Thursday, April 25, 2024

Tracking the change

After years focused on speed and hyper-optimisation, supply chains are rethinking their business models to offer the agility and flexibility today’s market demands.

By Peter Howard.

Changes in grocery buying behaviour have shaken up the supply chain. With products finding new paths to the pantry, companies must find new ways to meet demand.

When Covid-19 reached Australia in 2020, localised panic buying caused weeks of empty shelves, giving the first hint of problems in the supply chain.

While the supermarkets willingly collaborated to move stock around the country, with Woolworths at one stage sharing stock with Coles to meet a remote community’s needs, the supply chain cat was out of the bag.

Efficiency, speed, just-in-time manufacturing, and minimal warehousing may have been optimal in a perfect world, but weren’t what was needed to support a nation facing a pandemic.

What went wrong

After the early bouts of panic buying, shopper behaviour began to change.

Thousands turned to online grocery shopping, with unprecedented growth in home delivery. In 2020, online ordering of groceries increased globally by US$60 billion over the previous year.

Other consumers began limiting their exposure in supermarkets by ordering online and picking up locally. They continue to do so today. Large numbers of people also began shopping for their non-perishables online, topping up with fresh produce at local independent supermarkets or convenience stores they hadn’t previously used.

All this different buyer behaviour created new and previously unseen demands on a supply chain already under immense pressure.

New social distancing requirements had forced factories to reconfigure production lines and function with fewer staff across hastily introduced shift systems. Imported ingredients and packaging materials began to run out, forcing substitutions to be made and even temporary withdrawals of the product.

At the same time, producers were having to rethink their supply routes because restaurants were closed, online ordering had grown and homes had become the new end point, adding further pain due to the significant increase in transport costs.

With so much change, supply chains couldn’t possibly keep up. Having been optimised for efficiency and speed, they had little chance of success in circumstances demanding agility and flexibility. It was clear they needed to change their approach.

Read the feature on supply chain and logistics in the June issue of Retail World magazine.

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