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11/09/2021

Overcoming supply chain roadblocks for private brand

Daymon executive discusses product shortages, turnover and the supply chain crunch on store brands.

As the world continues to face prolonged supply chain disruptions, private brand manufacturers continue to grapple with challenges like lockdowns, labor shortages and escalating raw material costs at times crippling manufacturers’ ability to recover.

The current global supply chain crisis — and inability to effectively deliver critical materials such as packaging— poses a significant challenge for private brand producers. Delays in delivery have forced many manufacturers to halt production, further exacerbating the supply deficit. Private brand manufacturers need to get creative to help mitigate the impacts of these delays to satisfy their retail customers and consumers alike.

Not unlike other sectors of manufacturing, packaging producers have been hit hard by the supply chain woes facing the world. Bottle manufacturers, cap producers, box makers and label printers alike have battled shortages of raw materials, escalating costs, transportation delays and more. As all finished goods manufacturers need packaging, when those goods are missing or delayed, the production cycle stops, with private brand manufacturers being particularly susceptible.

While many have attempted to streamline their production, the nature of producing private brands means carrying a wide variety of retailer specific labels, caps, bottles, etc. While national brands may carry only a handful of different labels for their production, private brand producers carry hundreds of individual labels unique to each of their retail customers. Additionally, these producers maintain unique box configurations specific to their retailers — adding further complexity to the production cycle. The inability to efficiently move goods over land or sea has crippled manufacturers ability to produce and service their retail customers. Based on the unique challenges faced by private brands, it is unsurprising to see a high incidence of out of stocks.

Along with the challenges facing production, labor shortages are delaying the arrival and departure of packaging materials. According to the U.S. Bureau of Labor Statistics, quit rates within the transportation sector are among the highest in the nation, with over 1 million associates choosing to leave their job in August alone. The significant turnover rates have compounded the challenges in an industry that has already been operating in labor deficit. That spells trouble for many private brand manufacturers that are relying on the arrival of packaging and boxes to produce and ready shipments of goods for retailers. 

Manufacturers have been working diligently to try and offset supply chain challenges by extending lead times on key raw materials and packaging, and holding elevated levels of inventory to work through any delays that might occur. Despite these best efforts, the fluid nature of today’s supply chain environment makes it impossible to anticipate every potential shortfall. The domino effect of this ultimately culminates in product missing from store shelves.

Now more than ever, collaboration and partnership between private brand manufacturers and retailers is essential to help mitigate the potential impacts on the consumer. Extended lead times, willingness to carry elevated levels of inventory, and full truckload ordering are all opportunities to help maximize the utilization of available transportation and overcome challenges.

Ultimately, a comprehensive plan is needed that will address the shortage of drivers and equipment needed to efficiently move goods to and from manufacturers. There will be no quick fix to today’s problems, as we anticipate that transportation will continue to be a challenge through much of 2022.  Knowing that, it is crucial for private brand manufacturers and their retail consumers to work together ultimately for the benefit of the consumer. 

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Jonathan Finch is the senior director of client services, nonfoods/HBC at Daymon. He has a B.S. in hospitality management from Cornell University.

 

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