fmcg: consumer companies develop plan B for probable supply disruption
Industry leaders say companies are reaching out to Indian suppliers, fine-tuning logistics contracts, and planning to transport more components by air to maintain supply amid steadily recovering demand so far. .
Executives of logistics companies also expect further delays in ocean and air freight shipments, as well as higher freight rates and container prices.
Japan and Israel have already closed their borders to concerns over the variant, which first surfaced in South Africa. Australia will delay easing border restrictions, while Sri Lanka, Singapore, South Korea, Indonesia and Thailand have banned travelers from South Africa.
India has suspended its plans to open international flights from December 15.
Meanwhile, freight rates and container prices have skyrocketed.
For example, the Shanghai Containerized Freight Index (SCFI) spot rate on the Shanghai-Europe route, which was less than $ 1,000 per twenty-foot equivalent unit (TEU) in June 2020, has increased to around 4 000 dollars per TEU at the end of last year, and rose to $ 7,395 at the end of July.
âThe current surge in container freight rates, if sustained, could increase global import price levels by 11% and consumer price levels by 1.5% by 2023,â said the United Nations Conference on Trade and Development in a report. Expect cargo clearance at Indian ports to be extended, said Ravi Jakhar, strategy director for Allcargo Logistics.
Personal care brand Mamaearth is preparing a three-pronged strategy to guard against any potential impact – international logistics and imports, increasing the number of distribution and packaging shelves in the event of a foreclosure and l ‘intensification of security measures for ground personnel. âEven last year, with further planning, we still saw the impact due to the border closures and customs ports. So I think we are clearly looking to build an inventory of the materials that are imported. .. “said Varun Alagh, co-founder, Mamaearth. “Less dependence … can still lead to a breakdown in the supply chain for some products.”
Aman Gupta, co-founder and marketing director of boAt, which sells headphones and other electronic accessories, said the company plans to “hold more inventory (electronic products) than necessary because there is a sense of unpredictability in global supply chains due to the new Omicron Variant. ”
Lexship, a logistics company for small retailers in the e-commerce industry, is working with retailers to tackle port delays and flight cancellations that can impact hold cargo, said founder Padmanabhan Babu . âWe have heard that Chinese ports may not allow liners to dock for days. We have also encountered problems in the United States and Europe. About 150 ships were stranded outside of California. The delivery time for overseas export shipments has already increased from 10 to 12 days to 20 days, âBabu said.
The woes of semiconductors
According to a seasoned industry expert, mobile phone makers have two options: carry more components by air, which increases input costs and cellphone prices, or delay launches. âAlthough it’s a lean period between January and March, there are launches. Businesses can postpone if they can’t meet their volumes,â the person said.
Another senior executive in the handset manufacturing industry said semiconductor chip reservations were made a year in advance, but deliverables were not performing as expected at this time. âIf the semiconductor maker had taken 12 million control units for the year, it can now supply barely 6 to 7 million. The production for all customers has gone down and there is no way for the handset manufacturer to reserve for a longer period. current needs are not being met, âthe executive said.