Supply chain disruptions are a top concern of U.S. retailers as they enter the 2022 holiday season, a new survey from Coupa Software, a provider of cloud-based spend-optimization software, suggests. Nearly all retailers (98%) surveyed said they expect supply chain disruptions to continue during the 2022 holiday season, while 88% predicted they will worsen. As a result, 95% said they believe they will not be able to fulfill consumers’ holiday needs this holiday season.
Supply chain concerns also are impacting traditional holiday sales events. The majority of retailers — 90% — said they plan to offer fewer Black Friday and/or Cyber Monday deals than they did in 2021, with 56% citing supply chain concerns as the primary reason, Coupa said.
One of retailers’ supply chain disruption-related concerns is the financial health of their suppliers. In fact, nine in 10 retailers that experienced supply chain disruptions in 2022 said they are concerned one or more of their company's suppliers will shut down, Coupa said. That’s a 61% increase from those who expressed such concern in 2021.
Supply chain snarls and demand swings are other disruption-related worries for retailers this year. Many retailers are facing inventory issues as a result of seasonal merchandise arriving late and shifts toward "just-in-case" inventories, Coupa said. These issues come on top of a slowdown in consumer demand due to the current inflationary economic environment. As a result, 90% of retailers said they have excess inventory, but 88% said they are already experiencing out-of-stocks on key holiday items.
"Seemingly overnight, relentless shortages are flipping to inventory surpluses in certain categories,” said Madhav Durbha, Ph.D., vice president of supply chain strategy at Coupa. “This is further complicating retailers’ ability to orient their supply chains to rapidly shifting consumer behaviors and evolving regulations. Retailers must pay close attention to consumption patterns and selectively build in optionality in their supply chain to address the changing wants and needs of consumers."
Despite precautions, retailers are aiming to keep their customers shopping in their stores — 66% said they have over-ordered or plan to over-order products; 55% said they have rush-ordered or plan to rush-order products; and 33% have invested or plan to invest in additional inventory management tools, Coupa said.
One way retailers could right-size their inventory is by employing demand-shaping practices such as dynamic pricing, promotions management and markdowns to tackle inventory challenges, Coupa said.
“A demand-shaping practice such as studying SKU behaviors at product-, location- and channel-level can be helpful for retailers to offer dynamic pricing promotions and markdowns,” a Coupa spokesperson told SupplyChainBrain. “Scenario planning is another key demand-shaping strategy that can help businesses gain a clearer perspective on simulating inventory targets amid supply chain disruption.”
The survey was conducted online between October 4 and October 10, Coupa said. The 602 respondents are employed in management-level or higher positions at retail companies having more than 500 employees.
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