As the Christmas hangovers started clearing in January, two things became very clear. The first is that a number of retailers did a lot better than the doom-mongers were predicting; the second is that effective management of the supply chain will be even more critical in the year ahead than in the year just gone.
Some commentators appear to be revelling in the distress of retailers like Woolworths and Zavvi – the BBC has even designed a special logo. They have since had to report that Sainsbury’s had its best ever Christmas performance, and that sales were up at retailers such as Jessops, JD Sports, Primark, Carphone Warehouse and the Co-op.
What is clear from the post-Christmas trading statements is that those retailers that have been pro-active in managing their supply chains have been able to stay ahead of the pack. Debenhams, for example, saw a fall in like-for-like sales of 3.5 per cent, but it still managed to increase pre-tax profits.
That was down to tight control of stocks, reducing the number of SKU options and absolute stock levels while investing in greater availability of bestsellers.
And Marks & Spencer and Next, which saw falls in like-for-like sales before Christmas, were both able to ameliorate the impact by effective inventory control.
In an uncertain market, understanding where the major risks lie is vital. Holding too much inventory, and inefficient supply chain systems are obvious issues. But it is also important to be aware of the health of suppliers – a supplier of a vital component getting into difficulties quickly becomes a critical issue for a business.
That in turn highlights the importance of building relationships in the supply chain. A couple of years back there was a lot of talk, but less action, on the importance of supply chain partnerships – perhaps it is now the right moment to look again at that.
Malory Davies FCILT