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Pandemic prompts need for fresh look at retailers’ partnerships with suppliers

As the stage four lockdown was announced in Melbourne early in August, panic buying yet again set in. Nervous shoppers led a run on items including toilet paper, meat, pasta, flour and hand sanitiser. As before, this led to retailers enforcing purchasing limits on some of these items.

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These kinds of fluctuations in consumer appetite and demand are just one of many examples where unpredictability can lead to disruption for retailers and a need for adaptation. Changing government regulations in the COVID era are also adding to complexity. Retailers must also contend with the impact and uncertainty about border closures.

How customers are consuming goods has also changed dramatically in some cases. Online purchases have sky-rocketed for some brands, while shopping in store has died down significantly. In fact, the volume of online shopping was found to be up by 90 per cent across the country in July – 161 per cent in Victoria, where a severe lockdown was in place.

While the pandemic is an extreme example of how unpredictability can play out for those who are less well prepared, this isn’t a new phenomenon. In a recent webinar hosted by CEDA, Alexandra Riha, President of the Australasian Supply Chain Institute (ASCI) revealed that 99 per cent of global companies have faced supply chain disruption in the last five years. Even pre-COVID-19, 11 per cent of the ASCI’s members experienced weekly supply chain disruptions.

Yet when the pandemic hit, many procurement teams were reactive and uncoordinated in the initial stages, according to the Harvard Business Review.

While there are many facets to the story, two stand out as low hanging fruit for strengthening retailers’ supply chain resilience: enabling more proactive action through stronger visibility of the supply chain and thinking differently about how they partner and collaborate with suppliers.

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Proactivity

A proactive, rather than reactive approach to supply chain management is essential to business survival. A few key steps can go a long way towards helping retailers to stay in front of the curve. First, mapping suppliers and their sub suppliers and having data at hand will allow retailers to better analyse risks to the health of those suppliers and the likelihood of potential supply chain disruptions.

Critical data points might include factors like contracts, invoices, and open purchase orders, but also all internal and external factors that signal financial, operational, regulatory, environmental, and social risks emanating from the supply chain.

There is far too much data for any human to process, but by tapping into technology, procurement teams are able to gather data across a variety of departments and use AI and automated dashboards to spot trends and gather insights before issues escalate.

Building a dynamic network of suppliers provides opportunity for retailers. If disruption does occur, supply chain technology connects systems and aligns stakeholders in such a way that retailers will have more information at their fingertips in order to quickly secure supplies elsewhere.

In March, SAP Ariba opened access to SAP Ariba Discovery during the pandemic to help businesses, including retailers, to do just that. Any buyer can post their immediate needs, and suppliers can respond on their ability to deliver the goods and services required. As a result, we saw an increase of a third in activity, as buyers looked to ensure critical supplies reached the people and places where they were needed.

Technology-enabled proactivity can also pay dividends in a crisis via more efficient warehouse management and supply distribution. This was something Frucor Suntory, one of ANZ’s largest beverage companies, experienced during COVID-19 when it was able to better manage warehousing space to ensure seamless distribution and reduce the time it took to supply retailers running low on stock.

Partnership

Working together with suppliers on how they can optimise their businesses amid disruption, retailers have been able to get information faster, gain visibility around potential issues sooner, and become buyers of choice in the eyes of their suppliers. Technology can support here too, offering dynamic discounting for better payment terms or other digital collaboration platforms equips you to work safely and easily with multiple tiers of contract manufacturers and suppliers.

Whether it’s in terms of COVID-19’s spread or the potential for supply chain disruptions to rip through industries, it’s clear that no man, woman or retail business is an island. Retailers will emerge stronger by deepening partnership with suppliers and investment in technology to become more proactive and adaptive in the face of rapidly changing supply or demand.

Henrik Smedberg is regional vice president at SAP Ariba Australia and New Zealand