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Supply chains are more delicate than most people think.
Getting an order to a customer’s doorstep requires meticulous calibration, endless coordination between multiple parties, and precise timing — so even a small hiccup in any supply chain process can cause big issues.
Sellers and consumers alike witnessed this fragility firsthand as the COVID-19 pandemic crippled global trade and supply chains.
However, in the aftermath, businesses are beginning to re-evaluate their supply chain management and agility, and are taking steps to prevent bottlenecks in their supply chains going forward.
In this article, we’ll dive into some common causes of supply chain bottlenecks, how past and current bottlenecks are shaping the ecommerce landscape, and strategies for resolving and preventing them.
What are supply chain bottlenecks?
A supply chain bottleneck is a point, stage, or process in the supply chain that is preventing or hindering goods from moving through the supply chain as they should.
Some bottlenecks are small enough that the supply chain can keep running, albeit less efficiently. For example, say a warehousing conveyor belt breaks. While fulfillment workers can physically carry items to the correct location, this issue will slow down operations.
Others are so big that the supply chain grinds to a halt, and customers cannot get their orders. For example, in 2021, a massive cargo ship got stuck in the Suez Canal. This blocked hundreds of ships — and their cargo — from passing through, stranding businesses without their inventory and freezing their supply chains altogether.
Either way, supply chain bottlenecks cause delays, result in extra costs, and make it harder for a business to run effectively.
Common causes of supply chain bottlenecks
Sometimes, bottlenecks are caused by unexpected circumstances or events outside of a business’s control. These can include:
- Labor shortages
- Carrier disruptions
- Global crises (such as war or disease)
- Natural disasters
- Sudden surges in demand
- Trade restrictions
- Factory closures
However, simple mistakes can also produce devastating jams. Some common (and preventable) errors that lead to bottlenecks are:
- Failure to forecast demand correctly
- Miscommunication with suppliers, vendors, or other stakeholders
- Lack of contingency plans
- Inventory management issues
Here are some examples of recent supply chain bottlenecks and their root causes.
The COVID-19 pandemic was the biggest disrupter to supply chains in decades, for multiple reasons:
- Restrictions placed on the movement of people and goods caused delays in the transportation of goods and raw materials.
- Lockdowns caused factories to shut down or run at extremely reduced capacities, as workers were unable to travel to work, were unwell, or were asked to come to work in smaller batches to ensure social distancing.
- Online shopping and demand for certain products (such as cleaning supplies and groceries) skyrocketed, but due to the aforementioned lockdowns, goods could not be produced fast enough or in high enough quantities. This supply constraint led to huge backlogs in order fulfillment, and affected the bottom line of many businesses.
“ShipBob was invaluable in helping us navigate the COVID supply chain crisis, especially during the 2020 holiday season. Some fulfillment providers keep a curtain of secrecy around their operations, especially when issues arise — but not ShipBob. Even during the worst of the pandemic, they maintained transparency and communicated with us every step of the way.”
Aaron Patterson, COO of The Adventure Challenge
As the pandemic continued and many restrictions continued, the global labor shortage became a bigger concern in 2021.
Many left the workforce for a variety of reasons, including due to health concerns, or to care for sick family members.
New challenges also arose for supply chains, including Hurricane Ida, a devastating winter storm in Texas, and the infamous Suez Canal blockage.
While these incidents did not have as wide an impact as the coronavirus, they nevertheless resulted in notable supply chain bottlenecks in their respective areas.
The last year saw many supply chain disruptions due to events like truck and truck driver shortages, geopolitical conflicts, natural disasters, increased freight costs, and wild fluctuations in oil prices.
Russia’s invasion of Ukraine, and the resulting unrest and blockades, led to the drying up of commodities typically sourced from the Eastern European nation.
In China, the COVID-19 lockdowns affected prominent manufacturing and port cities.
Together, these incidents prompted businesses to look for alternate suppliers, and begin forming contingency plans for manufacturing and resource shortages.
Future of supply chain bottlenecks and volatility
These and other supply chain disruptions over the past few years exposed the many weaknesses in the global supply chain. That’s why, in 2023, many brands and businesses are focusing on building supply chain resilience.
According to one McKinsey & Company study, to do this, many companies are instituting formal risk-management processes, pursuing regionalization, and digitizing more supply chain processes.
Moving forward from the pandemic, ecommerce businesses in particular will have to learn how to create agile supply chains that are optimized and prepared for just about anything.
Main challenges for ecommerce sellers
Supply chain bottlenecks present specific challenges to ecommerce businesses. Here are some of the most common issues that supply chain bottlenecks cause for ecommerce businesses, no matter their size.
Whether you make your own products or sell manufactured products wholesale, your ecommerce business is almost never entirely independent.
Usually, merchants and retailers rely on suppliers, vendors, and manufacturers for the raw materials or finished products they sell. This puts them at risk if a bottleneck arises within procurement.
Bottlenecks in procurement are particularly harmful. Since every supply chain stage is dependent on the performance of the stage before it, bottlenecks at the beginning of the supply chain stall every other process, and create huge inefficiencies and costs down the line.
Lack of flexibility
It’s not always easy to switch suppliers, change warehouse or fulfillment workflows, or to adopt new technologies. Because supply chains are so carefully constructed, most are not adaptable in case of an emergency.
This lack of flexibility and agility can make it difficult to overcome bottlenecks — especially when those bottlenecks are the result of unforeseen and uncontrollable events, such as a natural disaster.
Customers don’t care how your supply chain works — all they want is for the correct order to arrive on their doorstep on time.
So for ecommerce businesses, supply chain bottlenecks can negatively impact the customer experience. Delays, extra costs, and inconveniences that arise from bottlenecks (whether they are your fault or not) can frustrate customers, and discourage them from purchasing from your brand again.
“Because we sell a high-quality anti-aging product, we want to provide high-quality service throughout the whole customer experience — and that includes a quick and smooth delivery that shoppers have come to expect.
ShipBob’s 2-Day Express ship option lets us meet these expectations for US customers, and compete with the likes of Amazon for speedy fulfillment.”
Maria Osorio, Logistics and Operations Director at Oxford Healthspan
Supply chain bottleneck solutions in 2023
Some supply chain issues are unavoidable, no matter how much you plan. However, having the right infrastructure and systems in place can go a long way towards resolving bottlenecks.
In 2023, ecommerce businesses should make sure that they secure good partnerships with reliable suppliers, balance inventory levels so that they are neither overstocked nor at risk of stockout, and have contingency plans in case of common supply chain disruptions.
In this next section, we’ll discuss specific strategies for fighting and preventing potential bottlenecks.
What can ecommerce businesses do about supply chain bottlenecks?
There are ways that ecommerce companies can combat supply bottlenecks. Here are some tips and strategies for improving supply chain resilience and navigating disruptions.
Communicate with customers
Don’t leave customers in the dark about supply chain bottlenecks — especially not if their order is affected by one.
Even if customers may not entirely understand the bottleneck, they will appreciate proactive communication from you about delays, increased costs, or changes to their order fulfillment.
While they may not get exactly the delivery experience they expected, honesty and transparency may help you recover customer loyalty.
Watch inventory closely
Are SKUs disappearing from stock? Is it getting consumed faster than the previous week? Are there more backorders? Keeping a close eye on inventory KPIs can help you identify opportunities for inventory management optimization.
No matter how you manage your inventory, always make sure that you have enough safety stock on hand, are regularly auditing your inventory, and tracking SKU units as they travel through the supply chain. These processes will help prevent shortages that produce bottlenecks.
Take delays into account
Considering supply chains are made up of so many moving parts, delays are inevitable. As such, make sure to build in extra time where necessary to avoid bottlenecks.
This means reordering inventory before you run out, and leaving enough time for freight shipping and warehouse receiving.
Improve demand forecasting
Many bottlenecks result from not having enough inventory on hand to meet consumer demand.
Ecommerce businesses should therefore hone their demand forecasting strategies to ensure that they order just enough of the right SKUs to satisfy demand without over- or under-stocking.
Try getting feedback from customers on their product preferences, and analyze order histories to identify demand patterns and further improve forecasting.
Strengthen supply chain agility
Contingency plans are essential, and help enable greater supply chain agility in the face of different circumstances.
In addition, businesses should run regular risk assessments to identify and plug the gaps in supply chain operations, as and when they are spotted.
Leverage ShipBob’s technology to navigate supply chain bottlenecks
If your business is spending more time fixing bottlenecks than fulfilling orders, it’s time to find another solution.
One of the easiest and most effective ways to streamline your ecommerce supply chain is to partner with a professional 3PL.
As a global omnifulfillment platform, ShipBob can help your business navigate supply chain disruptions with ease.
Using our warehousing, order fulfillment, and shipping expertise, you can sell across channels and expand into new countries smoothly and seamlessly, while taking time-intensive operations off your plate.
“Logistics is something you never think about until it stops working, and we’ve never come to that point with ShipBob. Everything just works. We are super happy with ShipBob and very impressed by how well they’ve pumped out our large volume of orders.”
Sergio Tache, CEO of Dossier
Our proprietary dashboard provides real-time data on inventory movement, levels, and fulfillment and shipping performance at no extra cost, so you can avoid inventory-related bottlenecks.
ShipBob’s dashboard also tracks historical data, making demand forecasting much easier for merchants.
For more information on how ShipBob can help your business conquer and prevent supply chain bottlenecks, click the button below.
Supply chain bottlenecks FAQs
Below are answers to some of the most common questions about supply chain bottlenecks.
How do you find bottlenecks in the supply chain?
Large bottlenecks are usually fairly obvious, but smaller jams can be harder to pinpoint. Consider the issue, and try to create a workflow diagram of your supply chain operations so that you may identify what process(es) are causing the issue.
What are the benefits of minimizing bottlenecks?
Fewer bottlenecks mean improved supply chain efficiency, which increases cost savings, reduces delivery times, and improves the customer experience.