Oh The Weather Outside Is Frightful And The Supply Chain Is Already Disrupted
We used to be accustomed to ordering holiday gifts for clients, employees and prospects as late as October. Way back then, bad weather was about the only thing that disrupted deliveries. However, that simply doesn’t hold true anymore. In fact, ordering in October was considered getting a jump on holiday shopping. However, that simply doesn’t hold anymore. We are living in a whole new world.
There Is No Time Like The Present
Holiday hoodies, apparel items of any kind and pretty much any other item that you like to give to employers, employees and prospects may be a little more difficult to come by this holiday season, unless you place your orders now. And by now, I mean now. There isn’t a moment to lose as the supply chain for goods and services are largely affected by the global pandemic. The domino effect is really coming to light now. And it is especially visible in the world of apparel goods.
We rarely think about the supply chain, however the global COVID-19 pandemic has brought it front and center for every industry. I received a letter from one of my long-term and most dependable suppliers, some of which I will share with you to drive home the point that we are all part of a supply chain that has been severely impacted.
The point this supplier is making is that no matter what industry you are in, you are part of a supply chain and in the apparel world the supply chain is more complex than most. “We have farmers, yarn spinners, textile manufacturers, cut-and-sew factories, suppliers and distributors. This intricate supply chain is knit together (no pun intended) by a complex transportation and logistics infrastructure. Right now, that complex supply chain is out of balance and it is creating challenges for all of us.”
He Who Hesitates…
What this points out to me is that there is a whole lot of waiting going on. And remember this: Even when the supplies come in there isn’t going to be enough to fulfill all the orders at once. On top of that, we can all expect price increases. Here’s why according to my trusted supplier.
There are four key areas that are driving cost increases from our factory base:
1 The cost of raw materials. Cotton has increased an average of 31% year-over-year. Cotton prices, like any commodity, are driven by supply and demand. While global demand has recovered nicely, supplies have been dramatically reduced by the prohibition of Xinjiang cotton (which, by some reports, accounts for up to 20% of the world’s cotton). The cost of polyester has also experienced a roughly 29% year-over-year increase.
2 Exchange rates. The U.S. dollar has weakened against many global currencies, including the Chinese Yuan and Honduran Lempira. We pay our global vendors in dollars. They largely pay their workers and suppliers in local currencies. When the dollar weakens, that means they are earning less in local terms than they did when the dollar was strong.
3 Ocean transportation and logistics. The cost of shipping goods across the ocean has increased by 293% year-over-year.
4 Generalized System of Preference (GSP)—also better known as tariffs. In the last few years, we moved many of our bags out of China to avoid the Section 301 tariffs. Many of our bags were resourced to the Philippines and Indonesia, as they’ve benefited from the GSP duty exemption. That preference expired at the end of last year and has currently not been renewed. While we are watching D.C. carefully and are cautiously optimistic, we have no way of knowing the timing of when the GSP might be renewed.
Think Holiday In July
You really do have to complete your holiday gift shopping before end of month to make sure you get the items you want for the holidays. This may even be cutting it too close and you may end up with New Year’s gifts after all. Give us a call today and we’ll do our best to get you at the top of the holiday shopping list.