A Lesson in Powerlessness and the Global Supply Chain
When I started Kibou I knew that I would learn many, many things. For starters, I didn’t know how to sew or design a bag, and I’d never worked in fashion or run a business. These weren’t small things to overcome, but I was undeterred. I truly love to learn, and the challenge of building a successful business lit a fire under me. I have spent the last 4+ years doing so much learning--through classes and conversations, trial and error, webinars and seminars, and lots and lots of listening to our customers.
All of this, at least to some extent, I expected. What I did not anticipate was the steep learning curve and critical impact that global factors like a pandemic and a complete breakdown in the supply chain would have on our budding business.
So what IS Supply Chain, anyway?
The global supply chain refers to the interconnected factories, processing centers, and shipping providers that each rely on one another to create, transport, and distribute raw materials and consumer goods.
And as we are learning, when there are clogs in the system, the impact is all-encompassing, and affects the supply of everything--large and small: from food ingredients to computer chips, soda to cars.
The New York Times reports, “Consumers in the United States and other wealthy countries had taken pandemic lockdowns as the impetus to add gaming consoles and exercise bikes to their homes, swamping the shipping industry with cargo, and exhausting the supplies of many components. After a few months, many assumed, factories would catch up with demand, and ships would work through the backlog.” But they haven’t. In fact, far from it.
“Ordinarily, the peak demand for trans-Pacific shipping begins in late summer and ends in the winter, after holiday season products are stocked. But last winter, the peak season never ended, and now it has merged with the rush for this holiday season — reinforcing the pressure on factories, warehouses, ships and trucks.”
“Delays, product shortages and rising costs continue to bedevil businesses large and small. And consumers are confronted with an experience once rare in modern times: no stock available, and no idea when it will come in.” Outdoor gear company Columbia’s CEO, Timothy Boyle, said of the supply chain “It’s sort of like, every day when you get up in the morning, you turn on the lights and the lights always work.” Now suddenly we can’t count on that.
According to Vox, “companies and industries have spent years — if not decades — fine-tuning [their supply chain] for maximum efficiency and maximum profit.” While here at Kibou, we’ve had barely two years to begin navigating this complex system, nearly all of which has occurred during a global pandemic.
Step-by-step: From component parts to product at your door
When we began Kibou, it was our hope to manufacture and source all materials in the U.S. We spent nearly nine months researching and sourcing zippers, nylon, buckles, and belts to find the best quality and begin pricing out labor. We learned the ins and outs of importing raw materials and the high price of moving goods and setting up a manufacturing and distribution process.
Ultimately because we wanted to be able to offer an affordable bag to a broader customer base, we sought an overseas manufacturer who could source and produce ethically, and ensure both quality and safety standards for our workers and our products. We were incredibly lucky to find a partner in China who manages the logistics on the ground for us. With Judy’s help, we’re able to navigate the complex process that begins when we order raw materials and ends when your bag is quality checked and mailed to your door.
To understand why essentials like paper towels may be missing from your store shelves, or you why still haven’t received the couch that you ordered over 6 months ago--or in our case, your long-awaited brown Kibou--it’s helpful to visualize the sequence of events that takes place...and all the places where delays can (and do) occur.
Curious to know what that process looks like?
Where might delays set in along the way? In short, everywhere.
Consider this example from the New York Times:
A shipping container that cannot be unloaded in Los Angeles because too many dockworkers are in quarantine is a container that cannot be loaded with soybeans in Iowa, leaving buyers in Indonesia waiting, and potentially triggering a shortage of animal feed in Southeast Asia.
“Behind every sold-out product ‘there’s a vast supply chain linking raw materials to factory floors to distribution centers.’ reports Vox’s Hilary George-Parkin. “The pandemic has created a ripple effect in this system that often leaves, quite literally, minimal room for error, since companies rarely stock up on excess inventory. As a result, over a year later, businesses and suppliers are still grappling with the fallout.”
While we at Kibou are currently awaiting our bags’ arrival from ocean transport, we’ve learned that the term “port jam” is an actual thing where too many boats are waiting at the harbor to unload. There is currently an “historic surge of cargo volume coming into our ports,” according to Tom Bellrud, the chief operations officer of Washington’s Northwest Seaport Alliance.
See a GPS image below of the current port jam, and our boat (in the red box) awaiting docking in mid-September:
But the delays do not begin or end at the port. “Inland freight hubs, where cargo is sent from the ports, have also been inundated with containers of goods… Congestion on rail networks and a labor shortage of truck drivers and warehouse workers has led to big backups at cargo facilities.’ Companies are struggling to unpack shipping containers and get them back into circulation. As a result, shipping containers are in short supply, even though there should be enough containers to handle global demand. Too many are just stuck in circulation and stay unused,” According to the Wall Street Journal and Vox.
So what exactly does that look like? Here’s a visual breakdown of our process from raw materials to your door and all the delays in between:
So what does that mean for small businesses like ours?
For starters, it means higher costs. It also means greater risk in production projections and significantly longer lead times.
While we’ve done our best here at Kibou to anticipate sales for the coming months, the order that we placed with our factory in May is still sitting in a container waiting to be unloaded, processed, and delivered to our fulfillment warehouse.
As a growing company having sufficient inventory is a challenge on a few fronts:
- It’s always tricky to know exactly how quickly sales will grow, and as a self-funded company, it’s key to our success that we are financially responsible.
- We are always improving and evolving our products. Because we continue to incorporate your feedback into the quality and function of our bags, we manufacture on a smaller scale so that you always get the latest version of Kibou available.
- The world of manufacturing as we know it has never been this way! We’re all learning and finding ways to do better.
And now an additional challenge has presented itself: the price of moving goods to the United States from Asia is up as much as tenfold since the beginning of the pandemic. But we’re not ready to pass that cost on to the consumer. Instead, our hope is that we can weather this storm by finding new, creative ways to engage with our customer base and bring them back to our store for purchases of items--some new and some best sellers--that we do have in stock.
Unfortunately, while our own costs have increased, because we are out of stock in multiple colors, customer orders have decreased. Each time that a prospective customer comes to our website and sees that a product is out of stock, they are less likely to make a purchase or preorder. And we totally understand. No one likes waiting!
Of course we know that Kibou is far from alone. We’ve talked with other clothing and accessories companies and heard the same story nearly verbatim. The increasing costs are a domino effect that begins with raw materials and very likely means that all of us will begin to see prices rise in nearly every category of consumer goods we purchase--if we haven’t already. As the Times said, “The world has gained a painful lesson in how interconnected economies are across vast distances, with delay and shortages in any one place rippling out nearly everywhere.”
For us at Kibou, this lesson isn’t so painful. We know we will weather these challenging times. It is, however, a lesson in powerlessness. Much like the lesson each of us had to learn in the earliest days of parenting--recognizing how many factors impact our little ones and our day, and how very little is within our control--we’ve taken a step back.
Those lessons from the newborn days very much translate to so many aspects of running a business. And these trying times are no different. We will do all that we can to be one step ahead. We will communicate with transparency with our team and our Kibou family (all of you!) And we will continue to learn, and grow, and celebrate all the beauty in between.
CURIOUS TO HEAR MORE? Listen to The Daily from Friday, October 15, 2021:
"The Great Supply Chain Disruption"
Photos courtesy of Rinson Chory, Ian Taylor, Barrett Ward and Ruchindra Gunasekara via Unsplash. Icons courtesy of Noun Project.