14 types of retail supply chain risk between manufacturer and customer
With supply chains often spanning many countries and multiple modes of transportation, getting items from manufacturer to customer in a timely and cost effective manner is a complex task. One weak spot or break in a retail supply chain can cause a knock on series of effects, creating much larger problems and further disruption. To avoid these supply chain risks turning into expensive issues, retailers must first identify all potential risks and have plans in place ready to mitigate these as soon as they arise.
Supply chain risk at the manufacturing stage
Products pass through many tiers of a supply chain during their assembly before they are ready to be shipped. Each vendor must meet their manufacturing deadlines, otherwise they risk having an impact on the timescales of all of the other suppliers in the chain.
Late deliveries from material and component suppliers are often one of the largest causes of production delays. However, workplace disruption, equipment malfunctions and suppliers prioritising more lucrative contracts should also be taken into consideration.
Specific supply chain risk occurs when a single supplier has sole responsibility for a component or finished item. Having a clear understanding of who is involved and what they are supplying throughout your supply chain helps spot these risks and spread output amongst trusted suppliers.
Are delays in manufacturing communicated to your freight forwarder quickly so as to avoid charges/expensive carrier options?
Quality control issues in the retail supply chain
Managing quality right across the supply chain is something that businesses cannot afford to ignore. Poor quality control can prove disastrous to a brand’s reputation and also creates unnecessary extra expense in the form of replacement product and delays.
Serious quality issues that are not picked up on until too late can mean faulty, and sometimes even hazardous, products end up in the hands of consumers. This leaves retailers with the costly task of having to recall products that could be affected by the issue and negatively impacts consumer trust of their brand.
What quality control processes exist in your supply chain and when to address these risks?
Freight transport supply chain risks
No freight forwarding plans to mitigate transport delays
The transport of components, materials and stock can be full of potential obstructions and this needs to be carefully factored into the transport time when estimating the arrival of shipments. Traffic, bad weather, accidents and a whole set of other unforeseen circumstances can all prevent items getting to their destination on time.
Whilst these reasons for delay are often seemingly trivial and difficult to predict, many retail supply chains are so dependent on delivery at a specific time to make the booked transport that even slight changes cause severe knock ons.
Does your freight forwarder have systems in place to receive early updates on delays and back ups in place to quickly respond?
Customs documents, charges & processes
Shipments can also be delayed whilst passing through customs. Each country often has its own specific requirements for international trade, so it’s important to understand the rules and regulations. Customs documentation provided without the correct detail or in the wrong format, risks unnecessary delays or even seizure of non-compliant shipments.
Staying on top of changes to customs requirements and completing these correctly is a vital task for the team responsible. Getting documents right first time and not having to consider changes at a border makes a huge difference when sticking to tight deadlines. An expert freight forwarder will also be able to help retailers understand and take advantage of customs warehouses. Making use of customs warehouses can provide cash flow benefits by avoiding unnecessary duty and VAT costs before goods are moved on.
Do your products often get delayed in transit at customs? What steps are your freight forwarder taking to provide correct customs documentation ahead of checks? Does your freight forwarder offer suggestions to make full use of customs warehouses?
Carrier issues not mitigated by freight forwarders
The financial health, capacity and dependability of your carriers are critical supply chain risk factors and should not be overlooked. Without them materials, components and final products would not reach their destinations and production would come to a halt.
To guard against this, businesses should take careful note of how their carriers are performing, both in their abilities and financially. A ship or train becoming temporarily out of service, or an important carrier going out of business could have dire consequences, so robust backup plans and carriers should be considered ahead of time.
Does your freight forwarder have contingency plans in place to mitigate carrier risks in your retail supply chain?
Damage and theft of products in transit
Cargo theft has risen dramatically over the past few years and presents a significant retail supply chain risk. With such large volumes of product being moved and the relative lack of vehicle security, the potential profits make cargo a highly appealing target for thieves. Whether a shipment is at a port, a warehouse or a truck stop along the way, it is vulnerable to both opportunistic and organised theft.
Items can also be damaged whilst being transported. Improper handling, incorrect storage and accidents along the way can leave products unfit for sale. The loss of a single container of products can have a financial impact on a business, so it’s essential to ensure carriers employ solid security measures and correct handling of products.
What steps are your freight forwarder taking to keep your cargo safe and in perfect condition during transit?
Geographic and environmental supply chain risk
Natural disasters such as earthquakes, flooding and hurricanes can be truly devastating and present a serious supply chain risk. Damage to equipment, premises and the surrounding area can be unavoidable in these situations and often has a knock on effect, creating disruption not only to retail logistics and transport, but also causing further delays due to stock loss. It can take weeks, or even months for businesses to recover from their effects.
Do you have suppliers or significant freight travel in areas which see regular natural disasters? Does your freight forwarder have plans in place to deal with natural disasters?
Political and civil unrest
Political instability and civil unrest can cause severe disruptions to transport routes and make doing business in these countries extremely difficult, or sometimes even impossible. Disruption to vital trade links can also make it harder to do business in neighbouring countries and weaken existing links in the retail supply chain.
Are you suppliers and trade routes assessed for potential disruption by political unrest?
War and terrorism
Major businesses who employ a large number of people can be prime targets for terrorism and other attacks. Retailers that provide essential commodities are also often targeted in order to create shortages within areas of conflict. Factories involved in production are often singled out due to their media visibility and the high level of damage and disruption an attack could potentially cause.
The sudden closure of airports and other travel links mean the flow of goods could be stalled or even shut down completely due to war or terrorist attacks in a region.
Does your freight forwarder monitor news alerts on regions of activity to help divert supply/freight?
Large events and important calendar dates not spotted by freight forwarders
Events or calendar dates that see large gatherings of people or transport congestion can cause problems to a inflexible freight forwarding operation. These localised issues can easily be spotted in advance and alternative plans put in place by a proactive freight forwarder.
Does your freight forwarder prepare a monthly calendar of events to help avoid routes that could be delayed or more costly?
Supply chain risk posed by inefficient retail logistics
Warehouse shortages and separate inventories
Customers rarely care about the reason why a retailer's shelves are empty, or why the product they’ve been waiting for months to buy is still not available. Instead, they take their custom elsewhere or buy an alternative. As a retailer, it’s incredibly important to understand the buying habits of your customers and to be able to accurately predict demand.
Finding the right balance in inventory volume is crucial in guarding against supply chain risk and ensuring an efficient flow of product. A low inventory can help to keep costs down, with items and parts arriving just in time, as and when they’re needed. However, a higher volume but more costly inventory can help to protect against shortages, allow businesses to meet changes in demand more readily and benefit from a lower transport cost per unit.
Customer demand for true omni-channel retail has put extreme pressure on brands that hold separate stock for online and store. The inability to quickly identify if a product is available from a single stock inventory and quickly deliver it to a customer can result in poor experience and future loss of sales.
Do your retail logistics providers support single product inventory across channels?
Unexpected demand not managed by retail logistics partners
With the rise of social media and an on-demand economy, products can quickly become an unexpected sell-out success, leaving brands struggling to keep up. Retailers without a strategy in place to cope, create unhappy customers and in turn miss out on both the opportunities and potential profits from these spikes in demand.
Can your retail logistics providers demonstrate supply chain agility and flexibility?
Business practices that could lead to supply chain risk
Cyber security issues and protection of personal data
In this digital age of doing business, sensitive information is stored and exchanged on a daily basis. Keeping this data protected and secure is obviously a major concern. Businesses who work with a number of suppliers and allow vendors access to their own systems could be unknowingly providing a direct route for hackers to exploit this information. The reliance on supply chain systems to provide accurate detail of orders and current status means that any downtime or loss of data could cause serious repercussions.
The introduction of the General Data Protection Regulation in May 2018 makes it critical that retailers pay even closer attention to personal detail to avoid large fines. A key part of the regulation is in its definition of both controllers and processors of data, so retailers must understand how data is collected and used both by themselves and their partner organisations.
Are you and your partners using secure and reliable systems to protect data?
Insurance not made clear by retail logistics partners
As supply chain risk becomes more global and complex, insurance has become ever more important. With appropriate insurance in place, the financial impact of a supplier failing to deliver or goods being lost or damaged is minimised. Retailers can also recoup costs much faster and are able to quickly find alternatives to cover shortages.
Do you have clear understanding of what is and isn’t covered by your insurance? Do your freight forwarder and retail logistics providers make it clear what insurance cover you have?
Supply chain risk management is crucial
Unexpected delays, shortage of product and damaged or faulty items can all have a devastating impact on customer satisfaction and eat into profits. A well thought out risk management strategy should be a top priority for all retailers. By identifying all supply chain risks early, businesses are able to ensure their products move as smoothly as possible and are able to tackle risks before they can become bigger issues. Working with a proactive and transparent 3PL service provider gives brands the expert support to identify supply chain risk and develop strategies to mitigate against them.
Ask us how we can guard you against supply chain risk
Find out from our expert team how we can help you develop a resilient retail supply chain by completing the short form below or calling James Thorpe, Freight Business Unit Manager, on +44 (0) 1455 200 700.