As communities in countries all over the world continue to take steps toward a post-pandemic environment, there remain some lingering issues. Not least of which, impacting both businesses and consumers everywhere, are disruptions to the global supply chain. Precipitated by the outbreak of the COVID-19 virus, and sustained by subsequent spikes in positive cases, the negative results have been highlighted most predominantly by container shortages, port congestion and price inflation. Though these challenges persist, exacerbating uncertainty and an unpredictability surrounding the current supply situation, the adversity faced by industries could yet yield some favourable outcomes with respect to reimagining and strengthening partnerships within the retail supply chain. In fact, according to retail industry and supply chain expert, Gary Newbury, the past year-and-a-half-plus has highlighted the significance of this need in order to create greater agility, efficiency and success for all.
“One of the biggest deficiencies within the current retail supply chain is the fact that the relationships between retailers and suppliers are very transactional,” he says. “It’s a type of relationship that creates a sort of one-off economic reality in which there is limited flexibility, hampering their ability to be agile and minimizing the cooperation that takes place. And, I think as a result of impacts of the pandemic, retailers are realizing strategies that will allow them to get to a different place, working with a number of suppliers in ways that they haven’t been able to very often up until now. During the early stages of the pandemic, the major grocers, which all have a very wide assortment of product but are provided from a very narrow source of suppliers, all got together to work with one another in order to help the consumer. Although this type of cooperation has since receded, all of the players involved got a real sense that this type of collaboration in the supply is possible.”
A shift in power
Newbury goes on to explain that as it stands, with spots of pandemic collaboration across certain sectors reverting back to pre-pandemic norms, the retail industry remains lightyears away from achieving such unity within the supply chain. He generally describes the current relationship between retailer and supplier as an “I win, you lose” scenario, adding that it’s one fueled by hyper-competitiveness and a lack of trust. However, he also points out that it’s at least in part the result of a shift in control and influence that occurred over time between the retailer and its manufacturing partners.
“When considering the way in which the modern supply chain works and the players benefitting most, we have to remember what the purpose of a retailer is,” he suggests. “When suppliers began producing product in big chunks, they used retailers to bring that product into market, break it up into bite-sized orders for the consumer to purchase. The retailer was simply the recipient of the product and presented it with the manufacturer holding most of the power. However, we seem to have gone a long way from that general setup with the power now in the hands of the retailer who, in many cases, make demands of their manufacturer partners and suppliers for the product that they want on their shelves. And their competitors are doing the same, creating at times a very tense and distrusting backdrop to these relationships. Retailers are there to work with national brands and their variants and labels to provide a service to the consumer. To most effectively do so, it would seem that the share of power needs to be a little more balanced.”
Openness and trust
As a result of this shift in power, the natural balance of supply and demand is actually skewed, allowing for the potential manipulation of supply and a misunderstanding of it among industry players. Newbury emphasizes the fact that collaborative thinking among competitors is not necessarily on the minds of those involved. However, he goes on to suggest that there are numerous benefits that could be uncovered for all stakeholders, including retailers and their manufacturer partners, allowing them to find collective efficiencies and opportunities. In addition, supply collaboration would also serve as a catalyst for enhancements that could be made to the customer’s journey and experience with the brands they shop with.
“The whole purpose of collaboration is to actually put your books on the table and share that information openly with others,” he says. “And it’s obviously very rare to see this in the retail environment among competitors or suppliers. However, it could be suggested that in doing so, competing retailers and their supplier partners could come together and collectively arrive at a much better position. This kind of thinking requires everyone to fairly share in the losses of a deteriorated market, but also the gains. The problem is that we’re nowhere near that level of honesty and trust within the industry to arrive at these meaningful partnerships and collaborations. If the lack of trust can be solved and overcome, then common tools can be used to share information and allow entire segments of the industry to react in a consistent way, eliminating influences like the bullwhip effect and other overreactions causing disruptions to the supply chain.”
Enhancing the customer experience
It’s a collaborative approach that makes a lot of sense considering the fact that there are often multiple suppliers and retailers sharing a common ground and goal. Commercially, on the other hand, when the bottom line is more times than not the determining factor in decisions that are made within organizations, the lack of openness and trust that exists is also understandable. It ultimately results in a hyper-competitive landscape in which the winner can take all. Despite this, however, Newbury underlines the fact that there are deficiencies and weaknesses within the current retail supply chain that could be overcome, conclusively improving the customer experience and elevating the trust within the consumer concerning the entire process.
“Within the current retail supply chain, there seem to be a number of isolated parties that don’t quite work together as effectively as they could,” he suggests. “There’s a lot of room for stakeholders involved to remove a lot of the friction from the process, find efficiencies, and ultimately remove friction from the customer experience. Of course, supply chains are generally quite complex, involving a number of different linkages and nodes of transport across a wide geography. It’s very intricate with a number of different relationships that need to be developed. Strengthening these partnerships to find those efficiencies is the biggest challenge for retailers going forward. And, in order to provide the seamless experience that customers are looking for from brands across channels, it’s got to be one of their top priorities.”
In addition to finding efficiencies within their supply, a collaborative approach with their suppliers could also result in a more holistic view of the global network, allowing them to identify opportunities, helping them move away from a single-sourcing model to achieve greater agility. However, Newbury adds that it also poses the potential to help alleviate fast-growing concerns among consumers around sustainability and supply transparency. It’s a part of the conversation that, he says, adds another layer of benefits attached to the idea of collaboration and information sharing, and one that he believes may prove to lead the industry toward this kind of approach soon enough.
“In order to arrive at this strategic way of thinking among stakeholders, those at the top of these organizations will need to embrace a new way of thinking. Part of that shift in mindset is going to require them to place greater emphasis on the sustainability efforts of their organizations. Consumers increasingly want to spend their money wisely on product. And they want visibility and transparency into where the product is coming from. In order for retailers to be able to provide that transparency, they need to develop a wider view of the supply network. This requires increased collaboration with their suppliers, and sometimes their competitors, in order to avoid overproduction. Historically, there are a lot of markdowns and clearance sales in retail which really ends up in a lot of landfill materials. And it’s really the result of not properly understanding demand and production. By incorporating the principles of information sharing, expanding the supply network, being price indifferent and by thinking of collaboration with suppliers in ways they haven’t done before, retailers can address many of the issues around sustainability, opening up an entirely new set of opportunities for the growth of their businesses.”