A confluence of regional and global factors have led to the widely reported current crisis in our supply chains.
In the UK, we have seen huge delays on the import and movement of goods, firstly due to the effects of the pandemic and now from the Brexit-related labour shortfalls, restrictions on labour movement, increased border controls and now fuel shortages. In some instances, Heavy Goods Vehicle (HGV) drivers will soon need to complete 700 pages of documents to gain entry to the UK and could point to a chronic shortage rather than the acute challenge that is being positioned by some.
And it’s not just being felt in the HGV cabs. The impact of Brexit is having a much broader impact on essential retail through produce and supply labour shortages owing to the dramatic drop in available migrant workers.
It may seem like a perfect storm, but should we expect more from our food retail supply chain? Should it not be more resilient?
Some say that the issue is undoubtedly exacerbated by the prevalence, and over-reliance, of the just in time (JIT) fulfilment model in retail and supply. The idea that products arrive in store just as the existing supply is running out is fine in steady-state times, but in periods of flux it becomes difficult to manage, operate and scale the response effectively.
The result is felt almost immediately as many retailers are experiencing empty shelves as products take longer to move through the supply chain. In the most recent shopper research performed by IGD, 56% of customers have experienced a shortage in the product they have tried to buy recently – both online and in-store. These shortages are most common in a select few categories; fresh produce, soft drinks, dairy, bakery, and meat.
Consumers can be understanding, but they have limits. Research shows that poor on-shelf availability is one of the biggest drivers of customer dissatisfaction. The omnification of retail has made access to products much easier and low availability can encourage brand switching, basket abandonment and even channel switch. This will do little to reverse the 8% of revenue that retailers lose through poor availability – the combination of this plus intense competition means availability is an issue retailers cannot ignore. Retailers are currently playing a furious game of whack-a-mole, dealing with supply chain issues that are popping up everywhere.
Many retailers will be scrambling to inject pace into their distribution model and get product onto the shelf as quickly as possible, the question most will be asking is how can they tackle these supply chain problems at a store level?
At Retail Insight, our AvailabilityInsight product is more than just an alerting system, it is an essential tool for Operations and Supply Chain teams to leverage in supporting supply chain effectiveness.
Most JIT models rely on inventory data to appropriately order for the store – simply put, as the product supply drops close to zero or a pre-determined threshold, an order for new stock is submitted and then, once this arrives, the in-store team will replenish the shelves accordingly. Yet, this approach relies heavily on the accuracy of the inventory record, if it is out of date or incorrect then the replenishment model becomes far less effective. AvailabilityInsight can detect phantom inventory and allow store teams to bring their on-hand inventory data back to a more accurate baseline or automate the fix through head office – stock ordering becomes more accurate and supply chain and retail execution is improved.
Replenishment models will also rely upon advanced forecasting techniques, designed to consider numerous variables to dynamically model the level of stock needed in a store. Needless to say, the fluctuations in demand have challenged this approach during the pandemic period. Our retailer clients use AvailabilityInsight’s outputs as part of their forecasting model, allowing more appropriate knowledge of when a product is not on the shelf and so making the forecasting even more effective.
There are still some categories in which the inbound supply to stores is governed and owned by the suppliers themselves through direct store delivery (DSD). In most cases, the DSD process is difficult for Operations and Supply Chain teams to monitor and manage due to poor visibility, differences in reporting standards, and just the nature of this decentralised approach to replenishment. AvailabilityInsight provides a single source of truth when it comes to DSD performance, allowing retailer teams to clearly see the split of DSD vs. internal supply chains, meaning governing performance and other service level agreement related terms becomes far easier to manage. The resulting impact is that DSD performance rebounds, improving product availability and customer satisfaction.
Across the coming months, we should see those retailers that leverage available data to ameliorate the impact of a sub-optimal supply chain and limited labour resource rebounding best. Solutions that provide insight to maintain more accurate inventory positions; optimise store-product allocations and volumes, and guide limited labour to issues that matter the most are already here to sure up supply and operational performance.