Audit shelf

What challenges do retailers and manufacturers face in preventing supply chain disruptions in 2023?

Horloge 6 min
What challenges do retailers and manufacturers face in preventing supply chain disruptions in 2023?

€4.5bn 

That was the revenue shortfall in France’s fast-moving consumer goods (FMCG) and self-service fresh produce sector, according to the November 2022 NielsenIQ survey./strong>
 

NielsenIQ Taux de rupture

Dans un contexte inflationniste global, l'année 2022 a été marquée par une hausse sans précédent des ruptures de stocks en rayon : hausse des matières premières, négociations commerciales serrées entre industriels et distributeurs, problématiques sanitaires, les causes de ces pénuries sont multiples. 

Against a backdrop of global inflation, 2022 saw an unprecedented increase in retail shelf disruptions. There are many reasons for this, including rising raw material costs, tense negotiations between suppliers and buyers, and ongoing pandemic-related issues. For consumers, the situation was almost unknown: aside from the Covid pandemic, shortages on this scale hadn’t been seen in France for more than seven decades

From supply chain to store execution, impact is widespread

Between January and October 2022, the number of incidents increased four-fold, with shortages lasting four days on average.

Raw materials supply difficulties affected all categories:

- Mustard disappeared from shelves due to unusually low mustard seed harvest yields following an extremely hot 2021 summer in Canada, the world’s biggest producer.

- Wheat was another victim of climate change, coupled with the war in Ukraine. A report on possible shortages in the Brittany daily Ouest-France spread panic across the region, which is particularly partial to wheat for savoury pancakes.

- Non-grocery items were also impacted: consumers faced shortages at the petrol pump, while aluminium was in short supply in the electronic components' industry.

Overall, undelivered products accounted for one-fifth of supply chain incidents.

In addition, negotiations between suppliers and buyers have become particularly tense. In spring 2022, for instance, a major food group was removed from Intermarché and Casino’s supply chains, and its products disappeared from the shelves a few weeks later.

The issue? The two supermarket chains had refused to accept the 22% hike in prices requested by the major French food & beverage company.

It wasn’t until 8 December that the group managed to seal a deal with the grocery chains allowing bottles of Évian, Badoit and Volvic to reappear on the shelves. The details of the agreement were not disclosed.

 

Eager to prevent empty shelves – every retailer’s nightmare – while battling with widespread price inflation, some stores resorted to rationing items in especially short supply. Could this lead to a boomerang effect?

That’s what happened during the coronavirus crisis, with shoppers piling their trolleys high with staples like pasta, oil and toilet paper.

Personal hygiene products, and especially paper tissues, are among those most in short supply, with supply chain disruptions reaching 10% over the last year, according to the NielsenIQ survey.

If someone pops into the supermarket to pick up a bottle of oil but then sees a sign saying “mustard only available at the checkout” or “maximum of 3 bottles of oil per shopper”, the chances are they’ll panic buy and stockpile these essentials – “just in case”…

How can retailers fend off supply chain disruptions in 2023? ?

Since the start of 2023 retailers have also been hit by the huge increase in energy costs.

On 2 January, COFIGEO – owner of brands like William Saurin, Garbit and Zapetti – announced it was shutting down four of its main manufacturing plants, as it was unable to cope with the ten-fold increase in costs.

In addition, the NielsenIQ survey revealed that one-quarter of supply chain disruptions were due to poor execution, compelling sales and merchandising teams to hone their business intelligence in order to keep a closer watch on day-to-day realities – and respond with greater agility.

What are the options for retailers?

Without necessarily relegating new items to the storeroom, retailers should prioritise flagship products to weather the current storm. This means reducing assortments and SKU cannibalisation to attenuate the impact of pricing on consumer purchasing decisions.

Another tactic is to increase the proportion of own-brand ranges: the “Carrefour 2026” strategic plan unveiled by the retail chain’s chairman & CEO Alexandre Bompard last November aims to raise own-brand items to 40% of turnover within the next four years (up from 33% in 2022).

To avoid losing market share, it’s crucial for retailers to improve cost management but also ensure optimal availability. If products are out of sight, they’re less likely to end up in the shopping basket.

At the Retail Execution Forum and again in an interview with LSA, Casino CEO Tina Schuler reiterated the importance of eliminating what irritates shoppers. She also pointed to technology like artificial intelligence as an opportunity to drive up efficiency.

Like Casino, several food & beverage companies, including Mondelez and Danone, have kickstarted their digital revolution by calling on the expertise of EasyPicky to equip their sale forces with the right tools to embrace the challenge of enhanced efficiency.

Video recognition technology allows retail outlets to obtain real-time shelf intelligence so they can instantly identify potential stock shortages versus their planned assortment. Continuous reliable in-store data translates into heightened responsiveness.

As well as boosting operational efficiency, the EasyPicky solution allows sales and merchandising teams to accurately monitor performance outcomes resulting from strategic decision-making.

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