April 15, 2020
April 15, 2020
Contributor: Sarah Hippold
The global outbreak of COVID-19 is causing huge swings in demand across retail. CSCOs can take three actions to mitigate disruption and prepare the supply chain for the months to come.
A national supermarket chain. A big apparel brand. COVID-19 has severe effects on both businesses, but in very different ways.
While the supermarket faces a steep surge in demand for certain items such as pasta or flour, the apparel brand had to close stores and now relies exclusively on online sales to fulfill declining demand.
“The global outbreak of COVID-19 has created a very dynamic environment in retail supply chains,” says Thomas O’Connor, Senior Director Analyst, Gartner. “Demand is extremely volatile, depending on the product category. It has also shifted from physical stores to online channels as consumers seek to avoid public places due to fear of infection or government restrictions. Whether you’re a CSCO dealing with increased or declining demand, this is a unique challenge for everyone.”
For retail CSCOs, it’s not only about actions to survive the lockdowns and restrictions. It’s also about taking the appropriate measures to be prepared for the after-pandemic market — here are three that CSOCs can take now.
Retail CSCOs have access to a wide array of data from the markets that were first impacted, including China, Italy and South Korea, as they look to forecast consumer responses to the virus. For example, In Italy there was a clear peak in sales for many edible grocery products during the week ending March 15, 2020, when many Italians were ordered to self-quarantine.
It is important to utilize the available data to model scenarios for your own organization. For example, cities that experience a long-term lockdown might see some consumers spend more time and money working on their homes, driving a surge in home improvement sales. Others, however, will simply focus on minimizing total spend. Special arrangements — contactless delivery or curbside pick-up offerings — might also drive sales, while seasonal sales periods such as Amazon Prime Day or back to school will likely underperform.
Many retailers that source from China already experience challenges caused by constrained raw material as well as limited availability of goods. As the virus spreads, similar situations are occurring globally.
Learn more: Building an Agile Supply Chain
For retail CSCOs, prioritization is key — know where demand increases are taking form and work to meet that demand. “Let’s take a high-demand item such as hand sanitizer. To supply as many consumers as possible, it might be a good idea to ask the supplier for only single units rather than multi-packs,” O’Connor says.
“In the midterm, continue to work closely with your suppliers and try to mitigate any bullwhip effects. Supply-demand balancing is a difficult task at the moment, but it is of great importance.”
When it comes to the workforce, retail supply chains face two very different issues. On the one hand, the dynamic demand environment necessitates large increases or decreases in workers required.
Supermarkets need more staff to fill the shelves, while apparel retailers currently have limited activities for the staff that usually man their temporarily closed stores. On the other hand, no organization is immune against COVID-19. Sick employees must stay home; stores, warehouses or other facilities might be closed due to quarantine restrictions.
Read more: Use Labor Market Insights to Manage People-Related Costs
Solving this twofold challenge requires creativity and care. For example, employees who aren’t needed in stores at the moment can deliver products to online shoppers or work from home in customer support. CSCOs who can’t sustain their workforces can also reach out to businesses with increased demand and try to temporarily redeploy staff. This will be an advantage after things have normalized, as there will be no need to train new employees.
However, the most important thing is to ensure the safety of every member of the workforce, be it by providing protective equipment or guaranteeing paid leave in case of an infection.
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This article is based on insights that are part of an in-depth collection of research, tools, templates and advice available to Gartner clients. Gartner for Supply Chain leaders clients can read more in Retailers Seek to Mitigate Disruption From COVID-19 and Identify Emerging Opportunities by Thomas O’Connor, et al.
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