Christmas sales has always been what businesses look forward to every year, as sales soar leading up to and post-Christmas and the new year. However, in the upside-down world of the COVID-19 pandemic, many businesses are buckled up for a reduction in profit this year. This has all to do with the current global supply chain challenges and bottlenecks that reduces the capability for businesses to obtain goods to meet the high seasonal demand. This is also driving up the cost of goods.
Global supply chain issue
The pandemic has caused a severe global supply chain problem. Many global suppliers are unable to produce goods as their factories were forced to shut down due to COVID-19 outbreaks or were impacted by the strict government rules and regulations put in place to help prevent the spread of the disease. For the factories that are able to operate, only a limited number of workers can be present in the factory according to the COVID-19 safety measures. Where there were cases of exposure or close contact to a person positive with COVID-19, many workers were forced to be in quarantine at home.
Suppliers were also unable to deliver finished goods promptly due to lack of resources and mobility restrictions. Many ports including Singapore are experiencing extreme port congestion due to tighter border controls.
Lead time from ordering to receiving goods is now taking much longer with limited availabilities. “Supply chain disruptions are still plaguing local manufacturers as they struggle to cope with reduced margins from the higher cost pressures,” said Ms Sophia Poh, SIPMM’s vice-president for industry engagement and development.
On the bright side, Singapore’s economy has been growing at a faster pace than previously predicted, with GDP growth expected at 7.0 per cent. We have seen a strong recovery in the import sector, with higher activity compared to pre-COVID. In August 2021, total imports was USD33 billion compared to August 2019 at USD29 billion. Overall manufacturing has now recorded 15 months of consecutive expansion.
As the population has been spending most of the last 18 months at home, there is a pent-up demand from consumers who are ready to start spending and catching up on lost time. Despite the supply chain challenges, it is expected that business sales should be positive over the Christmas period.