How better supply chains can help retailers through tough times

It’s a difficult moment for businesses in almost every sector. High inflation, energy price rises and a predicted recession mean that many are focused on nothing more than getting through their immediate challenges.

But while the outlook is testing for nearly all, the difficulties facing retail businesses are even more severe. Added to the problems already mentioned, they face ongoing supply chain challenges, high business rates and a cost-of-living crisis that will leave consumers with far less money to spend. 

Five steps supply chain leaders must take to help their businesses

Given the scale of the challenge they face, many retail businesses will need to take bold steps right across their organisation. But some of the most important actions will need to focus on how they source, move and deliver goods.

1. Make sure you understand your true costs in this moment

At a time when high costs are squeezing profits, businesses have to focus on higher-margin products. But with ongoing economic volatility and price fluctuations, it’s not necessarily an easy task to keep track of exactly what it costs to put your products on the shelf and what the true level of profit is.

Businesses can all too easily stock – and invest marketing spend on – products that on closer analysis are generating little, if any, profit.

Understanding your true costs and true profits, day by day, is crucial. And while now may not be an easy time to make big investments, having the right enterprise resource planning software in place can help give retailers the information they need to make quick decisions about products and pricing.

2. Put certainty of supply at the heart of your supply chain

Consumer spending is dropping, and customers will be looking to make savings where they can. So retailers are going to need to reduce their range and focus on those core, often high-value products that will continue to sell.

But with that reduction in the number of items comes greater pressure to actually make sure the stock is on the shelves. With fewer stock items, anything missing is more likely to represent a missed sale, given the lack of alternatives. And if you let down customers on key items, they will start to look elsewhere.

So supply chain leaders’ number one priority must now be to ensure the predictability of supply to the business and the availability of goods to the customer.

3. Focus on finding suppliers you can rely on

As geopolitical shocks highlight the fragility of many businesses’ supply chains, and as China begins to turn its focus away from being the world’s manufacturer towards building a more consumer-based economy, many consumer companies have been left scrambling to find suitable new suppliers.

To increase their supply chain resilience and to avoid suffering from future geopolitical problems, many businesses are seeking suppliers closer to home (near-shoring) and in countries that are likely to remain on good terms with the West (friend-shoring).

But with so many businesses trying to find new, reliable suppliers in a smaller geographical area, there is bound to be competition. This will favour larger companies, which can place bigger orders, so small businesses may need to find ways to collaborate to ensure they can get the supplies they need.

4. Take another look at logistics

The reliability of shipping and logistics is also a challenge for many businesses – and often an expensive one, with shipping costs still a multiple of what they were prior to the pandemic.

The high volumes big businesses deal in usually give them enough sway over logistics providers to get exactly the support they are looking for. But for smaller companies, now may be the time to look carefully at their contracts and to reconsider how they manage their relationships with shippers and hauliers to see how they can increase their reliability and efficiency of service.

Some mid-sized businesses have gone as far as bringing their logistics in house, investing in a fleet of lorries and in training the team needed to run it. This represents a major investment at a time when resources are often tight. But it does give total control over what may have been an area of weakness. And it highlights just how important it is to get certainty and reliability in how you move supplies and products.

5. Understand your supply chain from end to end

At time when there is no money to waste, supply chains must make sure they are delivering maximum efficiency from their operations, along with increased reliability of supply.

For many businesses this remains a challenge because their teams still think in isolation: sourcing is not considered in the light of logistics, which doesn’t get considered in its relationship to warehousing and final delivery.

This lack of joined-up thinking can hide problems and opportunities for increased efficiency. For example, while your warehouse may be meeting all its targets, and your logistics supplier is strictly fulfilling the terms of its contract, if they aren’t co-ordinating properly it can cause delays and unnecessary expense.

By mapping out and truly understanding the whole end-to-end supply chain process, from source to customer sale, you can begin to see where the problems and points of friction are, which is often where different processes meet. And once you understand these pain points, you can design and deliver projects to solve them and to increase your reliability and resilience.

This last point in some ways encompasses them all. Understanding and addressing the shortcomings of your supply chain requires, firstly, the data needed to understand the situation. But while for most companies there’s no lack of data, for too many there is a lack of an overarching, end-to-end understanding.

Getting a team together to map out and understand your full supply chain, from end-to-end, is a crucial stage in addressing both specific blockages and inefficiencies. It can also provide the necessary background for those more radical changes – balancing online and instore, maintaining the right warehousing footprint, reassessing and redesigning the product range – that businesses may need to make to remain competitive.

Because in these extremely tough economic conditions, retailers will need to get both the big decisions and the small details right, right across their supply chain and beyond.

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