With the Office for Business Responsibility predicting that the UK’s economy could shrink by 35%, things are looking very grim for both retail and our economy. However, digging beneath the surface of the impact of the pandemic reveals a more complex picture. While some businesses have put their operations on hold, furloughing their people and waiting for restrictions to lift; others are facing unprecedented demand for products, which can be delivered online.
Clearly, the dreadful virus’ effects on the economy are not predictable or uniform. Some companies have nothing to do, while others can’t cope with demand. What does all this teach us for future supply chain planning and investment into automation?
Firstly, let’s look at the sectors that have faced challenges such as the UK automotive market. Registrations of new cars in March fell by 44% year-on-year, reflecting the mass closure of dealerships across the country. This drop in sales sent shudders back up the complex automotive supply chain.
Our clients in the parts supply sector have virtually closed down following the halt in production at all major automotive manufacturing plants. While they have put many of their staff on furlough duty, most are already deep into daily discussions in planning the re-start, which they expect to be in the next couple of weeks. This pattern has been seen across most of UK manufacturing, with research group IHS Markit commenting that output was at its lowest level since the 2012 recession.
Looking to the other side of the coin, it has been sectors such as online retail, food and pharmaceuticals that have seen unprecedented growth. While some retail businesses have coped well with the unprecedented demand, others have not responded well.
Value high street brand Primark is a good example of a retailer who’s lack of online investment has left it exposed. With the temporary closure of its 189 UK stores, the business is losing approximately £650 million a month in sales. To make matters worse, it’s estimated that the business has around £1.6 billion of stock in stores, warehouses and in transit – all with nowhere to go.
Granted, this is an extreme case, but Primark’s lack of any kind of multi-channel strategy must be hurting right now. What makes it even worse is the brand’s reliance of fast fashion, meaning that today’s ‘in fashion’ stock is likely to be irrelevant when shops finally re-open.
Businesses such as B&Q appeared to have fared better by moving quickly to provide a click-and-collect service for its online product range. Thanks to its pre-existing e-commerce platform, the hardware retail shop has been able to mobilise its staff to provide a ‘to the car’ service, adhering at all times to the government’s two-metre distance advice.
While the grocery retail sector has seen huge surges in demand, established automation systems here have not always delivered. Data from week ending March 22, 2020 shows that around 1% more of households received an online delivery – compared to the same period in 2019. This suggests that despite the significant rise in demand, the industry was not able to respond to this opportunity.
There have been many stories of the 1.5 million people classed as vulnerable still waiting for delivery slots with major grocery retailers, despite them registering on the government website to confirm their at-risk status.
As an industry, retail professionals often like to shout about the impressive transition we’ve made from ‘bricks and mortar’ to pure online or ‘bricks and clicks’. But the reality is that too many businesses have been caught out by the virus.
Like Debenhams, Cath Kitson or Oasis, it’s likely that many more vulnerable businesses will fail as a result of the COVID-19 crisis. If logistics is to learn how to adapt to a new, post-viral economy, then we need to ensure we plan systems with realistic joined up thinking.
Looking to the medium term, those businesses with highly automated systems could well benefit for an unexpected advantage, given the social distancing and hand washing regimes we will all need to adopt. Even as we emerge from the COVID-19 crisis, those with truly automated, roboticised systems will be more efficient than their human-operated competitors.
Ultimately, businesses will need robust online strategies, which are supported by reliable transport infrastructures based on automation and robotics. COVID-19 has already killed off many businesses. Those that survive will need to reassess their operations. If your current supply chain isn’t working in the current crisis, then it’s unlikely to survive another hit. The logistics sectors need to completely review their purpose and ability to cope when the next global crisis strikes.
Robert Wood reports.