Retail Therapy: Addressing Supply Chain Problems in Highly Uncertain Times
10th February 2021
Our Service Offerings & Thought Leadership team are working closely with the University Of Bath and the students of the MSc in Operations, Logistics and Supply Chain management to investigate the trends driving changes and the common ways organisations are tackling them. Next up, we looked at addressing retail supply chain problems in highly uncertain times.
There is no doubt that the pandemic has caused massive uncertainty and upheaval in the retail sector. Supermarkets, in particular, have been faced with unprecedented demand in a previously relatively predictable and steady industry. Consumer anxiety led to bulk-buying and stockpiling, resulting in mass stock–outs of key commodities such as toilet roll, cleaning products and flour. This in turn placed extreme pressure on the supermarket’s internal planning, operations and sourcing from global supply chains.
The unprecedented demand coupled with global-scale supply disruption challenged retail operations like never before. With local lockdowns and travel bans, organisations who previously focused on low-cost global sourcing from countries such as China and Vietnam, suddenly found their supplies cut off with no alternatives within their networks. This has called into question the viability of retail supply chains, and whether they are still fit for purpose.
In a highly competitive and congested marketplace, cost reduction and improved efficiency in upstream supply chains have been the focus for many retailers. However, with the pandemic leading to difficulties of sourcing from worldwide markets when disruptions in supply occur, deglobalisation may be seen as the way forward. By increasing localisation and establishing alternative supply routes, organisations will reduce their risk of stock-outs and transport failures. It may also provide additional benefits that support the retailer’s sustainability agenda.
Many retail organisations will have experienced massive under–utilisation of space and assets during the pandemic. This coupled with increased e-commerce demand paves the way for the amalgamation of retail and online assets. For example, so called ‘dark stores’ can be repurposed into fulfillment centers, offsetting operating costs and increasing online capabilities while still retaining vital assets. The combining of store and online inventory also allows for increased end-to-end visibility, but does require significant restructuring of business processes.
Investing in Supplier Relationships
Aside from forming new regional supply networks, organisations may also benefit from investing in the development of closer and more proactive relationships with current suppliers. During the pandemic, Waitrose invested £200,000 in supporting overseas farmers and their local communities. This attitude ensures the longevity of the relationship, and creates benefits for both parties – Waitrose has greater supply certainty, and suppliers can maintain high quality with the promise of continued business.
4C has a long-established history of working with leading retailers on projects from cost optimisation to supply chain design and transformation to deliver real business benefits and improvements in operational and commercial performance.