What a difference 18 months makes.
Retailers in the UK are highly optimistic about their supply chains, according to the GreyOrange Retail Week Supply Chain 2024 survey of 50 retail supply chain and technology leaders conducted in January. Some 75% feel very or somewhat positive about the state of their supply chains, compared with 62% last year.
The sunny attitude represents a sea change from the depths of the coronavirus crisis, which disrupted supply chains and contributed to stock shortages, manufacturing holdups and other problems. In August 2021 the first mile of the retail supply chain was blocked up by a whopping 353 container ships idling outside ports around the world – twice the number from earlier that year. Customers weren’t getting the products they wanted, resulting in reduced sales.
But feeling good because a tsunami of challenges has abated is different from being optimistic because there aren’t any. Top UK retailers face various issues, including supply chain staff hiring and turnover, inflationary price increases, Brexit complications, automation, and much more. Here’s a peak at the report’s revealing retail supply chain findings.
Automation matters in the retail supply chain
- More than 50% of retailers see automation as critical to transforming their supply chain
- Over 50% are making the most of AI-driven automation in their supply chains
- A significant 38% of executives surveyed said they were not making the most of automation in their supply chains
Big challenges for retailers
- Shrinking demand. As customers came out of pandemic lockdowns, they have been buying less merchandise online and more services like restaurant meals and travel.
- Overstock. Today’s problem is yesterday’s challenge (blocked first mile of the supply chain) inverted: Retailers have plenty of inventory – in many cases too much – which makes warehouse management more challenging. Reversed supply-and-demand dynamics result in lower prices.
- Overcapacity. Smaller domestic competitors pursued aggressive growth strategies to gain market share. Larger retailers are feeling the heat after betting that pandemic levels of ecommerce would continue indefinitely.
- Gross margin erosion. Overstock due to diminished demand and pandemic inventory stockpiling has led to heavy discounting that has cut into profits. Greater competition is challenging market share and profits.
- Retail supply chain strategy. Supply chain bottlenecks are likely to happen in the future due to labor strikes and continued geopolitical conflict. The solution is to double down on developing differentiated and localized supply chains to provide alternate sourcing options.
- Automation. Implementing automation and AI in warehouses will help make ecommerce more affordable for their customers.
- Bold action. The retail supply chain is solid shape, but retailers need to evolve to deal with volatile and expensive global supply chains in the future. While the first decision announced in a recession is often a hiring freeze or layoffs, ambitious growth-oriented moves will be rewarded. Like investing more in their warehouse staff and retaining and attracting sought-after talent by making warehouse environments more appealing as workplaces.
- Customer first. Top retailers sweat the details from the customer’s perspective by weighing how best to cost-effectively address the following questions:
- Should returns be free online or only in-store?
- How much does click-and-collect really matter?
- Is drone delivery feasible?
- When will driverless delivery be a reality?
- Should video streaming and ordering be implemented?
- Should we scale back micro-fulfillment to achieve better cost-efficiency?
Explore the report.
About the Retail Week Supply Chain 2024 report
Retail Week surveyed 50 retail leaders working in senior supply chain and IT positions in January 2023, about their roles, leadership teams, investment priorities, challenges they are facing, and they believe is required for retail supply chains of the future. Respondents remain anonymous in the report, whose results Retail Week has compared with the same survey conducted in February 2022. Explore the report.