Sobering new report from TLT suggests a long road ahead for supply chain crisis

·3-min read
Sobering new report from TLT suggests a long road ahead for supply chain crisis
Sobering new report from TLT suggests a long road ahead for supply chain crisis

A stark new report from TLT highlights retailers’ attempts to tackle major issues facing the sector. By Karen Peattie

 

LEADING retailers are predicting that the current global supply chain issue is a long-term one with costs unlikely to return to pre-crisis levels, according to a major new study from UK law firm TLT.

The triple effect of Brexit, the pandemic and the war in Ukraine has driven supply chain costs to new heights and shone a spotlight on areas of over-reliance and inefficiency in global supply networks.

The study, which saw researchers interview 100 leading UK retailers operating within the food and grocery, fashion and beauty, home, and lifestyle and leisure sectors during April, reveals that 87% of retailers do not believe things will go back to how they were before.

TLT’s report ‘The Long Game: Counting the cost of the global supply chain crisis’ concludes that this is a long-term issue requiring long-term changes, and reveals where UK retailers are investing.

While the vast majority (89%) of retailers are taking a pro-active approach rather than waiting to see what happens, 24% are making small, reactive changes with 38% making incremental changes, and 27% making significant changes or restructuring.

Rising costs are retailers’ greatest concern in relation to global supply chains (82%). Fuel was cited by 86% while shipping containers (68%), raw materials (66%), and supplier costs (65%) were also big concerns.

Meanwhile, responses to higher input costs include finding new efficiencies (68%), raising consumer product prices (67%), and charging more for deliveries (55%).

The survey reveals there is also increasing demand for suitable warehousing in the UK, contributing towards an expected increase in retail warehouse rent in the coming years (0.9% between 2022/26, Statista) although developers will also be looking for more opportunities to meet that demand.

Technology was cited by just over half (51%) as a necessary area of capital expenditure in order to improve stock visibility and increase efficiencies.

Retailers predict they will need 7% more warehouse space on average over the next five years, and two-fifths (39%) say there isn’t currently enough suitable warehousing available in the UK.

Not surprisingly, recruitment and retention is retailers’ third-largest concern with supply chains (64%).

The biggest labour pinch in retail is in warehousing and distribution (61%) – the shortage of HGV drivers highlighted in the latter half of 2021 remains an issue – as opposed to shops (20%) or head office (19%).

This can partly be attributed to the displacement of jobs during the pandemic, meaning that retailers are now having to spend more on attracting and retaining staff. Common incentive tactics include wage increases (63%), sign-on and long-term incentive bonuses (56%), and extra benefits (51%).

The majority (78%) of retailers say changes to modes of transport are among the longer-term issues affecting supply chains after sea freight became less feasible during the pandemic – due to port closures, delays, a lack of workers, a shortage of shipping containers and, therefore, rising costs.

This means that air and road transport have seen the biggest proportions of retailers relying on them more (20% and 17% of retailers respectively).

Howard Beach, real estate partner at TLT, says: “The global supply chain crisis isn’t going away, and the challenge is that this is affecting every link in the chain.

HeraldScotland:
HeraldScotland:

“As a result, retailers are having to quickly find new areas of flexibility and increase efficiencies, in order to stave off unfavourable decisions like raising prices and closing unprofitable stores.

“Retailers will need to consider all of their options, and we are increasingly seeing retailers rethinking their supplier strategies and investing in technology solutions for example.

“It is positive to see that the vast majority of retailers are doing something about this, as well as the recent news – particularly from the major supermarkets – about how they are focusing on ways to support households with the cost-of-living crisis.

“How retailers respond to the ongoing supply chain disruption will be the subject of much scrutiny for many months to come, especially the long-term impact on households, suppliers, employees and the environment.”
www.tlt.com

 

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