Supply chain issues dominated the news in 2021. From port congestions to shipping delays, to part shortages, every industry was affected by these global issues. For ecommerce companies resilience became a major theme. Merchants needed to get creative to keep a continuous flow of goods and ensure customer satisfaction. This meant that brands took different routes to optimize their operations: some moved assembly and postponement work closer to the customer, some shifted shipping methods, and everyone dealt with rising costs and a steep labor shortage.
Here is a recap of what the experts said about the supply chain in 2021—from advice to navigate issues, to investing trends that will inform the ecommerce industry for years to come.
“COVID-19 created a domino effect in the supply chain by increasing demand, limiting overseas supply lines, impacting carrier capacity, not to mention dealing with the repercussions of essential worker fallout from the virus. The past two years has truly raised the bar of the definition of ‘agile’. I believe that working alongside high growth brands for over 40 years, where innovation has always been paramount to their success, has rooted our entire organization to operate with an agile mindset.”
The biggest supply chain issues of 2021: COVID, Labor Shortage, and Delayed Parts
Of course, COVID was still a dominant presence in commerce this year. While many industries figured out how to set up remote work, the supply chain runs on workers across the globe, manually moving products from point A to point Z. For fulfillment providers the labor shortage of 2021 made the high volume of orders feel even harder to get through; staying competitive meant keeping a healthy workforce. Read more about how the human aspect of fulfillment can’t be commoditized.
“In a world running hard toward commoditization, ecommerce fulfillment and logistics will continue to be a space facilitated and optimized by the human touch. In fact, the human element is becoming a competitive advantage for many 3PLs, providing a unique ability to customize and bring personalization to a world that is quickly becoming overly-commercialized. Partnership, transparency, and human connection are increasingly important matters, particularly in light of this year’s extraordinary events.
The component and part shortages of 2021 made it very difficult for sellers in all industries to keep products well stocked. Many merchants had to make big changes to their supply chain operations in order to keep a steady flow of products.
“We’ve seen an interesting shift for some hardware companies: they are having some supply constraints, so they’ve simplified their supply chain. For example, going from two facilities back down to one, in order to consolidate their inventory and become more nimble. Most of these companies are bringing their hardware in from overseas. We saw the shift starting towards the middle of last year, but it’s continued into this year.
Sellers had to get creative in order to mitigate these component shortage issues. Experts suggest that the sellers who put in significant effort to communicate and have a close relationships with suppliers, manufacturers and fulfillment providers were better off—especially for smaller brands trying to compete with the production needs of global companies. Shifting production strategies became a big trend this year.
“Postponement can be a great tactic for merchants, especially in hardware and consumer goods. One if you are a startup, postponement means that you’re making decisions closer to the customer. Even if it’s just updating the latest firmware, the closer you do that to your customer they’re less likely to need to make updates to use their device.
Second, operationally it can take some of the burden off your forecasting. You’ll be able to better meet consumer demand because you won’t be forecasting for products shipping internationally. Whether it’s firmware updates or color choices or some other customization, I think postponement generally results in a better customer experience.”
Biggest cost this year: surcharges and shipping fees
Carriers struggled to keep up with the rising volume of packages this year. To bolster their services and keep up with demand they increased their service fees. Peak season charges went up for all carriers a record number of times throughout 2021. Read more of the shipping carrier surcharges this year.
“These surcharges have started overtaking the original order value of some products. For example, if a customer creates a $10 product, and their shipping is $20 or more, it stops making sense for them to use that carrier. My team and I are working really hard to find other solutions that make a bit more sense. We’re engaging with our carriers daily, because extra surcharge are changing so frequently. A few years ago I only checked a few times a year. Now it’s practically non-stop.”
It’s also worth mentioning that the average cost of shipping a 40-foot container rose tremendously (more than quadrupled over last year) and the average cost per mile to ship domestically was the highest recorded at $2.85 per mile in November and likely went up over the holiday season.
The future of the industry: new ecommerce strategies and investing trends
Some ecommerce merchants had great success with the 2020 surge in online shopping. Many chose to bring their products into new sales channels to diversify their customer base. Dropshipping became a big trend for brands looking to get into retail. Read more about the benefits of dropshipping.
“We estimate that more than 75% of all ecommerce sales will go through a drop-shipment or marketplace. If we continue to see ecommerce grow this rapidly, we predict the same number of ecommerce sales from last year will be done through dropshipping in a couple of years. It’s going to be a massive amount.”
And with the ecommerce industry boom, comes an expanded marketplace of new services, products, and platforms to support demand. Investors are taking note and moving toward funding startups in these burgeoning areas. Read more about the ecommerce investing trends of 2021.
“As retail technology has been an area with high growth and high investment. Global funding to retail tech tripled year-over-year (YoY) in Q1 of 2021 and hit its highest quarterly level in five years. Funding to ecommerce tech specifically in Q1 2021 jumped 71% from the previous quarter.
Early-stage investors who have traditionally focused on consumer products and services are increasingly turning their attention to enabling software tools that will underpin the tectonic shift taking place across the ecommerce landscape. The areas include: Brand discovery marketplaces that help consumers navigate the plethora of new offerings coming to market; Cross-selling networks that help intelligently recommend new brands to consumers based on brands they have previously purchased from or interacted with; Streaming and video tools that deliver more immersive, interactive, or communal shopping experiences; and commerce enabling tools that help sellers sell via emerging channels (e.g. Messenger, Chat, DMs).”
If you’re looking for a 3PL with fulfillment centers in cities across the US, we own and operate facilities in The Bay Area, Los Angeles, and Kentucky. Use DCL’s national footprint of warehouses to distribute your inventory across the country to reduce transit times and save on shipping costs. If you need fulfillment or shipping support and want to partner with DCL Logistics, we’d love to hear from you.