Retail supply chains are set to face another year of challenges in 2021, with uncertainty around bricks and mortar trading, a surging demand for ecommerce and the need to grapple with new legislative barriers arising from Brexit, in Europe.
We spoke to Simon Dixon, the CEO and Founder of Hatmill, our specialist logistics and supply chain partner, to discuss how the challenges posed by COVID-19 and Brexit will continue into 2021 and how automation and the flexibility of supply chains will be instrumental to the survival and success of retailers this year. Read on to find out why your company should take supply chain optimization seriously, or if you’re in a hurry, contact our procurement consultants now.
The ongoing impact of COVID
Simon highlights that consumer demand for online shopping has advanced by almost five years since the pandemic began, forcing retailers to adapt their supply chains quicker than ever before. With restrictions likely to loosen and re-tighten for some months and consumers moving between high streets and online, retail leaders need to anticipate the ongoing impact this will have on their supply chains.
The impact of the pandemic will also continue to impact procurement and finance teams by pushing up prices for retailers with overseas trade. “The cost of shipping has soared” Simon notes, as shipping containers filled with Personal Protective Equipment from the East have disrupted normal flows. With many containers in the wrong locations and not being in free circulation, this has instigated a surge in the cost of shipping, which Simon suggests will continue to be a challenge in 2021.
2021 will continue the trend of businesses being winners or losers, with very few inbetween and Simon notes that, “some businesses could see huge leaps in sales over this period.” He highlights that those that will succeed, have the most flexible supply chains, enabling them to pivot them more effectively than other businesses. If you’re concerned your supply chain is not as flexible as it should be, speak to our procurement consultants.
Adjusting to Brexit legislation
Brexit and the UK-EU Trade and Cooperation Agreement (TCA) will present logistical and administrative challenges for retailers for at least the first part of the year.
Retail has been one of the industries hardest hit by the TCA, Simon says, with “retailers having to identify and disclose materials sourced and manufactured from countries outside of the EU, before import into the trade bloc”. This has spelt a crisis for UK-EU border disruption.
In addition to this, new legislation has caused huge problems in reverse logistics, with companies experiencing unsustainable costs for the return transport of goods between the UK and Europe.
Simon predicts that it could take three to six months for business to overcome these initial barriers and he then expects business leaders and procurement teams to seek to optimize their post Brexit supply chains once they are more stable.
Is automation the answer?
The combination of Brexit and the pandemic has caused significant resource gaps, with a large proportion of the European workforce returning to the continent and social distancing restrictions on the workplace meaning labour shortages with operational challenges.
For many retailers who have re-evaluated their operations and supply chains, automation is looking like an appealing option. Advancements in this technology have come in leaps and bounds with Autonomous Mobile Robots (AMRs) and co-bots being developed to increase efficiency, providing manufacturers and retailers with new, more adaptable, automation options to integrate into supply chains.
The cost of investment in automation, however, can be upwards of £30 million and requires “careful consideration and due diligence”. Simon highlights that investment returns can take between six and eight years, often needing 18 months to be fully implemented. The surge in demand for automation across retail and other sectors will also push the cost of purchasing up, due to limited supply capacity amongst providers.
Despite this predicament, Simon highlights that with a thorough strategic procurement approach, such options can be explored to build confidence in the investment decision. He says retailers must avoid being left behind, but “be patient in analyzing the data and landscape, before committing to this expenditure.”
Talk to our procurement specialists to find out next steps.
Now is the time to address supply chain challenges
In 2021, the need for a comprehensive supply chain and logistics strategy will be integral to the success of retailers. Supply chains are starting to be recognised for their ability to differentiate costs and customer propositions, notes Simon, “but businesses will now rely more than ever on their agility and flexibility in order to survive”.
“Ultimately, if the product cannot reach the customer when they want it, there is no business,” Simon highlights. With the ongoing impacts of the pandemic and Brexit, he suggests the importance of a transparent, robust, flexible supply chain has never been more important. 2021 will be centred on retailers reviewing learnings from 2020, embracing the changes which worked and building flexible and resilient supply chains.
About Proxima
As a procurement consultancy, we are often inspired and defined by who we work with. We provide expert procurement services to world leading brands in the UK, US and around the world.
For more information on how our procurement consultants can help you prepare your supply chains, reduce your spend, increase your cost savings, and optimize your procurement strategy – simply get in touch.
