As we get closer to the end of another turbulent year for procurement and supply chain, the 4C team shares their lessons learned in 2022 and predictions for the year ahead.
This year with Fashion, as a result of rising consumer demand, we have seen a drive towards effectively collaborating with key suppliers in identifying ways to become more ethical and sustainable. In addition, challenges still continue as a direct result of Covid-19 i.e. importing materials like cotton from China as well as supply chain constraints, says Gagen Rai, Senior Consultant at 4C Associates.
Food and beverage
“Constrained food supply chains required close management, agile sourcing and formulation changes in the F&B sector, driving food manufacturers to utilise R&D to reformulate products to reduce cost in 2022.”, says Kevin Moore, Senior Manager. He also believes consumers are now increasingly focusing on “Every Day Low Value” rather than multibuy or other promotional mechanisms, as a result of the cost of living crisis.
Hospitality and leisure
Jonathan Williams, Senior Manager highlights that the marketplace was largely in recovery mode post-COVID in 2022 focusing on building back sales and profitability which has created a number of opportunities. This included the development of supply chains, re-design of the operating model in the new world, and building new functional vision and strategy whilst in the cost management environment helping organisations manage their direct and indirect costs and utilities. The challenges in the marketplace this year, according to Jonathan, have included labour and packaging shortages, the need for supplier contingency, inflation and subsequently managing prices back down, as well as menu optimisation, pricing, re-skilling and digitisation.
General merchandise and DIY
Adapting omnichannel operations for the return of the high street footfall post pandemic, the emergence of marketplace concepts as a means of offering expanded ranges without the supply chain costs and risks, in addition to the rising costs, raw material availability and the impact of Russia war impacting cost prices and supply chains were the key challenges according to 4C’ Director Andrew Davidson.
Andrew believes that there will be softening of volatility in pricing as raw materials settle down and he expects reduced retail footfall and lower online sales as the cost of living hits home – particularly in the home and garden sector. “This will be a tough time for retail due to overall reduced spending – retailers will be looking to develop more ‘essential’ ranges to retain customers and enable them to compete with the discount sector. The discount sector may benefit, but will also feel the pain as their core demographic customers are the hardest hit by the cost of living crisis.”, added Andrew.
It has been a difficult year with unprecedented cost inflation leading to retail inflation and a more marked move by customers to discounters who continue to gain market share. Simon Latham, Senior Manager at 4C Associates notes trading patterns returning to more normal pre-pandemic levels. Whilst online sales penetration has declined, overall performance remained ahead of pre-Covid levels.
Simon expects next year’s focus to be on deflation to regain volumes as products become more affordable. The discounters are likely to continue to have ambitious plans with new store openings, and this will continue. “For the first time, there is a feeling that some retailers are beginning to put their people above profits – wage rises have been granted particularly for shop floor workers to ease the cost of living, with a significant swing to value-orientated brands is emerging – the major players are quickly extending value and entry price point ranges.”, concluded Simon.