An upturn in British business activity could be a sign for retailers to revisit supply chain planning for this year’s festive peak, writes Stuart Greenfield, sales director at Advanced Supply Chain.
After a dip in business confidence in June, new business growth across the UK private sector jumped to a 15-month high in July. Data from S&P’s Global Flash Purchasing Manager’s Index (PMI) showed growth tracking higher than expected by economists. The index rose from June’s six month low of 52.3 to 52.7 in July.
Further S&P data highlighted the strongest growth in UK manufacturing in two years, fuelling optimism about future sales. A new government targeting faster economic growth, as well as falling inflation are likely to be contributing to renewed confidence among businesses. This is good news for retail sales and also sends a signal to ecommerce retailers to revisit their plans for peak trading now, if they want to manage supply chain costs and maximise stock availability.
The impacts of early ordering
There were already growing expectations that this year’s festive peak may be earlier. Retailers and logistics partners have been working hard to address supply chain delays caused by Red Sea disruptions. Shipping bottlenecks have led to longer delivery times, causing concern among retailers and driving a trend of earlier ordering.
A strong retailer appetite to get products into the UK to ensure they are available for purchasing in the run up to Christmas creates a knock-on effect of earlier sales and promotions. As products arrive in the UK ahead of peak, there’s little point in leaving them sat unseen by consumers in warehouses. Instead, goods will be made available through sales channels, meaning peak trading increasingly creeps forward.
The forward momentum of peak is likely to be accelerated by the surge in business activity. Strengthening order books tends to fuel employment and can positively impact on consumer confidence. We’re already seeing signs of this. GFK’s Consumer Confidence Index increased by a point in July. At the same time, RSM’s mid-year survey of 2,000 people shows a trend of decreasing financial hardship amongst consumers. This could prove a financial stimulus amongst shoppers who’ve previously limited their spend amidst concerns about disposable income and living costs. Renewed consumer desire to spend and new products arriving in the UK creates a perfect storm for an even earlier festive peak.
Rising shipping costs
An earlier peak can create challenges for ecommerce retailers which stretch beyond stock availability. It can intensify competition for freight and cause a rapid rise in shipping costs. And a recent escalation in shipping costs make this even more problematic for retailers. The Drewry World Container Index shows shipping prices per 40ft container have risen from around USD$2,725 in May to almost USD$6,000 in July. Retailers’ margins are already under pressure, with peak trading profits at risk of being squeezed further as earlier ordering pushes up freight prices.
To address rising freight costs and protect margins, it’s more important than ever that ecommerce retailers focus on cube optimisation and route planning. This requires end-to-end supply chain data to determine the most effective loading of products. For example, we’ve worked with retailers to analyse the cost-per-unit of customer inventories and the value of mixing SKUs during transit. Along with the development of best practice loading techniques, this has optimised freight capacity to reduce unit costs. Put simply, more goods can be shipped per container to benefit stock inventory availability and protect against margin dilution.
Effective route planning can also enable retailers to pinpoint the most efficient entry point for moving goods into and across the UK. Arrival and departure times, locations and vehicle loads can be all planned to avoid the transportation of empty space, reduce idling and dwell time of vehicles at warehouses and fulfilment centres, and to strip mileage out of supply chains. As well as managing costs, this can also improve speed-to-market, which is even more critical during highly competitive peak trading.
Disruptions and delays caused by the Red Sea conflicts may have already spurred ecommerce retailers to plan for an early peak. However, with economic confidence building in the UK, it’s worth revisiting supply chain planning, again. There’s growing signs that this year’s peak will start even earlier, and strategies need to be put in place that do much more than simply place orders earlier.
Stuart Greenfield, sales director at Advanced Supply Chain
You are in: Home » DeliveryX News » Supply chain » GUEST COMMENT Surge in UK demand points to an even earlier retail peak
GUEST COMMENT Surge in UK demand points to an even earlier retail peak
Katie Searles
An upturn in British business activity could be a sign for retailers to revisit supply chain planning for this year’s festive peak, writes Stuart Greenfield, sales director at Advanced Supply Chain.
After a dip in business confidence in June, new business growth across the UK private sector jumped to a 15-month high in July. Data from S&P’s Global Flash Purchasing Manager’s Index (PMI) showed growth tracking higher than expected by economists. The index rose from June’s six month low of 52.3 to 52.7 in July.
Further S&P data highlighted the strongest growth in UK manufacturing in two years, fuelling optimism about future sales. A new government targeting faster economic growth, as well as falling inflation are likely to be contributing to renewed confidence among businesses. This is good news for retail sales and also sends a signal to ecommerce retailers to revisit their plans for peak trading now, if they want to manage supply chain costs and maximise stock availability.
The impacts of early ordering
There were already growing expectations that this year’s festive peak may be earlier. Retailers and logistics partners have been working hard to address supply chain delays caused by Red Sea disruptions. Shipping bottlenecks have led to longer delivery times, causing concern among retailers and driving a trend of earlier ordering.
A strong retailer appetite to get products into the UK to ensure they are available for purchasing in the run up to Christmas creates a knock-on effect of earlier sales and promotions. As products arrive in the UK ahead of peak, there’s little point in leaving them sat unseen by consumers in warehouses. Instead, goods will be made available through sales channels, meaning peak trading increasingly creeps forward.
The forward momentum of peak is likely to be accelerated by the surge in business activity. Strengthening order books tends to fuel employment and can positively impact on consumer confidence. We’re already seeing signs of this. GFK’s Consumer Confidence Index increased by a point in July. At the same time, RSM’s mid-year survey of 2,000 people shows a trend of decreasing financial hardship amongst consumers. This could prove a financial stimulus amongst shoppers who’ve previously limited their spend amidst concerns about disposable income and living costs. Renewed consumer desire to spend and new products arriving in the UK creates a perfect storm for an even earlier festive peak.
Rising shipping costs
An earlier peak can create challenges for ecommerce retailers which stretch beyond stock availability. It can intensify competition for freight and cause a rapid rise in shipping costs. And a recent escalation in shipping costs make this even more problematic for retailers. The Drewry World Container Index shows shipping prices per 40ft container have risen from around USD$2,725 in May to almost USD$6,000 in July. Retailers’ margins are already under pressure, with peak trading profits at risk of being squeezed further as earlier ordering pushes up freight prices.
To address rising freight costs and protect margins, it’s more important than ever that ecommerce retailers focus on cube optimisation and route planning. This requires end-to-end supply chain data to determine the most effective loading of products. For example, we’ve worked with retailers to analyse the cost-per-unit of customer inventories and the value of mixing SKUs during transit. Along with the development of best practice loading techniques, this has optimised freight capacity to reduce unit costs. Put simply, more goods can be shipped per container to benefit stock inventory availability and protect against margin dilution.
Effective route planning can also enable retailers to pinpoint the most efficient entry point for moving goods into and across the UK. Arrival and departure times, locations and vehicle loads can be all planned to avoid the transportation of empty space, reduce idling and dwell time of vehicles at warehouses and fulfilment centres, and to strip mileage out of supply chains. As well as managing costs, this can also improve speed-to-market, which is even more critical during highly competitive peak trading.
Disruptions and delays caused by the Red Sea conflicts may have already spurred ecommerce retailers to plan for an early peak. However, with economic confidence building in the UK, it’s worth revisiting supply chain planning, again. There’s growing signs that this year’s peak will start even earlier, and strategies need to be put in place that do much more than simply place orders earlier.
Stuart Greenfield, sales director at Advanced Supply Chain
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