Amid congestion, the risk of oversupply cannot be ignored

Today, the global supply chain is in an unprecedented state of tension. Many places in Europe and the United States are facing shortages, especially in the toy peak season in the second half of the year. Most physical stores and e-commerce platforms are out of stock. In order to maintain normal sales, many sellers have begun to purchase goods on a large scale, but at the same time, they must also pay attention to the risk of oversupply.

A representative of the well-known toy company Kids2 said: " Customers are just throwing orders like crazy now, so it's hard to determine the true level of demand, " and believes that a key danger in the current environment is that many sellers will rush to order a large number of goods around the holidays, which will lead to oversupply of products once the crisis eases.

Economists say spending on items such as furniture and computers that surged during the pandemic has cooled, and demand for many consumer goods will decrease in 2022, putting downward pressure on prices as supply chains ease. Global producers face such risks. Sellers have already seen signs of easing supply, including a slight drop in the cost of booking shipping containers.

In the current supply crisis, the natural reaction of many retailers and other businesses that rely on remote factories is to increase orders because they are worried that they will run out of goods before they replenish their inventories. This amplification of the problem creates a stronger surge in orders, which in turn produces a bullwhip effect.

In addition, the world is also facing the risk of energy shortages. As a manufacturing powerhouse, many factories in China are currently rationing electricity, and some factories have stopped production until the energy problem is resolved. There is also the port congestion problem currently faced by the United States, mainly concentrated in Southern California, where more than 100 ships were waiting to enter the ports of Los Angeles and Long Beach earlier this month .

One seller said that this situation will change again in the coming months, and his operations team is now focusing on sales at the end of this year and the beginning of next year, and will adjust the strategic direction according to changes in the situation.

Various situations change in a complex manner, and sellers must also decide the investment ratio based on their own actual situation and must not blindly follow the crowd.

Supply Chain

E-commerce