The coronavirus epidemic shows no signs of slowing down and if recent events, such as large-scale event cancellations, component shortages and widespread consumer stockpiling are anything to go by, the issue is likely to get worse before it gets better.
The fmcg sector, as a key consumer-facing industry, has so far felt the business impact of the outbreak particularly acutely, with many major retailers forced to impose restrictions on customers purchasing certain goods, such as hand sanitiser, pasta and tinned goods, to minimise crippling shortages.
Demand trends – which can be volatile at the best of times – have been thrown into chaos, which is largely due to over one in three consumers (34%) stockpiling longer-life, non-perishable goods in anticipation of potential self-isolation. This is compounded by the “snowball effect” of more consumers subsequently feeling the need to stockpile to avoid potential product shortages, which could create forecasting difficulties further down the line.
Workforce shortages will have a major impact both in-store and on the wider supply chain. Estimates suggest that potentially more than a fifth of the UK’s workforce could be made to work from home as the virus continues to escalate. Many of these workers, such as warehousing staff, cashiers and drivers are integral to the efficient running of the sector and cannot simply “work from home”, as is often the case with office-based staff.
Another issue which, despite its potentially crippling long-term impact, has not received as much attention is container stocks and their availability. Currently, many containers are stuck in China, thereby lessening supply and container availability in the UK and making it more difficult for businesses to move their goods.
Taken together, these factors create an environment in which retailers’ service levels – both in-store and further afield – could plummet if retailers do not consolidate their existing resource and maximise efficiency.
As for how the sector can mitigate the impact of the outbreak – as well as more obvious measures such as minimising staff exposure to the virus – staying abreast of shifting demand patterns is key. Collaboration between retailers and suppliers – working together to decide how disruption can be best handled – and greater communication throughout the supply chain are crucial in order to enable the quickest response possible.
Retailers should also consider using stock-building strategies to focus on key areas of increased demand, such as frozen goods. Furthermore, if the sector should experience further difficulties in transporting products onto shelves quickly enough to meet soaring consumer demand, businesses could make use of equipment that can thaw frozen products to optimum chilled temperatures, extending shelf life and availability of perishable products.
If this epidemic has shown us anything so far, it is that you cannot prepare for every eventuality. However, retailers that are able to remain agile, with a well-managed supply chain, will be well-placed to weather the storm and ensure service levels remain consistent.
If anything, fmcg retailers should consider this outbreak a practice run for the still all-too-real possibility of a no-deal Brexit, which could cause similar consumer panic and disruption. Subsequently, we would urge businesses throughout the sector to audit their existing supply chains and ensure they are able to properly manage future disruption.