How to handle the global shipping crisis as an ecommerce brand

two women preparing products to be shipped

Freight shipping has been a nightmare. Increased demand, the Suez Canal traffic jam, and pandemic lockdowns are wreaking havoc on the entire supply chain.1 The global shipping crisis has resulted in skyrocketing prices and months-long delays, causing brands to struggle to keep inventory in stock. The Wall Street Journal reports, “The average price worldwide to ship a 40-foot container has more than quadrupled from a year ago.”

Chinese factories typically pause manufacturing for the Lunar New Year. So when that happens in early 2022, fewer new shipments will be added to the supply chain, giving cargo a chance to keep moving with less demand on the system. But the sources of friction remain.

The pandemic hasn’t ended, so you can still face delays due to lockdowns. The world’s third busiest container port faced a COVID-related partial closure2 in August, adding to the mess. And there are still not enough shipping containers to meet demand. ING predicts the shipping crisis will last at least until 20233, when new shipping containers become available.

Brands can’t wait around and expect things to go back to normal. To continue to serve customers reliably, you need to adapt. Now that you know what to expect, you can prepare for the challenges to come. Here are some tips.

1. Manage customer expectations on out-of-stock items

No one is immune. You’re probably actively dealing with disruptions to your supply chain right now, and this won’t be the last time you will. No matter what you do to make shipping operations smoother, it’s unlikely you’ll avoid delays altogether. So have a plan in place to manage customer expectations when products go out of stock and inventory is delayed.

Be transparent with customers

Whatever happens, be honest and open with your customers when you aren’t able to meet their expectations. Most people are sympathetic to business struggles right now and appreciate being kept informed.

Much of the time, a one-sentence explanation will do to notify customers about any delays. But consider creating a dedicated webpage that describes the issue in-depth and what customers can expect from you while it gets resolved.

Then, link to it from your product pages, your homepage, in a banner, or in your emails for customers who want more information.

Give ample wiggle room in your in-stock estimates

Be generous with your time estimates on restock and product launch dates. Since so many factors can cause delays, it’s better to give wiggle room instead of announcing one timeline, then pushing it back several times and frustrating customers. If products are in stock sooner, your customers will be pleasantly surprised.

Put these in-stock estimates right on the product page and give your customers a way to be notified when the product is back in stock.

Prioritize the customer if mishaps occur

If you’ve run a pre-order and promised stock by a certain day, but the shipment to your warehouse is delayed, be flexible with customers who want to cancel their order.

If certain customers need your product by a certain date, like a backpack for a planned camping trip, and your 3PL receives stock with just enough time to expedite the shipment, offer to expedite their order free of charge.

If there’s a mismatch between inventory in your warehouse and inventory on the website and you can’t fulfill a customer’s order as promised, be generous with the solution you offer. Maybe you give them a coupon for their next order or throw in a low-priced item as a gift.

It’s the little things that bring trust back to the relationship when a setback happens.

2. Use automations to stop campaigns promoting out-of-stock products

Keep on top of your marketing campaigns, so they don’t promote out-of-stock products to customers. We’re talking digital advertisements, cross-sell and upsell campaigns, featured products on your website, organic social media, and customer communications like emails and SMS.

Connect your marketing automation platform to your product catalog so it can respond to inventory levels. In Klaviyo, you can set email and SMS flows to automatically skip a message that promotes an out-of-stock item, as long as your product catalog is connected.

3. Move stale inventory

With your bestsellers out of stock, focus your campaigns on other products that tend to move less quickly.

Use software like Klaviyo to recommend slow-moving products to customers who’d be interested based on what they’ve purchased in the past.

Build energy around existing products with your loyalty program

Get creative with how you move the products you do have on hand by encouraging customers to buy early. Reward your most loyal customers by giving them early access to sales like your Black Friday Cyber Monday offer. Bonus: You grab their attention early with less competition.

4. Make a campaign of your back-in-stock items

Beyond a simple back-in-stock email to customers who asked to be notified, make a campaign out of products that have been out of stock for a while.

Use it as an opportunity to create excitement about products customers may have put out of their minds. Feature the restock in campaigns across email, SMS, social, and, of course, right on your home page.

5. Increase your cash buffer

Considering risks across the supply chain, you’ve likely been doing all you can to grow your cash reserves. If you’re unable to sell product due to production or shipping delays, you need a larger cash buffer than usual to keep the business going.

Start building out your cash buffer to at least six months to account for these months-long inventory delays. Your financial adviser will have more insight into your business, so work with them to determine how much cash you should have in reserve.

To increase your cash buffer, consider these marketing and business operations actions to reduce costs and increase revenue and profit margin.

Focus on low-investment, high-impact marketing tactics

Digital advertising will become less efficient with third-party data going away. So focus on the power of your current customers to grow your customer base. Use channels like retention, referral, and word-of-mouth as cheaper acquisition channels.

Increase your profit margin on every sale

Raise average order value (AOV) by advertising high-ticket items and focusing on cross-sells, upsells, and encouraging customers to buy multiple items as part of a bundle.

Reduce returns

Make returns less likely by educating a customer before and after a sale, so they know they’re buying the right product and how to use it.

Keep cash flowing with pre-sales

You don’t need to launch a new product to have a pre-sale. Give customers a way to commit to out-of-stock products while building up your reserves when you don’t have the inventory.

Pre-sales only work if you have a general sense of when the product will be in stock. A window of a few months is fine, but if your materials provider is having sourcing trouble or your factory is on lockdown, it could be a while before you have inventory. Having a pre-sale now means you’re more likely to frustrate customers. So wait until inventory is already on the ship and on its way to your warehouse before announcing a pre-sale.

Run lean

Continue adjusting your budget to make sure you’re spending money on the right things. Nix any redundant services or downgrade services you’re not taking full advantage of.

Keep a close eye on the performance of your campaigns and channels; double down on what’s working and stop doing anything that’s not delivering results.

Look into Section 321 to reduce import costs

Section 321, put in place by US Customs and Border Protection (CBP), can help ecommerce brands importing into the U.S. to skip paying taxes and duties on certain products.4 Plus, it’s like Global Entry for your products. Faster delivery of your goods to your warehouse.

The fine print: The retail value of the products needs to be under 800 USD, and it’s limited to one shipment per day. And there are some rules on which products are allowed to pass through untaxed as well.

If your products qualify and you’re not already taking advantage of Section 321, it can save you some serious cash on every shipment.

6. Place your purchase orders early

With no guarantee of on-time deliveries from your factory to your warehouse, start production early. Place purchase orders (POs) much earlier than usual to keep products in stock and have smooth product launches.

All things considered, you should start production two months earlier than usual, if not more.

What to consider

How early you want to place orders will depend on a lot of factors.

  • Production: Delays can happen due to lockdowns or getting material to factories. Different industries vary in delays on lead times.5
  • Booking a freight forwarder: Once it’s time to put your products on a ship, many freight forwarders are already booked up. So Carlos Estrada, Operations Manager at Dirty Labs, recommends, “I would be booking my ocean shipments at least two months in advance” from the time you want the freight forwarder to pick up inventory from your factory. He continues, “It’s cheaper and easier to book way in advance than it is to do it later.” So work closely with your factory to determine when it’ll be done with production so you can guarantee a spot on a ship when it is done.
  • Port delays: Finally, delays at ports are causing ships to sit in line for weeks at a time, Insider reports.6 One freight forwarder executive estimates that port congestion alone is adding 30 days to shipping timelines.

Shipping delays are volatile, so pay attention to how much delay you see with each purchase order (PO), what’s happening with your material sourcing, and any delays at your factories. Stay on top of shipping news when you’re thinking about restocks, and extend your timeline while balancing order volume and cost of storage at your warehouse.

7. Place larger orders for more inventory

Place larger POs with your factory. It’s harder to adapt to increased customer demand with increased production and shipping timelines, so it’s worth having more inventory on hand. As a bonus, a larger PO with your factory usually costs less per unit to manufacture.

Prioritize your most popular products or the ones that bring the most revenue

Temporarily shift your marketing focus to these high-impact items, especially if you’re a small brand with fewer resources to go around.

Fill your shipping container

If you’re shipping a less than container load (LCL) but close to filling the container, it can be worth increasing your PO to fill that space and shipping a full container load (FCL) instead. According to Estrada, when shipping LCL, you typically pay the same price by cubic foot no matter how much of the container you fill. “The biggest price break you typically get is when you fill a container, when you grow out of LCL,” he says.

If you already ship FCL, fill the entire space with a larger PO. Ryan Petersen, CEO of freight forwarder Flexport, says most shipping containers are shipping at just 70% capacity. So take advantage of the space you’re already paying for, especially with such high shipping prices. If you can’t fill the container, consider downgrading to an LCL to save on high shipping costs.

8. Have your factory book freight shipping for you

Small brands producing small amounts of inventory have a problem: freight forwarders won’t take you. But Estrada recommends having your factory manage shipping for you. He says factories “will have a good idea of how to get things to you, so a lot of times you can just rely on them, especially if you’re not very big.”

In one conversation with a freight forwarder, Dirty Labs was essentially denied because of the size of the shipment. “We’re too small, and our shipments are infrequent enough,” Estrada says, so “we can’t even get some of the freight forwarding companies to work with us.”

One freight forwarder he talked to has a separate division for small businesses, but they’re stretched so thin they told Estrada they wouldn’t be able to book shipping for them until the middle of next year. “Everything is so tightly constrained,” he explained, “that even if they brought you in, they wouldn’t be able to service you.”

The bottom line

Factories have established relationships so they can more easily get your product on a ship. Rely on their built network and expertise to serve you.

9. Ship cargo by air

With extensive delays and skyrocketing prices for ocean freight delivery, shipping cargo by air is quicker and more reliable. Air cargo can arrive in days as opposed to weeks or months. And the price difference isn’t as high as it used to be. So, while still expensive, air freight delivery might be worth considering for priority items your business can’t do without or when customer demand spikes and you need inventory fast.

The price difference between air and ocean has dropped

According to FreightWaves, shipping by air was 12 times more expensive than shipping by ocean in 2019 before the pandemic. But by the summer of 2021, the price difference decreased by half.

Lululemon is one brand that’s offset delivery delays using airfreight7 to meet demand. By strategically using air freight alongside standard ocean shipping, chief financial officer Meghan Frank says they “feel really well positioned to navigate through this year.” So while you might not want to ship all your inventory by air, it’s worth considering as a short-term solution to keep popular, high-ticket inventory in stock.

Run new freight shipping estimates with every PO

Shipping estimates are volatile, so keep running new price estimates with your freight forwarder as you prepare for a new production run.

Check any relevant prohibited items lists8 and other shipping restrictions that might apply to your products before you book.

10. Use artificial intelligence to mitigate shipping disruptions

With artificial intelligence (AI), brands can determine if inventory will fill an entire shipping container in advance. Then, you can place a larger PO with your factory to take advantage of empty space or downgrade to an LCL. That’s what Flexport did to find out that its clients’ containers have been shipping partly empty.

Beyond optimizing shipping container capacity, you can use AI to optimize the entire shipping process. According to Ahmer Inam, chief artificial intelligence officer at Pactera EDGE, “Leading consumer retailers that had AI platforms in place pre-pandemic suffered the least disruption.”9

Predict impact of delays and execute your backup plan

By integrating data analytics and machine learning into your supply chain, you can track your inventory on the ship, predict the impact of delays, and implement your plan B so you can mitigate disruptions proactively. “You need to know the location of your goods [at] all times if you are going to successfully gauge what impact a shortage will have on your operation,” Inam writes.

If you’re not already using AI, this can seem a little daunting. But you don’t need to establish an AI department to build and maintain this software. Use an AI platform like Pactera EDGE that can provide supply chain intelligence.10 Or choose a forward-thinking freight forwarder like Flexport that uses machine learning in its processes to solve shipping issues together.

11. Reduce steps in your supply chain

If you can condense different parts of your supply chain to one geographical region, you take out a leg of expensive and time-intensive freight shipping.

Fulfill where your factory is

Finding material sources or factories in the same location can be difficult due to geographical limitations, but warehousing can happen anywhere. So you might consider establishing a fulfillment center where your factory is and shipping products from there.

Girlfriend Collective is an activewear brand that manufactures its products in Vietnam and uses a local fulfillment center. The drawback for Girlfriend Collective is that its customers are in the U.S., Canada, the UK, and Australia. So it doesn’t offer expedited shipping, which would be expensive internationally, and standard shipping can take two to three weeks from the time a customer places their order. It works for Girlfriend Collective because it ties slow shipping back to its values of sustainability.11

That said, if you manufacture in the country that you deliver, this could be a viable option while maintaining quick delivery to customers’ homes.

Consider multiple regional loops

Of course, the downside to condensing aspects of your supply chain to one location is that local lockdowns will likely affect any aspects in the same region. So you might also consider increasing diversity in your supply chain. You can diversify while creating multiple regional loops where appropriate—for example, you could have a manufacturing facility and warehouse in North America and another set in Europe.

12. Diversify your supply chain

Diversifying your supply chain is easier said than done. You have to research new facilities and make sure they can provide the same quality your customers are used to. It’s an exhausting process, but by relying on a single source for your materials, manufacturing, or warehousing, you lose flexibility when delays occur—whether that’s due to a backed-up port or a local lockdown that halts production.

The thing is, with or without the pandemic, supply chain disruptions happen for many other reasons. So while diversifying your supply chain is an investment of time and resources short term, it could be worth having multiple relationships you can call on when disruptions occur and you need to change course. Smaller brands can use this as an opportunity to find cheaper places to source and produce their products without completely abandoning their original suppliers.

Have multiple fulfillment options, including self-fulfillment

According to Ryan Kelly, VP of ecommerce marketing at FedEx, “Many merchants only utilize a single location for fulfillment,” he explains. “If a business doesn’t have the ability to self-fulfill, it should consider that as a backup option.

If a business only self-fulfills, it may want to complement its supply chain with a third-party logistics provider in a different part of the country to serve as backup and also help improve transit times and lower costs.”

Develop a relationship with another factory or material provider

Similarly, you might consider establishing a relationship with an additional factory or other material providers in case of a local shutdown. For example, many companies manufacture in China, but Vietnam has become another prime soft goods manufacturing hub12 in recent years.

Shutdowns and delays can happen anywhere for any reason, so the lesson here is: Diversify your relationships geographically so you can adjust to sudden changes swiftly with less impact on your business.

Build systems now to protect your business for the future

The global shipping crisis won’t last forever, but it will be here for a while. Implement the fail-safes relevant to your organization, so you’re prepared for shipping disruptions without causing undue stress on the business.

Creating these systems around your marketing and business operations now will safeguard you against future, hopefully smaller, supply chain disruptions long after the global shipping crisis ends.

Shipping confirmation emails help your customers understand when they’ll receive their orders. Check out these 7 tips to write your best shipping confirmation email yet.

 

Sources:

1“Why Shipping Is So Expensive in 2021 and How to Navigate It.” Optimoroute.com

2“The shipping crisis is getting worse. Here’s what that means for holiday shopping.” CNN.com

3“5 reasons global shipping costs will continue to rise.” Think.ing.com

4“How to Claim Section 321 for Your Ecommerce Shipment.” Shipbob.com

5“Lead times at record highs and ‘still accelerating’: ISM.” Supplychaindive.com

6“A record-breaking 44 container ships are stuck off the coast of California.” Businessinsider.com

7“North American retailers turn to airfreight as sales soar.” Aircargonews.net

8“Shipping Air or Ocean Freight.” Freightos.com

9“5 ways AI can help mitigate the global shipping crisis.” Techcrunch.com

10“LOGISTICS.” Pacteraedge.com 

11“When will my order arrive?” Girlfriend.helpdocs.io

12“Why the Prelude Collection is Made in Vietnam.” Blog.tortugabackpacks.com

 

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