Supply Chain Woes Push Promo Companies To Rethink Sourcing Practices
The ongoing disruptions in the supply chain has some business leaders reconsidering far-flung, overseas partners, at least for the time being, and considering reshoring or nearshoring certain operations. Moving production home or to a neighboring country may increase some costs, but the shift can also offer dependability and peace of mind. Promotional products companies face similar pressures and are taking their own look at how they approach their supply chain and sourcing.
“I see the supply chain issue as a long-term change that will affect the globe,” says Nadira Bakar, East Coast region manager for Houston, Texas-based supplier KTI Promo. “The surface issue of carting product from point A to point B is irrelevant, considering the global discordance concerning labor, vaccine regulation, worker treatment and the shortage of manpower that can cause shipments and port workers to be held up for months.”
The COVID-19 pandemic has snarled trade for more than 18 months. As an example, in August, China closed a major container terminal at its Ningbo-Zhoushan port, the world’s third busiest, for two weeks due to a local outbreak. Without uniform standards on vaccines and other precautions, navigating COVID restrictions is placing an ongoing drag on international trade.
“Without global regulation and unifying vaccine laws, workers have had to take up to 10 vaccine shots in a given period, considering the ports they had to pass through as different counties have varying regulations as to what is acceptable regarding vaccines,” says Bakar. “In some cases, workers have also had to take 10 PCR (negative) tests in five days to move through port in places such as Singapore. Until order can be achieved at this basic level, things cannot change through the logistics chain. Heads of commerce will need a unifying entity to ensure that seafaring workers are taken care of through multiple ports and channels.”
How long supply chain issues will take to work out is up for debate, as is what it means for trade in the long term. Richard Carollo, president of Chicago, Illinois, supplier Lion Circle International, says, “The aftermath of the pandemic put a strain on the system and that will work itself out. But it will take a long time to sort it all out. For us, once we work out the mills’ paper rationing, we will be back to business as usual.”
The challenges in the global supply chain have prompted some industry companies to review their own and make changes to minimize issues going forward. Carollo says, “We are working on building up our inventory of our core products to stem the tide. Of course, doing so now will impact the cost of goods, so we have to weigh out which components are on a temporary price surge and which components are the new normal price.”
Bakar says, “We have already implemented a plan that we intend to carry through 2022 and beyond. We have negotiated with parts manufacturers for smaller minimum order quantities and have now embraced that as part of our requirements for new and all existing products. We have also pared down our offering, to offer less of same/similar items and instead to offer more quantity stateside. We are taking ocean shipment timing (with delay) into consideration and changing our par levels for ordering. This has changed our protocol when it comes to inventory, especially at the number we now consider ‘low’ to prompt replenishment.”
She adds, “That said, it has not hindered us from offering factory-stocked and produced items. We still receive daily air shipments from overseas and are blessed to say that the delays have not exceeded two weeks (so far) and knock on wood! We continue to toggle innovating what we can print at our local printer and what we can offer overseas. We have the client in mind at all times, ensuring that all of our steps forward reflect their needs.”
Among distributors, supply chain concerns are a growing factor in how they source products.
“Right now the name of the game is ‘Who has stock?’ Customers seem to care less about how much and are more concerned with when they can get it,” says Bret Bonnet, president of Aurora, Illinois, distributor Quality Logo Products. “As a result, preferred supplier relationships are being tested and we're forced to expand our sourcing operations as we attempt to locate who has what. The good news is, at least for core products, supplier inventory levels appear to have stabilized as of late. I'm a little concerned about today's pricing that is a direct result of the current cost to have a container shipped, but for now, customers have been very understanding and flexible with all this pricing elasticity.”
Bonnet’s company has incorporated the trade issue in its communications with clients, to keep everyone up to date and on the same page, regarding the challenges they impose. And it’s paying off for them. He says, “We’re communicating and asking our clients to order often and early. We've sent our customers several messages encouraging them to plan or allow for at least 60 days from order to delivery whenever possible and we've been incentivizing customers to order early by offering them special discounts or free gifts with purchase. We started this messaging back in September, and both September and October have been banner months for Quality Logo Products. We've also seen many of our company store clients pre-purchasing 12 months of inventory at a time instead of the typical 60 to 90 days' worth of inventory. It's made warehousing a challenge, but that's a good problem to have.”