Thursday, January 22, 2009

Rocking the retailer's boats

The Village Sweet Shop, 1897 by Ralph Hedley
The Village Sweet Shop, 1897

In the shop we currently are experiencing some glitches with regards to stock. The first reason for that is that after Christmas, January and February in principle are quieter months where we can concentrate on the layout of the shop and initiate some repairs. The second reason is that reliability of the supply chain is a little fraught which means that some lines are not available when you want them and a delay of delivery is experienced. This does not relate to local food per se as the suppliers are known to us and very little changes on a daily basis. Some local suppliers relate that instead of a steady flow of customers, the pattern is a little more erratic which makes it difficult to plan staff and resources as effectively as in 2008. Larger suppliers experience gaps in the products that are delivered which may be a break in the transportation system described in an earlier post. Currently therefore, we are all in need of realigning our business practices and finding our feet in a new business climate. For very large firms that depend on credit from banks for cash flow, the impact is going to be greater than smaller shops. The speed at which goods sell is slower and the amounts of waste – products out of date and fresh unsold produce is increased which makes for more ready steady cook meals in the home and a reduction of the amounts of fresh bread etc that is displayed. Business customers as well as individuals are starting to downshift in the usual consumer patterns which needs careful monitoring.

As a business therefore we need to order stock before it starts to run out to ensure that there is continuity. That would mean an increase in investment before the product is sold and if you are depending on credit to supply that money then again there is a gap. Very few businesses hold large amounts of stock behind the counter. There has not been the need to stockpile before as suppliers could supply regularly at a week’s notice. Goods that are stockpiled increase the risk of waste due to dates passing quickly and take up more space. If shops are experiencing a break in the supply chain it may follow that consumers may find the same – not a complete guarantee that the product you are wanting is available immediately.

There are positive signs that consumers are thinking clearly about what is necessary and affordable instead of impulse buying and that is encouraging.

1 comment:

Darren (Green Change) said...

I think this is going to be a general problem in many industries in coming years.

For a long time now, industries have been following the Japanese principle of "just in time" (JIT) manufacturing. This is great for accountants, because the stocks and work on hand between manufacturing processes are minimised, so you don't have too much capital tied up.

However, it sucks when suppliers have trouble, or there are transport strikes, or oil/fuel shortages. Your production stops immediately, and shops run out of stock quickly. The shortages can then cause their own problems, as people rush out to stockpile and generate even more demand.

I'm sure we'll be seeing more of this in the years ahead!