Everyone Is Panicking About the Supply Chain — And That’s Making the Situation Worse

Shoshy Ciment
·2 min read

With supply chain issues reaching a very fever pitch, shoppers are preparing for a holiday season marked by empty shelves and out-of-stock product.

But according to new data, panic-buying from retailers might be making the problem worse. Panjiva, the supply chain research arm of S&P Global Market Intelligence, suggests that a strong retailer reaction to potential stock-outs is creating a cycle of early over-ordering amid record high imports. In other words, fear of congestion is leading to more over-ordering, which perpetuates congestion.

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“Individual companies are seeing longer lead times for goods, which then incites increased and early purchases,” the study explained. “This can turn into a cycle where congestion in logistics drives further traffic from companies trying to hedge risk by ordering additional supplies.”

Port congestion, factory shutdowns and labor shortages are all a part of a global supply chain crisis that is dominating every conversation this holiday season. In some cases, the delays are putting certain brands and retailers in jeopardy of missing crucial inventory targets, which has prompted many to order more product earlier in advance. For example, Walmart said last quarter that it was securing supply early and chartering vessels to prepare for Q3 and Q4.

According to Panjiva, imports to U.S. ports are up 20.5% compared to 2019. In October, imports increased 2.7% year over year. RBC Wealth Management also discussed this issue in an Oct. 15 note.

“Global supply chain problems quickly become consequential and multiply when inventories are tight,” RBC wrote. “Moreover, because the problems are well known, orders for raw materials, component parts, and finished goods are now being placed earlier than normal, which is lengthening the queue, creating a vicious cycle.”

According to Panjiva, sectors with increased imports compared to 2020 and 2019 have shown an ability to adapt to the supply chain struggles, despite severe congestion.

To be sure, out of stocks and shipping delays will still likely be a major theme this holiday season.

According to Adobe’s annual holiday forecast report, out-of-stock messages are up 172% this year compared to the pre-pandemic period of Jan. 2020 and up 360% compared to Jan. of 2019. Apparel is the category with the highest amount of out-of-stock messages. Adobe predicts that the problem will worsen as the holidays near.

At the same time, Adobe is predicting a season of record demand for e-commerce that will likely hit $207 billion spent online, which would mark the first time that the online retail holiday season crosses $200 billion.

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