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Addressing Our Supply Chain Issue With Transparency And Concrete Solutions

Addressing Our Supply Chain Issue With Transparency And Concrete Solutions

1. Our Apology

We've all heard of it it, from big to small businesses, everyone and their mother is facing supply chain issues. Inconveniently, restaurants are crossing out items on their menu, retail stores (like Uniqlo) are delaying their launch, even our shipping box factory is often out of stock for the most common sized corrugated cartons.

EqualRXN, unfortunately, couldn't escape the issue that is plaguing everyone globally. Our two and only products: Oat Milk PHA Serum and the newly launched Mushroom B5 Toning Cocktail are out of stock, while the latter has been out of stock since the end of January, more than a month.

First of all, we would like to sincerely apologize for being out of stock for that long, we hold high standards for ourselves, and we do not think this is acceptable, that's why we would like to take this opportunity to address the issue and show our dedication to provide a better customer experience in the future.

2. Where Is The Issue Coming From

Every business's story is different. Some beauty brands could be impacted by raw material or components shortages, while others can be affected by the transportation process or labor shortages.

For example, in November of 2021, there was a shortage of urea (a common moisturizing agent in skincare) in Korea. Since urea is also used in diesel vehicles and factories, the shortage could impact Korea's 2 million diesel vehicles, mostly cargo trucks, slowing down transportation and cargo delivery.

Luckily, our supply chain issue was not as complicated as some other companies are facing; it was due to a combination of under-forecasting, pricy transportation, and port congestion.

2a. Underforecasting

Forecasting combines data from the past supply with insights and understandings about demand, to help brands make the best decisions – whether it's stock inventory, cargo booking, or budget planning. Depending on the product, there are different forecasting methods, for example, something that expires fast and has a quick usage rate, like milk, will employ a different method for predicting its demand than tires for cars.

To have an accurate forecast, past data must be collected to predict the future demands, however, EqualRXN is not yet 1 year old with only 1 product before the toner launch, our past data points are extremely limited to predict the toner launch quantity.

2b. Pricy Transportation Cost

Air shipping cost is at a never-been-seen-before high, we were quoted 3500 USD for 480 pieces of serum, about 10 boxes, each as big as a medium Amazon package, which was insane.

To launch our Mushroom B5 Toning Cocktail in late December 2021, we had our supplier airship 5 boxes to the US, it was costly, but it was worth it since we wanted to launch the toner in that time. However, if air shipping rates were cheaper, we would have had them ship more boxes to cover the already under-forecasted demands. Instead, the rest of the toners came to the US by ocean shipment since ocean shipment is significantly cheaper than air freight.

2c. Crazy Port Congestion

In a normal circumstance, the Mushroom B5 Cocktail Toner would have arrived at our warehouse a month after dispatching from Korea, in late January 2022, but unfortunately, we live in a time that's abnormal.

The Los Angeles-Long Beach port was and is still extremely congested. Cargo ships are waiting to be unloaded, on the ocean, for a month or more. There could be many reasons that caused the port congestion: labor shortage, not enough automation in its workflow processes, capacity constraints, and reasons we wouldn't have thought of: shortage on truck chassis, can affect how many days the container will get transported from the container yard to the container freight station (CFS) warehouse for de-consolidation, before its delivery.

3. Our Solutions

As we grow and learn from our mistakes, we vow to prevent the current supply chain nightmare from happening again, or at least not to this severity. Here are 2 solutions we will employ in our future business making:

Build a Forecast System
As a new brand, we did not have enough data from last year's sales to determine what the future demands would look like, but we did look into external trends and existing data to build a forecast system that will be able to better determine our sales, launch, and on-going sales quantities for the future. We will hold enough inventories in our US warehouse and prepare for any big sales or launches, PRs, and more.

Search For a Warehouse in Korea

Perhaps this is the best way to stock up some safety stock and be able to react to a spike in demands quicker.

The major frustration we had for the Mushroom B5 Toning Cocktail launch was that when we needed more toners, all the quantities we had were stuck on a boat, at the LA port, and we had no more quantities in our Korea factory to the airship to us. Establishing a warehouse in Korea will resolve this issue; if we run out of the product, a message to our Korean warehouse and simply ask them to airship some boxes to us can reduce the out-of-stock time from a month to less than a week. Even though this means more financial investment on our part, however, we do believe it's worth the investment for a better future customers experience.

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