Retailers say supply chain costs will not return to pre-crisis levels
23rd May 2022, 2:26 pm
A new study from UK law firm TLT reveals that 87% of retailers do not believe things will go back to how they were before the global supply chain crisis began; and when asked about costs, retailers are more likely to say these will not return to pre-crisis levels.
The response is varied: while the vast majority (89%) of retailers are doing something rather than waiting to see what happens, 24% are making small, reactive changes, 38% are making incremental changes, and 27% are making significant changes or restructuring.
TLT’s report, The Long Game: Counting the cost of the global supply chain crisis, concludes that this is a long-term issue requiring long-term changes, and reveals where UK retailers are investing.
Rising costs are retailers’ greatest concern when it comes to global supply chains (82%), with the biggest areas of increased spend being fuel (86%), shipping containers (68%), raw materials (66%), supplier costs (65%) and technology (51%) – the latter being a necessary area of capital expenditure in order to improve stock visibility and increase efficiencies, but which adds to the challenge of balancing rising input costs with retailers’ reluctance to pass these onto consumers.
Nevertheless, the survey reveals how few alternatives retailers have left now, with the three most popular responses to higher input costs being finding new efficiencies (68%), raising consumer product prices (67%) and charging more for deliveries (55%).
Product availability is retailers’ second greatest concern (64%), and 64% also believe that longer lead times with suppliers is a long-term issue.
As a result, retailers are more likely to have grown (29%) than consolidated (20%) their supplier base over the last two years, and many are near-shoring or on-shoring, with the top five locations for new suppliers being Asia (beyond China and India) (19%), the UK (15%), the rest of Europe (15%), China (15%) and India (10%).
Recruitment and retention are retailers’ third largest concern (64%), with them feeling the labour pinch the most in warehousing and distribution (61%) as opposed to shops (20%) or head office (19%).
As a result of the displacement of jobs during the pandemic, retailers are having to spend more on attracting and retaining staff, with the most common tactics including wage increases (63%), sign-on and long-term incentive bonuses (56%) and extra benefits (51%).
Perran Jervis, head of retail and consumer goods at TLT, says: “The global supply chain crisis isn’t going away, and the challenge is that this is affecting every link in the chain. As a result, retailers are having to quickly find new areas of flexibility and increase efficiencies, in order to stave off unfavourable decisions like raising prices and closing unprofitable stores. Retailers will need to consider all of their options, and we are increasingly seeing retailers re-thinking their supplier strategies and investing in technology solutions for example.
“It is positive to see that the vast majority of retailers are doing something about this, as well as the recent news – particularly from the major supermarkets – about how they are focusing on ways to support households with the cost of living crisis. How retailers respond to the ongoing supply chain disruption will be the subject of much scrutiny for many months to come, especially the long-term impact on households, suppliers, employees and the environment.”
Forbes Solicitors names Rigby as managing partner and expands exec team