Logistics Manager Analysis: Planning for uncertainty

2019 may well be remembered by many in the distribution sector as the year political procrastination played havoc with the supply pipeline – from product sourcing to warehouse management, from demand forecasting to actual sales…  writes Penelope Ody.

Way back in spring 2018 – writing about Brexit planning – I was variously told of supermarkets looking to switch produce sourcing to India or South America, of online fashion retailers expanding their distribution centres in France or Germany to enable direct deliveries from China to bypass the soon-to-be-non-EU UK, while many more were busily hiring additional warehouse space to cope with the perceived need for stockpiling.

As we all know, the successive deadlines – 29 March, 1 June (if the UK had failed to hold European elections) and 31 October – turned out to be damp squibs, but each has demanded many hours and much investment in contingency planning just in case. No doubt many of those products stockpiled for the March deadline may already have reached their “best before” dates and will have been causing supply chain hiccoughs for months as companies try to manage an enforced higher stockturn while maintaining viable contingency supplies. A dilemma contributing, perhaps, to some of the discounting and enthusiastic promotion seen in almost all product sectors in recent months as companies try to clear overflowing warehouses.

Back in February, as the media focus on likely food shortages peaked I did invest in a few extra bags of my favourite coffee – now, of course, long since drunk: but scale up even such minimal hoarding nationally and these erratic consumer purchasing patterns must have played havoc with all those finely tuned models designed to ensure that the supermarket shelves remain filled while surplus stocks are kept to a minimum.Such upheaval has not helped at a time when high street sales are continuing to stagnate as shoppers opt to buy online or while UK consumers cope with the anger and uncertainty of constant Brexit delay, while attempting to manage their own domestic stockpiles in readiness for predicted supply problems.

Hardly surprising, too, that with many shoppers rather more intent on filling the larder, consumer spending on non-essentials dipped, adding to the high street’s woes. In November, the BRC-KPMG Retail Sales Monitor was gleefully reporting a notable boost to retail sales in October thanks to extensive discounting. But that increase – 0.6% year-on-year and the best performance since April – hardly represented an increase in real terms with CPI running at around 1.7%. Such “growth” figures also mask wide discrepancies in performance and the Office of National Statistics data for retail sales contains far too many minus signs to give any sector much reason for optimism. For much of this year both household goods outlets and department stores have seen sales in negative territory; latterly they have been joined there by the clothing sector. With online currently accounting for more than 19% of total UK retail sales, it is hardly surprising that so many familiar high street names are struggling.

How much of their sales decline is due to consumer behaviour and how much to this year’s supply chain upheavals is debatable. In November Marks & Spencer blamed a 7.8% decline in its half-year clothing and home sales on “poor availability of the most popular sizes and too much stock and markdown”. Given the wealth of data on its shoppers, which M&S has presumably accumulated over the years, getting its sizing ratios so totally wrong seems surprising: populations may become fatter or thinner but, barring famine or warfare, not usually dramatically so within a fashion season.

“Too much stock” might mean that they produced ranges that no-one liked or perhaps they based their sales forecasts on more optimistic historical data and under-estimated the depth of the downturn in consumer spending as the Brexit deadlines moved? After all, planning for summer 2019 fashion ranges may have started way back in late 2017 when B-day was still 29 March and the bulk of this year’s sales would thus have taken place in a more settled – if still uncertain – marketplace.

Now it looks like the UK will actually leave the EU by 31 January 2020. The naysayers may be predicting that gloom, despondency and widespread poverty will follow, but just as many will heave a sigh of relief and optimistically get on with the rest of their lives. For anyone involved in supply or distribution the major hope for 2020 must surely be an end to uncertainty – and all that stockpiling.

Columnist Penelope Ody is a retail market specialist. This article originally appeared in the December 2019 edition of Logistics Manager: click here to subscribe to the print edition