Retailers relocate £4.2bn of manufacturing to home turf
Retailers to on-shore £4.2 billion of products to the UK over the next 12 months as COVID-19 resets supply chain strategies
- 70% of Europe’s largest 30 retailers have conducted a review of their supply chains because of COVID-19, with many relocating production to domestic economies
- More than half (55%) have already begun to diversify suppliers, with 29% planning to do so in the next 12 months
- Sustainability is also driving supply chain change, with 46% of retailers now sourcing from their local markets to help meet ESG targets
- Long-term future of supply chains is unknown until a Brexit trade agreement is reached
Supply chain contractors and interim and turnaround managers working in the retail sector will be helping companies adjust to what has been reported as a massive production shift to ensure stock is available for the holiday season and Black Friday sales in light of COVID lockdown measures and uncertainty over the UK’s trade agreements with the EU, US, Canada and other countries.
Products to be on-shored
More than £4.2 billion of products will be on-shored to the UK by retailers in the next 12 months. This would represent a significant fillip to UK manufacturing, being equivalent to the country’s entire current clothing manufacturing output, according to a report by global professional services firm Alvarez & Marsal (A&M), in partnership with Retail Economics.
COVID-19 has created new pressures on retailers, exposing weaknesses in global supply chains and leading many to rethink strategies for the future to remain resilient. Nearly three quarters (70%) of Europe’s largest 30 retailers say they have conducted a review of their supply chains as a direct result of the pandemic.
Of the same group of retailers, more than half (55%) have already begun to diversify their suppliers, with 29% planning to do so within the next 12 months. 14% are already sourcing more from domestic economies, with almost half (42%) planning to do so in the next 12 months.
“COVID-19 has brought about a fresh set of financial and logistical challenges which retailers must overcome while accommodating permanent shifts in consumer behaviour,” said Erin Brookes, Managing Director and Head of Retail and Consumer, Europe at A&M. “Our research shows that despite these new pressure points, most retailers are responding at speed, creating new growth opportunities within their domestic economies and protecting against future risk.”
Brookes, who specialises in retail turnaround and transformation said this Christmas will be a “major test” for this new operating environment.
“The structural shift towards online will place extraordinary pressure on distribution and in some cases, we are likely to see supply not meeting demand. Meanwhile, new lockdown measures which prevent most physical retail from opening over key sales moments like Black Friday will only exacerbate these challenges. In the next few weeks, retailers will need to deliver a steady flow of online sales to contain the usual last-minute rush,” said Brookes.
Brexit poses uncertainty of long-term impact
Away from the pandemic, the uncertain outcome of the ongoing Brexit negotiations will have significant repercussions for UK retailers and their supply chains, with no-deal creating costly delays and interruption.
As such, A&M’s research suggests that European retailers are reluctant to commit to any permanent changes to their supply chains until a Free Trade Agreement (FTA) is negotiated between the UK and the EU.
Career opportunities at A&M’s UK operations can be found here.