Supply chain woes this time last year caused shortages of everything from basic necessities to that popular toy you wanted to give to your son or daughter, teaching American retailers some hard, short-term lessons on supply chain management. They started working early in 2022 to prevent another rash of holiday inventory shortages. As a result, they may have overproduced.

To give consumers the same range of product choices in 2023 that we have now, materials, products and other supplies need to be produced and sold closer to the markets they serve. In America, there needs to be more on-shoring of manufacturing capacity and decreased reliance on unreliable trade partners. Blue Planet Studio/Shutterstock.com

ABOUT THE AUTHORS

Robert Handfield is executive director of the Supply Chain Resource Cooperative at NC State University’s Poole College of Management. Timothy Kraft is an associate professor of operations and supply chain management and associate research director of Supply Chain Resource Cooperative at the Poole College of Management. Both are members of the Institute for Operations Research and the Management Sciences.

Quite simply, they started making and stocking the consumer goods and products that they knew most consumers would demand this holiday season. They did this as the economy hit turbulence, with high inflation, rising energy costs and tenuous employment numbers.

When you shop online or go to the mall this holiday season, you’re more likely to find what you want, where you want it, in the quantities you want this holiday season.

Are we out of the woods? We are not.

You can’t fix the fundamental problems America and the world has faced in recent years simply by stocking up or building bigger and more warehouses. There needs to be a comprehensive and more sophisticated set of solutions.

These solutions need to take into account the geopolitical climate in the producing regions: Asia for consumer electronics and semiconductors; South America for raw materials and food products; Africa for rare earth minerals, and North America for food, agriculture, pharmaceuticals, chemicals, energy supplies and more.

For example, because of droughts in countries like Brazil, sugar was in shorter supply this year. This has led to an annual increase in the cost of candy by 13% or more.

As tensions continue to rise in China and the surrounding region, the future reliability of Taiwan as a producer of semiconductors is in question. Semiconductors are found in a vast number of consumer products, from computers and smartphones to vehicles and kitchen appliances.

These factors and others like them will continue to affect the supply chain. Even if retailers take the same precautions in 2023, there are no guarantees that a year from now, you’ll have the range of product choices you do now.

The entire supply chain remains an issue. Manufacturers, retailers and logistics companies need better visibility on when and where supplies are at any given point in the process, along with cost and quantity. This means better systems and technologies that cover the supply chain from end to end and that are seamless across company and geographic boundaries.

In some cases, the long-standing commitment companies have made to just-in-time supply chain management may need to be revisited. Just-in-time is reliant on a predictable and stable supply chain at all times. We know this is no longer the case.

Materials, products and other supplies need to be produced and sold closer to the markets they serve. In America, there needs to be more on-shoring of manufacturing capacity and decreased reliance on unreliable trade partners. In cases where the materials or products that are needed can’t be found in North America, policies of prioritizing trade arrangements on the basis of friendly trading partners over sourcing on the basis of lowest cost have to take precedence.

And, of course, the government plays a role. One of the more promising developments on this front in 2022 was passage of the CHIPS and Science Act, which will enable the U.S. to produce more and higher-quality semiconductors on domestic soil, reducing the reliance on China and Taiwan. We need to do more of this.

In the meanwhile, the good news for holiday shoppers is that this year, you’re more likely to find what you want, possibly at a discount. That will make this holiday season brighter and a little better for the pocketbook. But let’s not allow this to cause us to take our eyes off of the need to comprehensively fix our supply chain challenges.