BY GARY NEWBURY
STRENGTHENING RETAIL SUPPLY CHAINS
Gary Newbury is interim chief supply chain officer – retail supply chains & last mile at Retail Aid.
HOW TO BUILD SCALABLE SUPPLY NETWORK DESIGNS The pandemic has undoubtedly been torturous for retail supply chain executives working with geographically extended supply chains. This is especially true when those supply chains move general merchandise items through just-in-time supply networks to fulfill what were once predictable demand patterns. Before the pandemic, organizations set up retail supply chains to achieve “lowest individual element cost.” This was supported by investors who enjoyed a dividend stream from this arrangement. Many governments also benefitted, as they were keen to demonstrate a continuous rising standard of living for citizens. Demand patterns were stable, linear and competitive. Competitiveness arose not through differentiation. Rather, it came from having the “lowest price,” or what has been described as “the race to the bottom.” Many teams never learned to execute proposition differentiation. If they did, it was not obvious, and they failed to reinvent their brands as they encountered long-range declining markets and profitability. Here in Canada, there was also a tightening of household budgets during the two years 16 FEBRUARY 2022
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preceding the pandemic, so much so that in March 2020, 48 per cent of working Canadians were only $200 away from meeting their financial obligations. At 1.70, the debtto-income ratio was the highest of any developed nation. The development of supply chains with a focus on single factories to drive economies of scale during procurement – and low-cost, advanced global transportation systems – meant Canadians could expect to have a wide selection of products presented to them, all at relatively low prices. The complacency that came from the predictability of category spending and seasonality provided little resilience to the demand pattern changes unleashed during the early stages of the pandemic. These changes accelerated quickly. As governments put through emergency legislation, consumers switched their category spending, their channels and their volumes. Many retailers were caught flatfooted, and many filed for CCAA. Some participated in significant layoffs to conserve operating cash.
THE FIRST TWO YEARS Many retailers and their CPG partners doubled down on the processes that got them to early 2020. They stepped up pressure on an ecosystem that had been based on linearity, fixed capacity due to the focus on cost reduction, low transparency, a lack of sustainability and inadequate risk management. In Canada, during the first few months, within the food supply chain the “Big Five Grocers” and key food CPGs worked together to reduce SKU count. They focused production on the “vital few” to assuage potential consumer anxiety from empty shelves of key lines and staples. It was important to avoid triggering panic buying as no one would win from this.
SUPPLY PROFESSIONAL
2022-02-08 9:21 AM
