipping traffic on a daily, weekly, and monthly basis.
  • Labor and infrastructure: The labor shortage that we often talk about when we talk about shipping delays is not a failure to meet the 2021 growth projections. It’s actually an inconsistency between the unexpected growth of e-commerce—now at its 2025 projection—and labor, which did meet its 2021 projection. If labor had grown with the same unexpected acceleration, and if our national infrastructure had also met projected 2025 investments, then we might not be in the position that we are in today. That doesn’t mean labor force growth is inherently off-track—only comparatively, and to an unexpected and unprecedented e-commerce boom.
  • Expedited delivery expectations: How quickly do you as a consumer expect your purchases to arrive at your doorstep? Ship immediately, then arrive in three days? This is a cultural adjustment around delivery expectations—the way that the rise of fast shipment and delivery have become the norm rather than an exception. But with the kind of e-commerce growth we experienced in the last two years, and the inability of labor and infrastructure to keep pace, any minor delay from that three-day marker can feel so much worse. We’re accustomed to instant gratification. It used to be that we would order ahead of time for major holidays because of the possibility of delays; now, we’re so used to single-click purchases and fast deliveries that a one-week delay is a disappointment.

That’s why there’s no single scapegoat when it comes to shipping delays; they’re a combination of different economic factors and cultural expectations.

So what can you do? I’ve been helping companies increase their supply chain maturity for decades, and I’ve learned that, while the principles post pandemic may have stayed the same as they were before, advancements in technology and supply chain management have changed the landscape.

Here are three ways to improve your supply chain management amid today’s challenges:

  • Analytics: Dive into detailed modeling of economic contribution and the costs of complexity from new offerings and supply chain delivery models. These will create your historical baseline, metrics, and related key performance indicators.
    These models include:
  • Maturity assessments
  • Target operating models.
  • Visibility: Ensure that internal members and partners have end-to-end network visibility to understand specific aspects of the supply chain through real-time information. Combine a deep understanding of your network with the ability to proactively manage and make decisions around receiving, manufacturing, and distribution.
    Visibility tools include:
  • Logistics control towers
  • Supply chain visibility platforms.
  • Strategic planning: Between market shifts, geopolitical constraints, supply/demand imbalances, and consumer trends, you must continuously adapt to internal and external influences. Armed with analytics and visibility, you can begin to forecast and strategize in today’s ever-changing market.
    Tactics include:
  • Network optimization
  • Digitalization
  • Omni channel.

The sooner that analytics, visibility, and strategic planning are integrated into your supply chain practices, the better equipped your organization will be for the complicated logistics of recent, rapid e-commerce growth.

As you begin the journey, know you’re not alone: explore how KPMG can help your firm better utilize next-generation planning and data and analytics to better plan for unknowns and maximize shock absorbers.