How COVID-19 is impacting supply chains, and the role of technology

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Following the outbreak of COVID-19 in the UK, widespread media coverage has shown images of bare shelves in supermarket aisles and over-piled shopping trollies. Following this, businesses and the media have erupted into a discussion of the ‘new normal’. This piece shall observe the changing nature of consumer behaviour and the impact of technological innovation.

At the centre of this discussion around the new normal is panic buying, occurring when consumers buy unusually large amounts of a product in anticipation of, or after a crisis. Such actions have been publicly shamed on various social media posts. Though the consequences of panic buying have had an obvious ripple effect on the wider context of customer demand – if people know that stock levels have been impacted, they are more likely to buy multiple of the same product to compensate for the difficulty in finding products (if you’ve been looking everywhere for pasta and you stumble across a local shop with plenty of bags of pasta, you’re likely to purchase more than one bag).

Bigger shops, less often

With the majority of the country self-isolating or limiting the number of journeys they take outside the home, coronavirus has changed the frequency of shopping trips. Instead, shoppers are doing substantially larger shops to stretch further. FinTech Revolut’s transaction data recorded 41% fewer transactions, but the value of purchases was 6% higher.

Shopping in smaller, local shops

Despite attempts to limit the number of people in shops, the volume remains likely to put a lot of people off shopping in supermarkets. Instead, people have been more likely to order from local bakeries and independent local shops. Particularly given the financial repercussions of coronavirus on small businesses, a desire to support local business slightly explains this shift in shopping. Though, it should be noted that a well-updated social media presence is useful for smaller, independent shops with all necessary information including opening times and the products offered. Additionally, photos of foodie goods and reviews are always a good tool to enhance customer interaction and improve word of mouth recommendations (a share of your images with a good comment goes a long way).

Increase in online shopping

The prospect of going to a crowded supermarket or other food supplier is a scary thought for some. Instead, I have found it much easier to order the majority of my food online and then have it delivered or go to collect it. This has really highlighted the local businesses that have dealt well with the change in consumer habits. Many local bakeries and butchers have offered online ordering systems, making it easy and safe to still order your favourite treats. I think the long-term impacts of coronavirus may be that individuals feel less inclined to leave their houses to go shopping. Therefore, improving your online presence and providing either a click and collect or delivery service may be worthwhile.

Changes in disposable income

With fewer opportunities for days out or weekends away, for some households, disposable income is there to be spent. However, this is not a reality shared by all households. The Centre for Economics Research has calculated that household income will fall up to £515 per household per month. It is therefore important that retailers are sensitive to this in their pricing and messaging – some will be spending more money while others will seek deals and bargains to adjust to the huge personal changes. For some businesses, it may be worth offering bundle deals (for instance, 3 items for £10) in order to drive revenue and manage stock levels – remember, you want to keep surplus to a minimum.

The Bullwhip

Major swings in inventory occur from panic buying which is magnified as it moves up the supply chain.

The primary causes of the bullwhip effect are little to no visibility into demand patterns and a limited understanding of demand drivers. In contrast to the empty shelves visualised, retailers have been hit by an equally worrying scenario. Huge quantities of food have been wasted as a consequence of the coronavirus impacts on the supply chain.

Time to adapt

In summary, could COVID-19 be the event that finally forces companies to transform their supply chain?

Simply, the coronavirus pandemic has exposed the inabilities of traditional systems to cope with the drastic change and the new normal. It seems that technological innovation is exceedingly necessary to maintain functioning supply routes. From this, companies would have a better understanding of the changing nature in consumer demand, enabling a more agile supply chain. Through this, enhanced resilience will minimise the effects of the bullwhip effect and dramatic changes in supply and demand. Additionally, and with particular reference to surplus, a refined understanding of customer demand through technology intervention will enable retailers to reduce this figure.

It really is technology to the rescue.