By Carl Moore, Managing Director of eFulfilment at Wincanton
Plenty of UK retailers are positive about their growth prospects in the coming years, but face challenges to scale up operations to meet these ambitions, according to a new industry survey. Businesses, however, see the opportunity to solve some of these supply chain issues through collaboration and innovation.
With peak season a not-so-distant memory for many retailers, it’s time for reflection.
While some will have knocked it out of the park, others will be feeling post-peak weary following a period of difficulties for the sector in general. There will be many retailers that are having to rethink their growth forecasts and are trying to find solutions to ensure better customer satisfaction, as well as new ways to reduce their cost to serve.
Taking a good, hard look at how their supply chain operations weathered recent peak periods will help aid retailers’ future growth, to help get them in great shape ready for the next one.
By surveying 500+ retail leaders with responsibility for their brand’s supply chain, Wincanton has discovered that the large majority (83%) of retailers surveyed are still planning for growth over the next three years, despite all the many challenges across the sector.
Reducing cost to serve
Not only have retailers had to deal with an impact on profit due to the rise in the rate of corporation tax, but they’ve also had to face higher inflation and increased import costs. These cost rises, combined with a fall in sales in general, has presented a different landscape to the time when retail was a healthy growing sector.
To have any hope of hitting ambitious growth trajectories, retailers are looking for ways to reduce cost to serve while also remaining agile and flexible in the face of unpredictability.
Customer experience
Published in February, the survey results show that retailers recognise they have a long way to go to get fit for growth. Despite their ambitions, 89% admitted that an increase in orders would negatively impact their ability to fulfil them successfully. Equally, if products are selling like hotcakes, unless the supply chain infrastructure is in place to provide a great experience, customers will be left disappointed.
Clearly, this identifies a risk of failing to meet customer expectations. When customer fulfilment operations are under pressure, the research shows they undermine the customer experience through factors such as delivery issues, quality of order accuracy, and the ability to manage returns effectively.
The storage conundrum
Those with ambitious paths for growth may have already invested in a larger storage site or distribution centre. If they don’t achieve the expected increase in orders, they’ll be paying for space they don’t really need. Or, they may have the opposite problem of needing to store too much stock due to an underwhelming peak, and don’t have the available storage space to accommodate it but don’t want to discount for fear of affecting their margins.
The skills gap
We know that a retailer can’t deliver a first-class service without the talent and skills to support. Great people are crucial to its success, but many retailers have shared that they don’t feel confident in their ability to find and retain good people.
68% of respondents to the survey said that a shortage of good quality labour has negatively affected business ability to keep up with customer demand, and similar said that labour concerns negatively impact their ability to scale up during peak demand.
Taking a collaborative approach
Many retailers are struggling to make the investment to modernise by implementing costly robotics and automation technology into their operations, with 61% of those surveyed saying that investment in this area won’t be feasible in the next five years.
The data shows that businesses see agility and flexibility as the key to managing growth, and they see this being achieved through collaboration. 71% of the retailers surveyed agree that having access to managed multi-user facilities could improve their supply chain flexibility and unlock their full growth potential. A similar number (69%) agree that having access to a managed shared transport network would improve their ability to cope with fluctuations in demand.
There also remains a challenge for retailers between investment and unlocking benefits. While 72% of retailers said that using robotics and automation would help to better manage peak periods better, only 35% are currently investing in this. Among the factors holding retailers back from investing in robotics and automation were not just costs (34% of respondents) and return on investment (31%), but the complexity and speed (30%) required to deliver the maximum benefit from such projects.
An alternative option is using a multi-user site with autonomous mobile robot (AMR) technology which can increase productivity through 24/7 ‘always on’ operations and grow pick rates of 237% compared to manual operations. It can also improve the flexibility to scale for peak periods. This option would also break the barrier or risk of capital investment.
Gearing up for the next peak
With consumer confidence currently remaining low, as 58% of consumers expect to cut back on non-essential spending in 2024*, and 41% of consumers say they’re feeling less financially secure heading into 2024, than at the start of 2023*, retailers are looking towards flexibility and productivity when fulfilling orders. After all, we know that downturns don’t go on indefinitely and the next exciting opportunity for growth could be just around the corner.
Access the full insights paper to discover more about the survey results.
Sources:
- Wincanton’s survey surveyed 501 people, director level and above, working in the UK retail and ecommerce sector. All respondents have some form of decision-making power over their companies supply chain in companies with £10m+ turnover.
- *KPMG UK Consumer Pulse Survey.
Published 01/03/2024
