From Plenty to None: What Can Supply Chain Leaders Learn from Australia’s Current Grapple with Product Shortages

Written by Raghav Sibal, Managing Director ANZ at Manhattan Associates

Since the pandemic, supply chains have been no stranger to product shortages. From the toilet paper saga that saw supermarket shelves laid bare in mid-2020, to the latest shortage of lettuce – of all things – it has become a recurring theme that shortages do happen more often than consumers, and retailers, think.

A case in point, being KFC’s debatable act to serve their burgers with cabbage – due to a lack of lettuce – raised public awareness of (and with no shortage of outcry) around just how quickly food shortages can result from supply chain issues.

So, what can supply chain leaders, retailers, and wholesalers and grocery chains learn from this, and how can they learn to prepare themselves for inevitably more supply interferences in the future?

A rethink of supply chain continuity

With issues such as food shortages, the climate crisis, worldwide pandemics, and more recently, military conflicts in Eastern Europe, significant disruptions to global production, shipping and logistics processes have occurred as a result. However, in an unexpected turn of fortune, these very same events present an opportunity to ‘rethink’ many of the approaches that have facilitated overly lean supply chains without any resilience built into them.

In due course, this crucial rethink could well be the spur that brands and governments need to kickstart a stronger supply chain, all whilst promoting a sustainable, green revolution in manufacturing, supply chain, and retailing approaches. As both brands and governments look to allay future supply chain disruptions and the very real knock-on effects inflation is having on businesses and individuals, the topic of onshoring and all its potential long-term consumer and environmental benefits is gathering momentum.   

A case beyond just pure economics

Increased flexibility, access to larger workforces and reduced operational expenses are just three of the most commonly cited reasons that have seen tens of thousands of Australian organisations moving significant business operations overseas. And, while expansive global supply chains gained prominence over the past decade, they have also introduced a level of fragility which, until recent events, was not entirely understood.

Nevertheless, there is far more to like about the potential for bringing supply chain and manufacturing processes closer to the consumer than simply economic and security incentives. The ‘onshoring’ movement of entire manufacturing processes and supply chain networks offer a tantalising opportunity for brands to reimagine and reinvent their entire approach to shortages, interferences, and sustainable practices.

Having your inventory in the right places

From a retail perspective, companies have traditionally been reluctant to hold large amounts of stock in their local DC network as a buffer against supply chain disruption. This is due to the fact that that it has a significant impact on short term cash positions for retailers and carrying large amounts of seasonal inventory means that working capital is constrained. Additionally, as a result of a business holding more stock, retailers are sometimes forced to mark-down prices to move goods and face challenges around where to hold stock, and when. Many retailers are still not sure about the split between eCommerce and brick-and-mortar, so they are still finding that their inventory is often in the wrong places.

In this environment, operational visibility and forward planning are critical to ensuring stock is where it needs to be to meet demand. To gain these insights, solutions like a Warehouse Management System (WMS), which integrate all sales and distribution channels into one place are required. With innovations like a WMS, retailers have absolute transparency around their goods and are able to review the rules of stock allocation, temporarily giving priority to in-store stock over warehouse stock, thus, freeing up any trapped inventory confined within closed stores.

In addition, retailers should consider adopting a micro-fulfilment strategy which involves moving out of large singular DCs to smaller and more local and convenient hubs. By expediting the fulfilment process, micro-fulfilment gives brands the opportunity to house their inventory close to the point of demand enabling them to get goods to their customers quickly; and also providing convenient collection point for consumers who want to click-and-collect. With the adoption of this kind of smart fulfilment method, retailers can get their goods to consumers faster, cheaper, and more efficiently.

Building a supply chain fit for the future

Global events and local production issues continue to have a profound and lasting impact on Australian supply chains. As brands and the federal government look to mitigate against ‘the next’ significant event, the idea of moving manufacturing processes, goods, and distribution networks closer to home and to consumers is becoming a more important tool than ever to execute supply chain resilience and continuity.

The key to success for this new strategy rests on the ability for brands to continue to innovate at a supply chain level and deliver the types of networks and solutions that are not only resilient and reliable, but also agile and responsive enough to deal with shortages, disruptions, and changing consumer and environmental needs in the future.