As recession radically changes the business environment, supply chains must rethink operations, says Alan Leaman
Recessions accelerate change economic, business and social. They expose weaknesses and prompt organisations to re-evaluate their strategies, often radically. Different and new ways of doing business become more attractive and successful.
The post-recession world is bound to be different in fundamental ways. Supermarkets, c-stores and their suppliers will be faced with what we are calling a 'new norm'. The food retailing industry as a whole has traditionally fared better than other sectors in previous UK recessions. But this downturn has seen marked differences. While retail sales figures rose in August by 2.1% year-on-year, retailers have been driving footfall and sales through stronger-than-usual seasonal discounting.
This is the result of a dramatic and maybe permanent change in consumer behaviour. A more cautious consumer hasn't just bought cheaper products; in some cases, they have switched their allegiances entirely to discount rivals.
Food supply chains have also come under extreme pressure. The rise in globalisation has produced ever-more complex supply chains. This has left retailers, suppliers and manufacturers more exposed to the possibility that the failure of one supplier would bring the entire supply chain to a halt. At the same time, customer expectations continue to rise, with little or no relaxation in demand for good environmental and ethical practice, leading to demand for ever-faster delivery in smaller slots, with lower prices and extended credit terms.
A recent MCA report found that only half of businesses have tried to involve suppliers in cost-reduction exercises and more than a third have failed to adapt supply chains in changing economic conditions.
The industry must act now if it is to take full advantage of the upturn when it comes. Reducing complexity of supply chains, ensuring processes can be adapted to meet rapid changes in demand and collaborating with suppliers will all help manage risks. And by identifying and focusing more on profitable lines of business, food retailers and manufacturers will ensure they are well positioned to thrive in the new norm.
Alan Leaman is chief executive of the Management Consultancies Association.