As the world’s supply chains come under historic strain – following years of disruption from the pandemic and geopolitical changes – a new report has evaluated the impacts this is having on the retail sector. The study notes that supply chain leaders are most worried about inflation, the vulnerability of global logistics chains, and the growing need to enhance sustainability.
For its study into the most important challenges that are currently experienced in the retail landscape, Supply Value asked managers from leaders from various segments within the sector, from food retail and fashion to luxury products, to earmark challenges that are at the top of their agenda’s.
Topping retailers’ concerns were: inflation, supply chain vulnerability, sustainability, rising customer expectations, B2B & C2B logistics, labor market tightness, location optimisation, digitisation, dealing with black swan events, and market consolidation and competition.
Inflation
With current price increases experienced at home and abroad hitting unprecedented levels, inflation was the leading cause of uncertainty (and agony) for respondents. With the rate of inflation looking unlikely to slow in the short term, many retailers are having to find new ways of dealing with rapidly rising prices – balancing costs, without driving away customers.
Explaining the predicament many organisations face, Maarten-Jan van Fulpen, Industry Lead Retail at Supply Value, noted, “As a company, do you choose to pass on these increases directly to your customers or do you look for savings in other ways? What impact do the price increases have on market positions and relationships with customers and suppliers? This is currently on the minds of many retailers.”
Vulnerable supply chains
Over the last three decades, retailers in the world’s largest economies looked to outsourcing, and offshoring manufacturing, as a means of reducing production costs and therefore yielding greater profits. With cheap labour providing that, many companies simply settled for that status-quo, and relatively few therefore focused on optimising their entire logistics chains.
But with globalised supply chains having become difficult to operate amid pandemics and cooling international relations, those who did optimise their logistics are reaping the benefits, and coming out ahead.
According to Manon Slootman, Consultant at Supply Value, “due to the focus on globalisation and cost reduction, many supply chains have become quite fragmented. As a result, chains tend to be complex and interconnected, meaning they are susceptible to disruptions and delays. Nowadays we see that retailers are trying to shift their focus and invest in optimising their entire logistics network.”
“So the challenge is how to deal with such vulnerable chains. This includes increasing visibility in the chain, spreading risks and building strong and sustainable relationships with value chain partners.”
Sustainability
More and more consumers expect retailers to address sustainability and circularity in their strategies and business processes. At the same time, the vast majority of companies are not yet (fully) equipped for this and a large part of our society is a consumer society.
“For example, where consumers buy new products, because clothing is out of fashion or because a newer mobile model with the latest technologies is available, retailers generate turnover. But this is increasingly expected to be balanced against customer demand for sustainability and circularity – something which many retailers cannot deliver on without taking a critical look at their current business models,” said Slootman.
A sector in motion
Based on the study’s key findings, Van Fulpen and Slootman agreed that due to “both external and internal” factors, “the retail sector is in a state of flux” which requires new thought when it comes to logistics policies.
“Retailers are dealing with unprecedented inflation and labour market tightness. Raw material prices are rising, but energy and transport costs also pose strategic and operational challenges for companies. Despite these challenges, retailers must continue to innovate and invest in their business.”
Sourced from Consultancy.eu