The coronavirus pandemic significantly disrupted the retail supply chain in 2020, sending retailers and suppliers scrambling to keep product on shelves, and finding new relationships where off-shore partnerships were shut down. However, there’s a new challenge afoot, preparing for a consumer explosion after the pandemic.
“Consumer demand is pent up and it will be unleashed when this is over,” said Nada Sanders, professor of supply chain management, Northeastern University, during her keynote presentation at PLMA Live! Presents Private Label Week.
Sanders addressed what could be learned from the supply chain disruption over the last year, as well as how to prepare for when consumers go shopping again after the pandemic. She said she believes that consumers will be hungry to shop this summer, without masks, closer to normalcy, as she heard from the medical community.
But until that time, retailers and suppliers are faced with two key challenges she said: First is to stay financially afloat so that they can make it to the recovery; secondly, maintaining their current market position.
Before addressing the future, Sanders highlighted some areas where the supply chain system seemed woefully unprepared for COVID-19.
First, she said retailers and suppliers built a supply chain system that was too complex, in which the slightest crack down the line created a large ripple effect. For example, she cited a survey of manufacturers that found 54% of executives didn’t have a view upstream beyond their tier 1 retailers.
She also said there was a heavy reliance on just-in-time systems, operating where inventory was replaced only as needed, so when the hoarding began, they weren’t prepared. Lastly, she said dependence on offshoring put retailer supply chains at risk. For example, a retailer may have depended on a small number of suppliers in China but didn’t diversify enough both locally or in other countries.
To prepare for the incoming pent up consumer demand, Sanders said retailers need to begin now, monitoring product lead times, margins and product criticality. She said to create a matrix sorting customers, products, suppliers based on importance and vulnerability. She also said to find alternative sources of supply, gear up assortments to what consumers are looking for now — comfortable, reasonable products — that will help them survive now but also be in a better position long term.
For example, there isn’t much impulse shopping happening now, so focus on multipacks, take-home versions of products, and on less toward on-the-go options.
Looking to more digital infrastructure for both suppliers and retailers is imperative, too. Knowing the technologies can be expensive, Sanders said to focus on a system that will help strengthen supply chain connectivity. The benefits of a digital system is shining a light down the full stream of the supply chain, helping to collaborate with supply chain partners quicker, as well as optimize assortment and pricing strategies. A digital system will also help retailers and suppliers better absorb any future shocks to the system.
Lastly, Sanders said that because the pandemic caused such unusual behavior, that looking at historical data won’t be as helpful, and consumers are so thrown that they can’t quite articulate what they’re looking for now.
She suggested companies hire a “futurist,” even if just as a temporary consultant. The person can help a company think differently about the future and assess future possibilities around consumers and shopper behavior. A futurist can identify emotional needs and buying patterns, and they can tap into the very things that consumers can’t articulate. Those insights will help design products that meet those needs and better anticipate what a consumer will be looking for when the pandemic ends, much better than any historical data right now.