Supporting retail businesses through an overstocking crisis

As Europe continues to grapple with an economic crisis, it is safe to say that all businesses and members of society are feeling the pinch. From high levels of inflation affecting everyday costs to facing a future of growing uncertainty, no one has made it out of the last year unscathed.

However, the retail industry is one that has been hit with a particularly heavy hand during such turbulent financial times.

For starters, the Covid-19 pandemic saw an e-commerce boom across Europe, with revenues up a significant 20% in 2020 according to statist and another 13% in 2021 (E-commerce Europe).

That left the retail industry scrambling to keep up with astronomical surges in demand and heaped a lot of pressure on global logistics. So when supply chain issues occurred caused by pandemic restrictions, manufacturing delays, port congestion, natural disasters and more, retailers and manufacturers were left struggling.

Consumer spending change

As pandemic restrictions eased and the world began to open up, consumers suddenly shifted their spending habits toward the travel and leisure industries as part of a newfound freedom.

And now we are facing record levels of inflation (10.9% in September 2022, according to statist), consumers are once again changing their behavior by investing in more essential discretionary products instead of non-discretionary items such as furniture and appliances.

High-end online furniture retailer, for example, achieved sales figures of £315m in 2020 and £110m in the first quarter of 2021, but now the company is on the brink of collapse. because demand falls drastically (BBC).

Within discretionary retail, consumers continue to spend on apparel but are switching to cheaper brands to keep disposable income as high as possible in the face of economic uncertainty.

Online clothing retailer Boohoo reported a massive 58% drop in core earnings in the first half of 2022 according to Reuters. Revenue was also down 10% on the back of lower consumer demand, a significant increase in product returns and longer lead times for products sold to foreign markets.

Supply exceeds demand throughout Europe

Unfortunately, this drop in demand has not been reflected in supply. So what is now very evident in Europe and the world is that retailers have too many consumer goods in stock that are not moving fast enough. market scale reports that some retailers are overstocked by as much as 30%, which has forced them to cut prices or increase stocks at liquidators to keep the product cycle moving with the seasons.

In the world of logistics, this means warehouses are full of inventory and European terminals are piling up containers full of retail stock, which can lead to high detention and demurrage costs and add disruption to companies’ supply chains. Simply put, a large number of retail businesses are now facing inventory traffic jams. So where does a logistics service provider come in? While it is difficult to reverse overstock problems and find immediate solutions from a supply chain perspective, there are things companies can do to soften the blow.

Containers in ports that rack up D&D costs can be moved to yard locations to make them more profitable, or indeed emptied to off-dock locations to give businesses more visibility into the commodities and what the costs are. possible next steps. In addition, the return of equipment could reduce costs and help keep the global supply chain moving.

Flexible solutions are the key

Resilience and agility are critical in inventory management, so supply chain management solutions that enable you to speed up or slow down your logistics operations are of paramount importance to get the right levels of stock to the right locations in the right moment.

One such tool that allows you to manage your cargo flow according to demand patterns is Maersk’s flex centerwhich has been often used by businesses in 2022 during such strong fluctuations in consumer demand.

With the flexibility to store cargo in hubs close to key markets or indeed at origin, companies have control over when the right time is to deliver the order. This provides up to a 70% reduction in lead times from order to delivery, allowing you to adapt to changing market situations and prioritize loading accordingly.

Add this to gaining real-time visibility into inventory in centers and a potential 30% cost reduction over traditional warehousing, and it becomes a very viable solution for today’s retail market circumstances.

The situation remains highly unpredictable heading into 2023, and preparing supply chains for every eventuality remains the most resilient course of action. However, market volatility is expected to continue into the new year.

We have seen the retail industry face a number of challenges in recent years, and the market situation will continue to pose tests for businesses in 2023. While mid-market retailers face pressure, discounters and high private label retailers are seeing the current situation. as an opportunity to gain market share. With this in mind, we expect to see certain segments of retail move progressively over the coming months, with others still left in tight spots. It is very important to closely connect your logistics and supply chain teams with your merchandising to achieve the best possible outcome for consumers starting the new year.

Juana Hainz,

Global Vertical Head, Retail

Accurate data is a key priority when it comes to managing inventory in retail, as slight inaccuracies caused by shipping variances, misplaced products, returns, and a host of other factors can cause overstock issues.

As we move ever further into a digitized future, the world of retail inventory management will be shaped around data and fully connected to an integrated supply chain.

The solutions will not only offer transit and storage visibility, but also complete end-to-end visibility to measure inventory levels in containers, warehouses and at the final destination.

Maersk is already building visibility-focused solutions into its integrated logistics operations for customers, giving companies the tools they need to prevent future inventory crises and manage market fluctuations effectively.

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