COVID-19 exposes retail’s supply chain shortcomings
A new study finds future investments in flexibility, visibility and automation will be necessary to adapt to crises similar to the coronavirus pandemic.
The study from the University of Warwick and supply chain software provider Blue Yonder, based on insights from 105 different retailers from Europe, Asia and the Americas, explored retail’s reaction to supply chain challenges created by the surge in demand for essential goods, store closures, social-distancing adaptations and significant shifts to online shopping.
Asked what proved to be the most effective supply chain strategies for dealing with COVID-19 situations, the top responses were:
- Inventory strategy to buffer against disruption, 61 percent;
- Multi-sourcing key products to reduce dependency on specific suppliers, 51 percent;
- Visibility across the supply network, 47 percent;
- Implement supply chain risk management, 38 percent;
- Reliance on suppliers with agile production systems and distribution networks, 29 percent.
In a statement, Jan Godsell, professor of operations and supply chain strategy at University of Warwick, said using inventory as a buffer “provides the greatest certainty of supply but comes at a cost.” In contrast, relying on suppliers with greater agility “is a potentially more resource efficient and resilient response.”
Asked to identify apparent supply chain bottlenecks in the current COVID-19 crisis, the top answers were:
- Warehouse operators are ill or in quarantine, 59 percent;
- Store operators are ill or in quarantine, 48 percent;
- Lack of visibility of capacity at suppliers, 46 percent;
- Lack of demand visibility from customers, 44 percent;
- Protective material (masks, gloves) for own employees, 40 percent;
- Inbound flow of raw material parts and components, 36 percent;
- Outbound transportation (delivery) to customers, 24 percent.
The study found that, with 75 to 80 percent of products seeing a demand fluctuation, retailers were slightly better at responding to decreases rather than increases in demand.
Said Mr. Godsell, “Whilst retailers found their supply chain processes and systems to be effective in responding to the demand fluctuations, many were still dependent on the human touch.”
- New study provides insights into how retailers have responded to COVID-19 by University of Warwick – University of Warwick
DISCUSSION QUESTIONS: What should retailers have learned from the supply chain challenges faced with the emergence of COVID-19? Do you see investments in flexibility, visibility or automation standing out as most critical for retailers in handling such crises?