What do coffee, ketchup, gasoline, wood pulp and rubber all have in common? These are items that have been identified to become less available in 2021. And why is that? It’s something called “The Bullwhip Effect.”
With COVID-19 still a threat and a number of regions in lockdowns, labor shortages, and extended transit times, the disruption to supply chains continues to be severe. Business leaders must make quick decisions to maintain operations during a combination of peak season and the bullwhip effect to fulfil urgent orders while mitigating the daily challenges.
The scale of COVID-19’s impact overshadows anything supply chain leaders have seen before. In manufacturing, everything is affected by the global supply chain. The glass for barware, the wood for cutting boards, the cotton and wool for textiles, and then the work force needed to harvest, process, and run machinery. When one or all of these are disrupted, either directly or indirectly, it becomes a domino effect.
Design, timing, and functionality are all impacted but most of all, pricing. Lack of raw materials due to high demand starts the chain reaction. Then there is increased wages to increase capacities, shutdowns from outbreaks, Government controlled energy supplies, and unprecedented transit times and port congestion.
All of this requires continuous end-to-end assessment and pivoting, and most of all strong supplier relationships. At The Vertical Collective, the teams in both Hong Kong and the United States anticipated that the changes in 2020 would have an effect on the company and all client business through 2021. It began when the teams started seeing delays in shipping and delivery which impacted the price of freight. This moved the teams to action in shoring up factory relationships, increasing efficiency by auditing all freight contracts and identifying best routes for sourcing resources and materials. This reset would then help secure pricing and resources, a benefit that could be passed to clients.
“In the development of our supply chains, and the industry as a whole, relationships are key,” said Morgaine McGee, co-founder of The Vertical Collective. “My team and I spend countless hours on calls, messaging, and video conferences checking in with our factory owners, both from a business standpoint and personally, it is those relationships that have helped us remain as stable and consistent in this marketplace.”
But making sure that the supply chain and production remain stable is just part of the equation. Additionally, it is critical to have an understanding of your customers’, and in some cases their customers’ demand so that planning for product and development can continue without interruption and unexpected increases to the budget.
“We have a team dedicated to trend research, consumer reaction to products, and the current state of the environment,” added Katherine Zabloudil, co-founder of The Vertical Collective. “This is not just eco-environment but the socio-environment around purchasing. We feed this information to our clients consistently to help them in planning. In addition with Morgaine’s team, we are constantly hedging our bets on these trends to secure positions with the raw materials and supply chains. This goes from things like cotton and glass, to metals and materials for producing PPE. Its spans from healthcare to home décor.”
It is easy to draw the parallels between the front of the chain to the end, what is paramount throughout are the relationships. It is what drives both sides of the company and what helps The Vertical Collective anticipate the needs of its partners’ business whether that be in sourcing, production, freight forwarders and specifically their direct to consumer clients. It is those relationships that keeps the customer service level at The Vertical Collective at such a high standard and what keeps their pricing competitive.
The Bullwhip Effect is reactionary. The Vertical Collective is facing that reaction head on with proactivity.
Learn more at theverticalcollective.com.
