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12/01/2021

What 5 Major Retailers Are Saying About the Supply Chain Crunch

Supply chain disruptions have been in the limelight throughout 2021, and retailers have leveraged their scale to develop new connections to ensure their shelves are stocked.
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supply chain

Consumers have also taken action, with many starting their holiday shopping earlier in the season in fear that some items will be out of stock. As the retail industry powers through the rest of the holiday shopping season, retail executives are investing in supply chain solutions for the coming years. Many have found workarounds, such as chartering their own vessels to import goods and bringing goods into smaller U.S. ports with less congestion. While these tactics have helped from keeping shelves bare during high demand, supply chain issues aren’t going away anytime soon.

Major retailers have been most successful at finding ways to mitigate the supply chain crunch, with the ability to build out new distribution facilities and hire thousands of new employees focused solely on their increasingly sophisticated supply chains. However, most have seen their costs rise and delays increase. 

Here’s what executives from five major retailers said during recent earnings reports about their supply chain issues and how their companies have been impacted:

Walmart

“Walmart U.S. gross profit rate declined 12 basis points, reflecting increased supply chain costs. We're seeing inflationary cost pressures in some areas and our merchants remain laser-focused on taking the necessary steps to mitigate supply chain congestion while working with suppliers and monitoring price gaps to manage margins appropriately. ….The steps taken to mitigate transit and port delays have positioned us well, including adding extra lead time to orders, chartering vessels for Walmart goods, rerouting deliveries to less congested ports, and expanding overnight hours at key U.S. ports.”

-Brett Biggs, CFO and executive vice president of Walmart

Amazon

“Disruption to the global supply chains and inflation in the cost of materials such as steel and services such as trucking have also raised our cost of operations. We estimate the cost of labor, labor-related productivity losses and cost inflation to have added approximately $2 billion in operating costs in Q3, particularly in August and September. … In short, our operations are normally well-staffed and optimized to be in-stock and to deliver to customers in one to two days. Labor shortages in supply chain disruptions upset this balance and resulted in additional costs to ensure that we continue to maintain our service levels to customers…. As you look to Q4, we've incorporated this nearly $4 billion of added costs into our operating income guidance range.”

-Brian Olsavsky, CFO of Amazon

The Home Depot

“Beginning in the second quarter of last year, our merchant inventory and supply chain teams leveraged tools and analytics and worked with our vendor partners to adjust our assortments and in some cases, introduced alternative products. The teams also built depth in job lot quantities and high-demand products. We improved our in-stock levels in the back half of last year and we've been able to sustain and in some cases, improve our levels, even as home improvement demand remains elevated. ….There is still product, and we have 95-odd ships in total parked outside L.A. and Long Beach. And we track our containers on those ships and also get onto the ports and off the port. So we're not too terribly concerned.”

-Ted Decker, COO and president of The Home Depot

Costco Wholesale

“From a supply chain perspective, the factors pressuring supply chains and inflation include port delays, container shortages, COVID disruptions, shortages on various components, raw materials and ingredients, labor cost pressures and [trucks] and driver shortages. ...Even on the domestic side, various major brands are requesting longer lead times, and [in] some cases, [facing] difficulty in finding drivers and trucks on short notice. Lead times on ingredients and packaging have been extended in some cases. So planning is crucial, [and] I feel our people have done a great job with that over the last several months. Also, we're putting some limitations on key items, like bath tissues, roll towels, Kirkland Signature water [and] high-demand cleaning-related SKUs related to the uptick in Delta-related demand.”

-Richard Galanti, CFO of Costco Wholesale

Target

“At the intersection of our overseas and domestic supply chains, the team continues to work around significant port delays, diverting shipments to less congested entry points, and relying on airfreight in certain cases. And while Target’s port operations have long been considered best-in-class, our team has been actively collaborating with government and port officials to help find solutions that will allow everyone's containers to move through the ports more quickly and we're encouraged with the changes that have recently been put in place.”

-John Mulligan, COO and executive vice president of Target