Tom Branna, Editorial Director06.07.20
When the pandemic reached the US in March, marketers and their supply partners soon realized that supply chains were damaged, even broken, in some instances. Inturn Founder and CEO Ronen Lazar reviews the issues and offers solutions to supply chain problems.
Happi: Do you have any estimates on the monetary damage caused by faulty supply chains during the first half of the year (US and global)?
Lazar: The challenge here isn’t just the supply chain disruption, it’s the demand side that has created a deeper issue. Consumers are spending less, especially on discretionary categories, online sales increases aren’t enough to compensate for less foot traffic to brick and mortar and in some cases, the supply chain isn’t the real issue, it’s inability to staff production facilities due to COVID-19 exposure or staff being furloughed.
Some of the world is open, some remains closed which causes a ripple effect between factories and their suppliers. Traditionally orders have been the signal that points to demand, however, consumers have pulled back on spending in discretionary categories, such as fashion and beauty products, and are spending more on food and beverage and cleaning products. The market realities create volatility in what products are in demand and in turn disrupts the entire supply chain from production onward. Companies just don’t really have a handle on what products to have, where and when.
Happi: In February, supply chains were fine. What happened in mid-March? For example, shortages of alcohol for sanitizers are well-documented. How could it have been avoided?
Lazar: The reality is that most companies carry 30-40 days of inventory on hand at any moment, so it’s not like there wasn’t inventory available. Visibility across the supply chain among all participants could have solved this and avoided delays in replenishment. A great example is how large CPG companies have co-developed planning tools with large format retailers in the US. Effectively, when consumers buy products, the supplier knows in real time that they need to replenish. Companies have less visibility into wholesalers and even less into small to mid-size retailers. Digitizing the supply chain offers a consolidated solution. Instead of information being held in different locations and there being a delayed process to convey that information, an effective digital solution will serve as a centralized system of record where inventory information can be easily viewed, updated and managed instantly from anywhere by all parties involved. Armed with this information, brands will benefit from greater visibility and more streamlined workflows.
Happi: When toilet paper disappeared, some blamed it on something as simple as the fact that people weren’t at work, so they did their business elsewhere. It was more an allocation issue. Do you agree? Why or why not?
Lazar: I disagree, consumer demands shifted heavily in mid-March, the combination of “pantry running” to stock up on shelf-stable items, toilet paper and cleaning products disrupted retailers’ normal processes for ordering and maintaining stock levels. This is compounded by the fact that last year, retailers reduced the amount of inventory they held by up to 25% depending on the category because manufacturers implemented just in time delivery capabilities. So, it went from retailers having more stock on hand, to less, to then requiring a lot more than they otherwise would have planned for. Logistics also played a role in this situation which was completely out of the manufacturers’ hands and delayed deliveries. Essentially, retailers and brands alike are feeling what is called the bullwhip effect, a supply chain phenomenon that has plagued the retail and CPG industries causing major disruptions and allocation issues. The bullwhip effect causes massive miscommunication between suppliers and retailers as the demand for products increase and decrease exponentially in a short amount of time. As suppliers are fulfilling the demand of yesterday, the demand of today could be completely different from that of tomorrow.
Happi: The CEO of Clorox was recently on the Today show saying that there will be a shortage of disinfection wipes into June. Any advice?
Lazar: For issues like this there’s no short-term fix, so brands need to be making adjustments and rethink their supply chain and contingency stockpiles so they can be better prepared in the long term. Right now, companies are facing disrupted logistics structures, and oftentimes getting products to customers is delayed. To make sure high-demand items are in stock and allocated appropriately brands will need a long-term plan for digitizing the supply chain.
Happi: What happens to supply chains next? Will a recession cause more disruption?
Lazar: The majority of consumers think a recession is coming and their spending habits reflect that. And there is unpredictable volatility in every vertical. For example, there is a few hundred billion dollars in unsold inventory across fashion right now because sales are down roughly 70%. In beauty it’s roughly 60%. Brands are providing deeper and deeper discounts, some up to 90%, in order to offload excess inventory. In CPG, despite there being a spike in demand in March, numbers were back to their pre-COVID-19 levels in April, and the volatility has created distortion up the supply chain the further you move from the consumer. As consumer preferences and economic situations continue to shift, brands will need to adapt their supply chains to keep up with an ever-changing level of demand.
Happi: Taking a long-term approach, what can companies do to ensure a strong supply chain? Some observers said, “bring it home,” when it became apparent that China was reeling from coronavirus. But does Made in the USA ensure a solid supply chain?
Lazar: I personally like the idea of products made in the USA but don’t think a USA-only supply chain is the solution to a challenging supply chain. The supply chain is made up of multiple stages, all the way from development to retail, each with a different stakeholder. Each stage within the chain tends to be siloed—with different information sets being stored separately across the entire chain. The result of this is a rigid supply chain that cannot adapt to disruptions. The best way for companies to ensure an agile supply chain is to leverage technology. By doing this, companies can enable visibility and collaboration to confidently prevent errors that might escalate into bigger problems, regardless of where products are made and sold.
About the Company
Inturn is described as the only enterprise software solution that empowers brands to efficiently sell slow-moving and excess inventory across industries. By streamlining workflows and providing a system of record, Inturn’s platform reduces inefficiencies and improves product margins. For further information, visit www.inturn.com.
Happi: Do you have any estimates on the monetary damage caused by faulty supply chains during the first half of the year (US and global)?
Lazar: The challenge here isn’t just the supply chain disruption, it’s the demand side that has created a deeper issue. Consumers are spending less, especially on discretionary categories, online sales increases aren’t enough to compensate for less foot traffic to brick and mortar and in some cases, the supply chain isn’t the real issue, it’s inability to staff production facilities due to COVID-19 exposure or staff being furloughed.
Some of the world is open, some remains closed which causes a ripple effect between factories and their suppliers. Traditionally orders have been the signal that points to demand, however, consumers have pulled back on spending in discretionary categories, such as fashion and beauty products, and are spending more on food and beverage and cleaning products. The market realities create volatility in what products are in demand and in turn disrupts the entire supply chain from production onward. Companies just don’t really have a handle on what products to have, where and when.
Happi: In February, supply chains were fine. What happened in mid-March? For example, shortages of alcohol for sanitizers are well-documented. How could it have been avoided?
Lazar: The reality is that most companies carry 30-40 days of inventory on hand at any moment, so it’s not like there wasn’t inventory available. Visibility across the supply chain among all participants could have solved this and avoided delays in replenishment. A great example is how large CPG companies have co-developed planning tools with large format retailers in the US. Effectively, when consumers buy products, the supplier knows in real time that they need to replenish. Companies have less visibility into wholesalers and even less into small to mid-size retailers. Digitizing the supply chain offers a consolidated solution. Instead of information being held in different locations and there being a delayed process to convey that information, an effective digital solution will serve as a centralized system of record where inventory information can be easily viewed, updated and managed instantly from anywhere by all parties involved. Armed with this information, brands will benefit from greater visibility and more streamlined workflows.
Happi: When toilet paper disappeared, some blamed it on something as simple as the fact that people weren’t at work, so they did their business elsewhere. It was more an allocation issue. Do you agree? Why or why not?
Lazar: I disagree, consumer demands shifted heavily in mid-March, the combination of “pantry running” to stock up on shelf-stable items, toilet paper and cleaning products disrupted retailers’ normal processes for ordering and maintaining stock levels. This is compounded by the fact that last year, retailers reduced the amount of inventory they held by up to 25% depending on the category because manufacturers implemented just in time delivery capabilities. So, it went from retailers having more stock on hand, to less, to then requiring a lot more than they otherwise would have planned for. Logistics also played a role in this situation which was completely out of the manufacturers’ hands and delayed deliveries. Essentially, retailers and brands alike are feeling what is called the bullwhip effect, a supply chain phenomenon that has plagued the retail and CPG industries causing major disruptions and allocation issues. The bullwhip effect causes massive miscommunication between suppliers and retailers as the demand for products increase and decrease exponentially in a short amount of time. As suppliers are fulfilling the demand of yesterday, the demand of today could be completely different from that of tomorrow.
Happi: The CEO of Clorox was recently on the Today show saying that there will be a shortage of disinfection wipes into June. Any advice?
Lazar: For issues like this there’s no short-term fix, so brands need to be making adjustments and rethink their supply chain and contingency stockpiles so they can be better prepared in the long term. Right now, companies are facing disrupted logistics structures, and oftentimes getting products to customers is delayed. To make sure high-demand items are in stock and allocated appropriately brands will need a long-term plan for digitizing the supply chain.
Happi: What happens to supply chains next? Will a recession cause more disruption?
Lazar: The majority of consumers think a recession is coming and their spending habits reflect that. And there is unpredictable volatility in every vertical. For example, there is a few hundred billion dollars in unsold inventory across fashion right now because sales are down roughly 70%. In beauty it’s roughly 60%. Brands are providing deeper and deeper discounts, some up to 90%, in order to offload excess inventory. In CPG, despite there being a spike in demand in March, numbers were back to their pre-COVID-19 levels in April, and the volatility has created distortion up the supply chain the further you move from the consumer. As consumer preferences and economic situations continue to shift, brands will need to adapt their supply chains to keep up with an ever-changing level of demand.
Happi: Taking a long-term approach, what can companies do to ensure a strong supply chain? Some observers said, “bring it home,” when it became apparent that China was reeling from coronavirus. But does Made in the USA ensure a solid supply chain?
Lazar: I personally like the idea of products made in the USA but don’t think a USA-only supply chain is the solution to a challenging supply chain. The supply chain is made up of multiple stages, all the way from development to retail, each with a different stakeholder. Each stage within the chain tends to be siloed—with different information sets being stored separately across the entire chain. The result of this is a rigid supply chain that cannot adapt to disruptions. The best way for companies to ensure an agile supply chain is to leverage technology. By doing this, companies can enable visibility and collaboration to confidently prevent errors that might escalate into bigger problems, regardless of where products are made and sold.
About the Company
Inturn is described as the only enterprise software solution that empowers brands to efficiently sell slow-moving and excess inventory across industries. By streamlining workflows and providing a system of record, Inturn’s platform reduces inefficiencies and improves product margins. For further information, visit www.inturn.com.
