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News September 30, 2021

The Fourth-Quarter Crunch: What’s in Store for Promo in Q4?

Leading suppliers deliver in-depth insights on inventory status, production time, customer service and what distributors can do to best address challenges.

By  Christopher Ruvo

It’s crunch time.

The fourth-quarter holiday gifting season is traditionally the North American promotional products industry’s busiest time of year. The good news heading into Q4 is that demand for promo has increased dramatically from 2020’s pandemic-driven lows – something evidenced, in part, by the 27.3% year-over-year sales increase distributors averaged in Q2.

Q4 fourth quarter on orange post-it note

The bad news is that as distributors and suppliers work to meet the intensifying demand, they’re facing unprecedented – yes, that word truly applies here – supply chain disruption.

Soaring costs for shipping/ocean freight, importing delays caused by everything from port congestion to lack of space on cargo ships, unfavorable monetary exchange rates, reduced factory productivity in China, rising raw-material prices, insufficient labor levels and domestic transport capacity – it’s all part of the mess. For promo, the repercussions in 2021 have been inventory shortfalls, higher product prices, lower customer service levels, longer production times, shortages of important decorating materials like screen-printing ink, and delays in order delivery.

So as the mad dash to the Christmas finish line ensues, what can promo expect when it comes to the big challenges of inventory, production/delivery times and customer service? And what can distributors do to navigate the choppy waters? For answers, ASI Media turned to leading suppliers.

Inventory: ‘Will There Be Enough Products?’

The Short of It: Suppliers have worked hard to bolster stock levels, but inventory is poised to be tight, especially in certain categories. Given anticipated heavy demand, even SKUs that suppliers are deep in could diminish significantly as the quarter progresses. Importing issues – including COVID-related factory shutdowns in China and southeast Asia – along with other factors will probably make rapid, robust replenishment of popular products unlikely later in Q4.

Advice for Distributors: Educate yourself about inventory shortfalls and what’s causing them, then educate your clients. Get customers to place orders as far in advance as possible. Also, be adaptable: If a particular product is out of stock or not available in a certain color, partner with suppliers to find viable alternatives. If you order early enough, you should be able to find something that works, suppliers say.

Check out this infographic for quick-hit stats that succinctly explain the supply chain crisis.

Word From Suppliers: In Q4, suppliers are expecting strong demand across a broad range of product categories. These include, but aren’t limited to, fleeces, hooded sweatshirts, T-shirts, food gifts, blankets, winter accessories like scarves and beanies, outerwear, bags, drinkware, technology items, brand-name products, and even umbrellas and tailgating items.

Note that technology items have been more difficult than usual to source, partly because of microchip shortages. Materials like aluminum, steel, yarns and even types of plastic have been harder to obtain and more expensive to purchase. These realities could contribute to stock issues on everything from drinkware to apparel. Also concerning is the fact that some supply lines for items like bags and umbrellas have been temporarily hobbled due to COVID-spurred factory shutdowns in China, suppliers say.

When it comes to apparel inventory, Jeremy Lott says distributors can expect a mixed bag.

“We have tremendous inventory flow and are inbounding significantly more product today than at any time in our history,” says Lott, president/CEO of SanMar (asi/84863), the industry’s largest supplier, and a member of Counselor’s Power 50 list of promo’s most influential people. “That said, sales are very robust and we’re not able to both service current demand and rebuild inventory levels the way we would’ve hoped. We’re doing everything possible to return inventory levels to what they’ve been historically, including not taking on new customers.”

Brian Sharkey, director of supply chain-trade at alphaborder (asi/34063), promo’s second-largest supplier, also says that apparel inventory will be “extremely tight through Q4. Expect T-shirt inventory in particular to be very tight into Q1 2022. Accessories will most likely be the one area that will be the last to recover based on production and logistics issues. Expected recovery and safety stock growth will not take place until well into Q1.”

Power shortages in China are reducing productivity at some China-based manufacturers. Certain factories are even temporarily shutting down.

Prime Line (asi/79530), a former Top 40 supplier that’s now alphabroder’s hard-goods division, says that it’s continuing to build inventory and that more goods are in transit from overseas. However, availability of items will be contingent on demand, which could draw down even loaded inventories. “For example, we’re seeing more mega-orders than even in 2019, so while we do have a lot on order, we’re also seeing people ordering larger quantities, presumably because overall the inventory is scarce,” says Teresa Fang, Prime Line’s vice president of supply chain.

Polyconcept North America (PCNA, asi/78897), promo’s fourth-largest supplier, reports that it has invested heavily in its top-selling SKUs and that stock is deep in these items, which include typical holiday best-sellers like blankets, fleece and drinkware.

“We promote these with a ‘Deep Inventory’ tab on the home page of our website and keep it dynamically updated with stock on hand, as well as what’s coming,” says PCNA Chief Revenue Officer Holly Brown. Still, Brown advises that distributors should “get the inventory when you can – product is moving quickly. We’re seeing many distributors placing earlier orders to ensure selection and delivery.”

Jeremy Lott“We’re doing everything possible to return inventory levels to what they’ve been historically.” Jeremy Lott, SanMar

At Top 40 supplier HPG (asi/61966), SVP of Supply Chain Jing Rong believes that no particular product type or category will be in short supply at the company’s family of supplier brands. “Instead,” Rong shares, “we may be light on certain colors or styles, but with multiple alternatives that customers may choose from.”

Koozie Group (asi/40480), promo’s seventh-largest supplier, reports that it’s begun landing critical out-of-stock items in the U.S. for inventorying.

“Additionally, we’re focused on building our stock position on our most-popular SKUs,” says Adam Black, Koozie Group’s director of supply chain planning and logistics. “Because we’re focused on our best sellers in our core categories, our lower-selling items/colors may become lighter as we sell through inventory on hand. We’re also concentrating on driving improvements to our top in-stock items.”

Jonathan Isaacson, CEO/chairman of Top 40 supplier Gemline (asi/56070) and Counselor’s 2021 Person of the Year, says that the Massachusetts-headquartered firm’s inventory position is in “pretty good shape for Q4.” He adds, “Anticipating issues with the supply chain, we started to order last March and had record inventory in stock by July. We have continued to flow in inventory and, although we’ve had port challenges and delays, inventory continues to roll in weekly.”

Popular food-gift suppliers that include Top 40 firm NC Custom (asi/44900) and Maple Ridge Farms (asi/68680) report their stock positions are strong.

“We’re well-positioned given our manufacturing ability, plus our use of domestic vendors for those products which we just decorate,” says David Miller, NC Custom president and a Power 50 member.

Tom Riordan, president of Maple Ridge Farms, says that when it comes to the supplier’s inventory “distributors really don’t have to be concerned. However, for large orders with short lead times it is always wise to check with customer service.” Riordan noted that Maple Ridge’s inventory of hard goods -- cutting boards, gift boxes and baskets – is nearly 50% greater than it was a year ago. He further stated that “our sale section has fabulous pricing and offers great value because we are phasing out of the packaging.  But remember, the food is always fresh.  These are limited quantities and are sold on a first come first served basis.”***

Customer Service: ‘Will I Get the Support I Need?’

The Short of It: Various suppliers have ramped up hiring of customer service staff, honed service processes, and launched or enhanced online tech tools in an effort to best serve customers. Nonetheless, distributors are still likely to confront challenges when it comes to responsiveness from customer service teams – at least as compared to pre-pandemic expectations.

Continued staffing shortages – which many industries in the U.S. are experiencing – exist despite the hiring surge, and are one reason for the service issues. Another is that the supply chain/inventory fiascos have caused upheaval that’s cranked demand for customer service into overdrive, overwhelming (at times) even the most dedicated, fast-working teams. Finally, as suppliers onboard new hires to their service groups, it takes time for those hires to get up to speed, which can be frustrating for distributors that need answers on the double.

The United States has been experiencing labor shortages. Some states have been harder hit than others, according to this study.

Advice for Distributors: Wherever possible, use digital resources suppliers may provide on their websites for things like checking inventory, placing orders, tracking shipments and finding answers to basic questions. Strive to have all details of an order complete when you submit it; post-submission changes can slow processing and fulfillment – and increase the risk of mistakes. Also, leverage preexisting tight-knit relationships with supplier reps/firms. It’s also of critical importance to exercise patience to the extent humanly possible, and think of customer service pros as partners. You’re likely to get a better outcome if you do.

“Remember that there are people at the other end of the line, and they’re doing their best to help,” says Isaacson. “We’re all working toward a common goal.”

Word From Suppliers: Many suppliers echo Isaacson’s sentiments. SanMar’s Lott says the company has hired aggressively all year long for its customer service and warehouse teams.

“We’ve hired and trained over 400 people in customer service alone,” Lott shares. “Our calls are taking much longer though, as we help customers find alternative styles or research ETAs on backorders. Anything distributors can do to take advantage of all of our online tools to answer questions will make our service teams more available for issues that can’t be self-serviced.”

Those tools include a daily updated spreadsheet that can be downloaded from the SanMar website in which customers can find products with ample inventory depth. “This can be a great tool if you’re looking for product that you can confidently sell,” says Lott.

Elsewhere, PCNA has stepped up seasonal hiring and completed a cross-training initiative that will allow the company to have resources available to handle all hard goods and apparel orders across its Bullet and Leeds brands, says Brown.

“We recently completed several critical productivity-enhancing projects that will speed up how we process reorders and simple orders,” Brown notes. “We’ve refined our order processes for our Drop-Ship and Perfectly Packaged orders. These enhancements will allow our larger team to be about 25% more productive than prior years.”

Jon Isaacson“Remember that there are people at the other end of the line, and they’re doing their best to help. We’re all working toward a common goal.” Jonathan Isaacson, Gemline

Part of the PCNA customer service initiatives include organizing a tiered support model in which customers can get answers to common questions – “Has my order shipped?” for instance – from the PCNA website. Common pricing questions can also be answered online, Brown says.

“The next tier of support that customers can use can also be found online with our new ‘chat support’ offering,” says Brown. “When customers can’t find the answers to their questions online, they can chat with a support agent without having to wait in a phone queue. A support agent can handle up to five customer questions at the same time, which is significantly faster than a phone call where agents can only take on one call at a time.”

Meanwhile, alphabroder | Prime Line empowers distributors to place orders, check inventory and track shipments through its website, executives say. The company has expedited the hiring of more customer service pros over the past six months to be best positioned to respond to distributors when additional support is needed. To get the new hires functioning at high levels as fast as possible, alphabroder | Prime Line has enlisted additional personnel to fuel the training process.

“We monitor our performance on a real-time basis through the day, and adjust support levels where needed,” says Marc Held, the supplier’s senior vice president of sales and service for the U.S. “We also adjust staffing levels around peak-volume times of the day.”

Meanwhile, Gemline has hired and trained more sales and customer service pros. It’s also asking employees to work overtime when necessary. Additionally, the supplier has established an overflow team, which will be deployed to add capacity to customer service when needed.

Says Isaacson: “It still may take a bit longer to get to a person, and return calls may also be delayed. Please recognize that this is a stressful time for a lot of people, and we will do better when we work together.”

Fulfillment: ‘How Long Will Production & Delivery Take?’

The Short of It: Overall, expect that it’s going to take longer than what you saw before COVID-19 for your orders to be produced and delivered. Some suppliers say their production times are at or near pre-pandemic efficiency. Others say production time could take three times as long compared to what was standard before virus disruption. Holiday shopping pandemonium, including anticipated massive retail e-commerce sales, figure to place extreme pressure on domestic freight carriers like UPS, FedEx and less-than-truckload providers, all of which can slow delivery of promo orders to end-users.

Advice for Distributors: Order as far in advance of the in-hands date as possible. There’s not an industry-wide exact formula for how far in advance to order, suppliers say, as there are too many variables to provide one. Still, the rule of thumb is that the sooner you get a PO in, the better. Be sure, of course, to confirm stock availability.

Relatedly, suppliers suggest you order early in the day, and provide fast-as-possible proof approval. Also, be flexible with regards to product and decoration method. “It might be that an alternative product or decoration method can really accelerate delivery,” says Brown. “Complex offerings can sometimes add additional production time.”

Word From Suppliers: Raw-material shortages and labor shortfalls are top factors that have elongated production times for many suppliers.

Before the pandemic and during a chunk of it, Koozie Group’s standard production time was five working days on most items, the firm maintains. The company also offered a 24-hour service on hundreds of products. However, due to staffing constraints, Koozie has suspended the 24-hour service and it now takes approximately nine working days for production. “It can be a bit longer for some items and shorter for others,” says Black.

Top 40 supplier Sun Coast Merchandise Corporation/Sunscope (asi/90075) focuses on custom sourcing and design, as well as large-quantity programs in lieu of domestic in-stock business. With its orders being only run overseas, the average pre-pandemic order time was 45 to 60 days. Now, it’s 75 to 90 days. “Work with your clients and commit early,” advises COO Dilip Bhavnani, a Power 50 member.

AAA Innovations (asi/30023), a New Jersey-based supplier of hard goods that range from umbrellas and coolers to various outdoor items, reports that average order production time is 10 to 15 days. Pre-pandemic, it was three to five days.

“AAA has taken significant steps to ensure strong client communication and as efficient production as possible,” says CEO/President Jeffrey Nanus. “We have added to staff in customer service, production and logistics. We’ve also developed new software to better track current cargo status for those orders that are waiting for merchandise to arrive.”

Tony Gaston“We’re making significant investments in resources, equipment, and technology to minimize our challenges today and improve our processes and capabilities for the future.” Tony Gaston, HPG

At HPG, production time varies. The supplier says the pace has quickened from slower periods experienced earlier in the pandemic, though it’s still not quite back to pre-COVID run times.

“Simpler orders that took one day prior to the pandemic, may have taken three days following shutdowns, with the turnaround time for larger and complex production increasing from five business days to 12 business days,” says HPG COO Tony Gaston. “Fortunately, over the past several months, production times across HPG are approaching those from our pre-pandemic state. We’re making significant investments in resources, equipment and technology to minimize our challenges today and improve our processes and capabilities for the future.”

Meanwhile, Gemline and NC Custom report that order times are in a three- to five-day sweet spot – the same as before the pandemic. Maple Ridge’s production spans haven’t changed either, clocking in at five working days when shipping to one location and 10 days when shipping to various locations, Riordan says. Once cleared to production, PCNA says average turnaround time before the virus outbreak was one to five days for typical order sizes – a range it generally continues to operate in, according to Brown.

Regardless of production lengths, all suppliers urge distributors to be mindful that there’s the potential for delivery delays to exacerbate challenges in the quarter, given what freight carriers are likely to be up against.

“Build in cushion time to ensure timely compliance to customer deadlines,” says Isaacson. “UPS and FedEx are going to be straining their capacity, so ordering before the holiday is especially important this year. The whole system is going to take a bit of time to get back into shape, but working together, we can manage it.”