Published by Jessica Weisman-Pitts
Posted on December 16, 2021
By Matthew Woodcock, Regional VP, Supply Chain at Coupa
The holiday shopping season is upon us. Normally, this time of year is a bright spot for retailers; a chance to wipe away any red in the ledger books and post a profit. Unfortunately, because of a myriad of issues including the ongoing global supply chain crisis, retailers face a difficult Christmas and some are even expecting a significant hit to their revenue.
The causes of the supply chain crisis are complicated and interconnected; factors that in isolation could perhaps be dealt with — such as the shortage of HGV drivers in the UK, or the disruption to shipping that has pushed up prices for cargo containers — have combined to create huge challenges.
Of course, Covid-19 also played a major part in today’s supply chain disruption, as lockdown restrictions put in place to curtail the pandemic required production lines to be shut down and manufacturing to be curtailed. As a result, production capacity has ended up being unable to keep pace with the surge in consumer demand that began once restrictions were lifted.
To understand how these issues are affecting retailers, we commissioned a survey asking more than 600 supply chain leaders at businesses across the US, UK, France, and Germany about how they were handling supply chain disruption.
So what did we find out? According to our survey, over half of retailers anticipate revenue losses of at least 5% from the past 18 months due to supply chain issues, with 5% expecting their losses will be greater than 20%. Combined, this translates into billions being lost for some of the world’s largest economies.
Meanwhile, nearly 3 in 4 UK retailers (72%) are concerned that supply chain disruptions will affect their revenue this Christmas. Looking beyond the festive period, the pain is likely to last for some time to come, with 9 of 10 UK retailers (90%) anticipating revenue will continue to be impacted by supply chain issues for at least the next six months.
Which aspects of the supply chain crisis are proving most irksome to retailers? The top issues cited by all retailers included the shortage of lorry drivers (49%), delays relating to shipping containers (43%), problems caused by “long” supply chains (42%), and general staffing shortages (24%). This last issue is particularly problematic in the pivotal Christmas shopping period, when retailers typically hire seasonal workers to cope with demand. Research from the jobs website Adzuna found that there are currently 26,307 seasonal job vacancies ahead of the festive season, almost double the 13,668 at the same point last year. Firms are reportedly offering higher wages and sign-on bonuses to attract staff, further eating into their profit margin and adding to wider inflation.
Of course, Brexit was also cited as a significant factor, with nearly half (46%) of UK retailers saying it has negatively impacted their business. Putting the political argument to one side, it’s clear that adding additional friction between Britain and its largest trading partner at a time when supply chains are already strained to breaking point has had repercussions.
Also, given that supply chain issues will continue to be a long-term challenge, many retailers recognise the need to support the key suppliers upon which they depend. In fact, our survey found that 59% of UK retailers were concerned about their supply chain partners and wider networks. This concern is felt more strongly by UK retailers than in the US (56%), France (56%), and Germany (46%). Overall, this finding suggests that that supporting partners and networks will become a top priority for UK retailers in the months to come, as they seek to recover and build more resilient supply chains. Retailers can support their supply chain community by guiding them towards finding potential alternatives for a lower tier single source supplier, as well as by creating and launching sourcing events to identify alternate suppliers. Retailers could also help the supplier diversify geographically to mitigate risks.
The survey findings underline that, while retailers are striving to meet demand, maximise revenue potential, and find efficiencies, they continue to face unprecedented supply chain disruptions. Navigating this disruption has been the biggest business challenge of 2021 and will likely remain so in 2022 as well, which means that supply chain design is no longer a nice-to-have, but a necessity to optimise networks and determine where retailers need to focus to build and maintain resilience.
But what can businesses do about it? A key element is adopting a comprehensive Business Spend Management (BSM) strategy that breaks down silos between supply chain, procurement, and finance. This will enable a more dynamic supply chain design and planning process, allowing retailers to make smarter and faster decisions while also being able to stress-test supply chains in real time and eliminate blind spots across their businesses to outsmart disruptions.
Getting full future-facing visibility into their supply chains must become a top priority for businesses, so that they can plan for contingencies, source alternative suppliers, and pinpoint their weakest link, while also achieving their profitability, risk, and sustainability objectives. The technology exists to enable this and it must be prioritised to ensure that next year, and another crucial Christmas in 2022, can be a great deal merrier for retailers.
By Matthew Woodcock, Regional VP, Supply Chain at Coupa
The holiday shopping season is upon us. Normally, this time of year is a bright spot for retailers; a chance to wipe away any red in the ledger books and post a profit. Unfortunately, because of a myriad of issues including the ongoing global supply chain crisis, retailers face a difficult Christmas and some are even expecting a significant hit to their revenue.
The causes of the supply chain crisis are complicated and interconnected; factors that in isolation could perhaps be dealt with — such as the shortage of HGV drivers in the UK, or the disruption to shipping that has pushed up prices for cargo containers — have combined to create huge challenges.
Of course, Covid-19 also played a major part in today’s supply chain disruption, as lockdown restrictions put in place to curtail the pandemic required production lines to be shut down and manufacturing to be curtailed. As a result, production capacity has ended up being unable to keep pace with the surge in consumer demand that began once restrictions were lifted.
To understand how these issues are affecting retailers, we commissioned a survey asking more than 600 supply chain leaders at businesses across the US, UK, France, and Germany about how they were handling supply chain disruption.
So what did we find out? According to our survey, over half of retailers anticipate revenue losses of at least 5% from the past 18 months due to supply chain issues, with 5% expecting their losses will be greater than 20%. Combined, this translates into billions being lost for some of the world’s largest economies.
Meanwhile, nearly 3 in 4 UK retailers (72%) are concerned that supply chain disruptions will affect their revenue this Christmas. Looking beyond the festive period, the pain is likely to last for some time to come, with 9 of 10 UK retailers (90%) anticipating revenue will continue to be impacted by supply chain issues for at least the next six months.
Which aspects of the supply chain crisis are proving most irksome to retailers? The top issues cited by all retailers included the shortage of lorry drivers (49%), delays relating to shipping containers (43%), problems caused by “long” supply chains (42%), and general staffing shortages (24%). This last issue is particularly problematic in the pivotal Christmas shopping period, when retailers typically hire seasonal workers to cope with demand. Research from the jobs website Adzuna found that there are currently 26,307 seasonal job vacancies ahead of the festive season, almost double the 13,668 at the same point last year. Firms are reportedly offering higher wages and sign-on bonuses to attract staff, further eating into their profit margin and adding to wider inflation.
Of course, Brexit was also cited as a significant factor, with nearly half (46%) of UK retailers saying it has negatively impacted their business. Putting the political argument to one side, it’s clear that adding additional friction between Britain and its largest trading partner at a time when supply chains are already strained to breaking point has had repercussions.
Also, given that supply chain issues will continue to be a long-term challenge, many retailers recognise the need to support the key suppliers upon which they depend. In fact, our survey found that 59% of UK retailers were concerned about their supply chain partners and wider networks. This concern is felt more strongly by UK retailers than in the US (56%), France (56%), and Germany (46%). Overall, this finding suggests that that supporting partners and networks will become a top priority for UK retailers in the months to come, as they seek to recover and build more resilient supply chains. Retailers can support their supply chain community by guiding them towards finding potential alternatives for a lower tier single source supplier, as well as by creating and launching sourcing events to identify alternate suppliers. Retailers could also help the supplier diversify geographically to mitigate risks.
The survey findings underline that, while retailers are striving to meet demand, maximise revenue potential, and find efficiencies, they continue to face unprecedented supply chain disruptions. Navigating this disruption has been the biggest business challenge of 2021 and will likely remain so in 2022 as well, which means that supply chain design is no longer a nice-to-have, but a necessity to optimise networks and determine where retailers need to focus to build and maintain resilience.
But what can businesses do about it? A key element is adopting a comprehensive Business Spend Management (BSM) strategy that breaks down silos between supply chain, procurement, and finance. This will enable a more dynamic supply chain design and planning process, allowing retailers to make smarter and faster decisions while also being able to stress-test supply chains in real time and eliminate blind spots across their businesses to outsmart disruptions.
Getting full future-facing visibility into their supply chains must become a top priority for businesses, so that they can plan for contingencies, source alternative suppliers, and pinpoint their weakest link, while also achieving their profitability, risk, and sustainability objectives. The technology exists to enable this and it must be prioritised to ensure that next year, and another crucial Christmas in 2022, can be a great deal merrier for retailers.
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