SUPPLY CHAIN SOLUTIONS
PREPARING SUPPLY CHAINS
FOR A NEW RETAIL LANDSCAPE POST CORONAVIRUS
By Louisa Hosegood, digital and strategy director at Bis Henderson Consulting T
he Coronavirus has radically and abruptly changed the way we work and live our lives. How will this alter consumer behaviour and attitudes? And what will this mean for retail and the supply chains that support it? There will still be consumers, retailers and supply chains after Coronavirus (AC). But that is not to say that it will be ‘business as usual’, and indeed there are many who would say that could be a good thing – a chance to reset, and correct some of the less attractive features of the recent, globalised, high consumption retail economy. Those hopes may not be fulfilled, but nonetheless much will have changed, in global and national economies, and in the desires and behaviours of individual consumers. While the directions of change are open for speculation, change itself is certain, and retailers need to look beyond the current hiatus to consider how their supply chains can achieve the necessary resilience, flexibility and agility to deliver on consumer needs in the brave new world that emerges.
We may not have a crystal ball, but there are some trends and features that are near certainties. Interestingly, many of these are not solely the result of the current crisis – in many cases they are amplifications and accelerations of trends that were already on the horizon.
FINDING THE NEW NORMAL As physics students know, ‘perturb’ any system and it will at first oscillate wildly, even chaotically. Over time the oscillations will decay towards a steady state, which may not be the same as the original state. It may take months, even years, for the shape of the new retail economy to become clear, and firms that reap early profits from an initial return to
‘normality’ may not necessarily be best positioned for success in the longer term. They will discover that true resilience isn’t about bouncing back to business as before; it is about bouncing forward to grasp new opportunities in new conditions. Governments have of necessity taken control, and to some extent ownership, of large parts of their economies – they may prove reluctant to loosen their grasp. The liberal laissez faire free market philosophy may to some extent be replaced by state support for domestic manufacture in key sectors; the reintroduction of tariff and non-tariff barriers, and domestic preference in public procurement. For retailers there may be new market distortions: for example, effective subsidy for physical High Streets, and new pressures and burdens on online retail, creating disincentives towards adopting new technologies, techniques and business models. On the other hand, government may learn some useful things: for example, the current loosening of Competition law to allow food retailers to share physical assets, workforces and demand data may suggest that there are ways of encouraging supply chain collaboration that are economically beneficial, serve the Green agenda, and do not constitute a conspiracy to disadvantage the consumer. A further macro-economic uncertainty post- crisis is the effect on international transport. It is conceivable, for example, that travel and tourism may remain at depressed levels for an extended period. This could seriously limit the availability of premium ‘belly freight’ air transport, reducing the attractiveness of long-distance supply chains. Meanwhile, until the new world economy settles down, exchange rates and commodity prices
34 SEPTEMBER 2020 | FACTORY&HANDLINGSOLUTIONS
could be volatile, creating extra challenges for sourcing policies.
TAX OR SPEND?
Governments will look to revitalise the economy by boosting retail demand. However, that is not straightforward. Vastly increased state borrowings will have to be financed through increased taxation and consumer booms tend to be inflationary. On the other hand, we may find that consumer demand remains depressed. A typical and often long-lived response to a crisis of the current nature is for consumers to become much more cautious in their expenditure.
Demand may be suppressed by changing consumer attitudes to ‘buying stuff’, which were already evident and are discussed below. An unknown, but potentially large, number of consumers may be at least temporarily unemployed, with little disposable income. It may be that many of the ‘just about managing’ will have to make significant reductions in expenditure: they may have spent months on just 80 per cent of basic pay, and have lost opportunities for overtime, or subsidiary incomes in the gig economy. Another, though doubtless smaller group will have retained their full-time income and, having been denied opportunities to spend, may come out of the crisis relatively cash-rich. The availability of consumer credit AC is another unknown; the government could choose to push credit towards industry rather than consumers.
It may well be that if the government is seen to have failed workers in the ‘gig’ economy – which includes many casual and part time workers in retail supply chains, from fruit pickers to warehouse staff and delivery drivers – new
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