Comment: Keeping the supply chain moving
But in a recession it becomes even more complex as the usual challenges are heightened by volatile demand, while the economic situation ushers in a range of additional problems.
This was highlighted by a survey of European retail and consumer brands executives I spotted recently by insurance broker and risk adviser Marsh. Its report found that while financial and macroeconomic risk were top of mind – with 75% expressing concern about cashflow – respondents identified the supply chain as the top “future strategic and operational risk” over the next 18 months with 45% of respondents ranking the level of risk as “high”.
The risk of suppliers collapsing has always been an issue for retailers, but the current economic situation has increased insolvencies and a failed business can inevitably cause problems further along the chain.
But there are steps retailers can take to mitigate risk.
It is important to have screening and due diligence of suppliers in place to identify those which could be at risk of failure. Retailers need to keep a close eye out for indications that they might be encountering problems: late deliveries, unfulfilled orders or requests for advance payment should all ring alarm bells.
In the current trading conditions it is wise to consider having reliable alternative suppliers which can be introduced into the supply chain at short notice – continuity is the name of the game here. For some businesses this is extremely difficult due to nature of their product portfolio. However, having a strategy to cope with such supplier failures is worth the investment in planning. For others, continuity of supply can mean the difference between profit and loss.
The decision by many to source product from distant shores has necessitated a renewed reliance on supply base intelligence. Some have learned of the demise of their supplier via news reports while others have buyers scrambling for dual sourcing. By having some degree of supplier flexibility, if the worst comes to the worst, having an alternative waiting in the wings can help to provide precious commercial advantage, particularly if competitors are similarly affected.
But it’s not just a case of being defensive when it comes to the supply chain - there are also practical steps which retailers are taking which are having a positive impact during these challenging times.
It has been interesting to see retailers finding ways of creating efficiencies within the supply chain. I have been seeing retailers implementing a number of initiatives such as sharing deliveries with other businesses to save on costs; sharing loads on vehicles with former competitors; and dovetailing store deliveries with collections from suppliers.
These sorts of innovative changes can all add up to create a desirable effect when it comes to streamlining the supply chain.
There’s no question that overcoming the challenges of the supply chain takes time and effort. But the good news is that those who develop ways of improving now should be in a strong position to reap the rewards of their hard work when the much-anticipated upturn does finally arrive.
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