After Brexit, Covid-19 and ships stuck in the Suez Canal exposed the fragility of global supply chains, retailers are taking action to avoid chaos in the golden quarter.
The current lorry driver shortage in the UK is wreaking havoc across supply chains as retailers face stock shortages due to the ‘pingdemic’.
Consumers faced a more limited choice as the pingdemic and a scarcity of labour among suppliers in warehouses and distribution fleets led to unaccustomed gaps on shelves.
The BRC warned at the start of September the problems meant “higher prices loom” for shoppers as price deflation slowed.
BRC chief executive Helen Dickinson said: “Some non-food categories, such as electricals, saw sharp rises in inflation compared to last year, owing to global issues from delayed shipping and shortages of microchips.”
The pandemic has undoubtedly highlighted the fragility and complexity of global supply chains as retailers have seen all of these critical supply chain components being significantly disrupted over the last 18 months.
Retailers are now having to handle and distribute products more efficiently as warehouses and driver availability come under pressure.
Retailers who have offered sign-on fees for new drivers, have called on the government to relax immigration rules in order to encourage lorry drivers from overseas to come to work in the UK, but that plea has been rejected.
On Tuesday, transport secretary Grant Shapps admitted that the UK’s lorry driver crisis means there could be food shortages at Christmas.
It comes after a series of retail figures warned that the country’s faltering supply chain could not support increased demand during the festive season.
Waitrose chief executive James Bailey claimed some families might miss out on a turkey, while Iceland boss Richard Walker said he was “sounding the alarm” over potential “big shortages”.
Speaking in the House of Commons, Shapps set out plans to increase the number of HGV drivers by 50,000 within a year.
Almost 50,000 drivers have left the road in the last two years thanks to the Covid-19 pandemic and Brexit.
Shapps claimed labelled Covid-19 the “number one cause” of the crisis but said the “problems had been coming along for a very long time”.
Earlier this month, the BRC found that UK shop prices rose last month by 0.4 per cent, with non-food items rising 0.6 per cent.
The increase came as a result of driver shortages and the costs of Brexit-induced red tape.
While shop prices remain below those in 2020, down 0.8 per cent in August compared with the same month a year earlier, that marked a slowdown in deflation from the 1.2 per cent year-on-year fall recorded in July.
Chris White, head of delivery at international fulfilment services provider fulfilmentcrowd, told Retail Gazette that high shipping costs are leading to higher retail selling prices.
However, he argued that this is not the only factor in play and selling prices are also rising because of the “wage war” for HGV Class 1 drivers.
“There’s intense competition amongst hauliers and delivery firms for drivers, with attractive joining bonuses and escalating hourly rates of pay inflating the prices consumers pay for goods,” he said.
“Unfortunately, rising operational costs will price some smaller retailers out of the market and lead to business failures.
“To help avoid this, retailers need to optimise stock and supply chain management to minimise errors, inefficiencies and waste to avoid any unnecessary margin dilution.
“Retailers need to optimise stock and supply chain management to minimise errors”
“Retailers are best placed taking a customer-first approach to dealing with stock shortages. This means not advertising and trying to sell products via ecommerce which aren’t available and have little chance of arriving with consumers any time soon.
“Similarly, where there are stock delays, retailers should proactively communicate this to customers and, where possible, try and offer a suitable alternative.
“Supply chain software provides a wealth of real-time inventory data, which retailers can use to constantly manage customer expectations and minimise frustrations.”
Justin Floyd, chief executive and founder of software firm Redcloud, said retailers should offer better incentives and working conditions to solve local driver shortages.
“New technologies can almost certainly improve the efficiency of the shipping industry. More satellites and better weather forecasting can help reduce unexpected distribution delays,” he told Retail Gazette.
“But the core problem with the current B2B supply chain is a lack of digitisation. And the only way to get millions of merchants in far-flung corners of the world – not to mention 100,000s of distributors to digitise – is to build commerce platforms that they actually want to use.
“It might sound obvious, but to date, this has been the most significant barrier to digitisation.
“Retailers and manufacturers have built digital trading systems with their own interests in mind, rather than providing genuine incentives for supply chain partners to adopt their technology.
“Ultimately, our goal must be to build a truly open, digital marketplace for commerce that allows any merchant to run their business more efficiently and access any FMCG products they want to sell.
“Irrespective of whether there are sufficient numbers of locally available HGV drivers, supply chains are already too slow to keep up with demand.
“Over-reliance on cash makes things even slower and adds to the cost, because cash is more expensive to handle and process. And without any real digital connectivity across the supply chain, meaningful sales data is impossible to come by.
“Retailers are so disconnected from their merchants that they don’t know who is selling their products, let alone who is buying them.”
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