Powerhouse: Coronavirus and the UK Economy Supply chain whitepaper
The manufacturing industry lost 75% of its economic output every day at the height of the coronavirus lockdown, according to our latest UK Powerhouse...
Coronavirus: The Supply Chain View
In conversation with retail and manufacturing experts on the impact of the COVID-19 pandemic.
Welcome
What insiders think about the pandemic’s impact on the industry, and the reasons to be positive about the future.
The manufacturing industry lost 75% of its economic output every day at the height of the coronavirus lockdown, according to our latest UK Powerhouse report.
Social distancing, furloughed staff and travel bans have had an impact on the whole supply chain. But how can businesses reduce risk, and what effect will changing consumer behaviour have?
We brought together key figures from retail, manufacturing and logistics to share their experiences, and talk about the positive changes the coronavirus situation may bring.
Our panel discussed:
- How coronavirus has created supply chain opportunities
- What global trading will look like post-coronavirus
- Why sustainability matters now more than ever
- How supply chain businesses have supported staff through the crisis.
Faye Bargery
Chair and head of consumer and retail, Irwin Mitchell
Roundtable attendees
- Eva Agnew, CEO, Lionel Hitchen
- Sarah Forsyth, operations director, Golden Acre Foods
- Mathew Grey, managing director, OSL Cutting Technologies
- Jeremy Makepeace, commercial director, Sheffield Forgemasters International
- Stuart Macdonald, head of global sourcing, Hobbycraft
- Scott Reilly, managing director, Ayrshire Metals
- Mark Crawford, associate partner, Ernst & Young
- Dominique Pesez, management consultant, Ernst & Young
- Vanessa Hope, group sales and marketing director, Kinaxia Logistics.
Representing Irwin Mitchell
- Faye Bargery, partner and head of consumer and retail
- Dorrien Peters, partner and head of manufacturing
- Elaine Huttley, partner and employment expert
- Rob Coleridge, senior associate solicitor and commercial law expert
- Kate Upton, business development manager
- Melanie Bancroft, business development manager.
What's UK Powerhouse?
UK Powerhouse is our quarterly economic briefing looking at regional growth around the UK. It’s published in partnership with economic think tank Cebr, and built around a city tracker ranking that helps you spot investment opportunities or areas for expansion.
Each briefing centres around a specific sector or theme. Our latest edition delves into the effects of coronavirus on different industry sectors, and looks at how different UK regions are coping with the crisis.
This whitepaper forms part of a series of roundtable events in response to our UK Powerhouse findings. The series covers the following sectors:
Tell me more about UK Powerhouse
Key Findings
The crucial points all retailers and manufacturers should know right now.
How Coronavirus Has Created Supply Chain Opportunities
The ways retailers and manufacturers have adapted during lockdown, and why dealing with change efficiently can bring big rewards.
How Coronavirus has Created Supply Chain Opportunities
In retail and manufacturing, lockdown caused a ripple effect through almost every part of the industry.
Travel restrictions made sourcing and transporting goods very difficult.
With shops closed and the public told to stay at home, there were fewer opportunities to sell products.
But the coronavirus situation has also shown that with the right approach, business supply chains can deal with even the toughest crisis.
With retail and manufacturing facing so much uncertainty, businesses have had to take a long, hard look at their supply chain.
Before COVID-19, many companies had a linear supply chain that helped them to source or sell products quickly and cheaply.
The pandemic has highlighted the importance of making supply chains more resilient. One simple way to reduce risk is to have multiple sources of supply, which helps businesses deal with unexpected situations in a more agile way.
Vanessa Hope, group sales and marketing director at logistics company Kinaxia, shared how her company had prepared for lockdown, and how this has helped them plan for the future. “We’d been watching what was happening in Italy very closely. The transport networks there dropped about 40% in volume, and we anticipated the same thing would happen here, which it did."
“Luckily, most of the products in our warehouses are ingredients for food and drink clients, which were classed as essential goods,” Vanessa continued. “We’re now looking at which market sectors have performed best through the crisis, so if something like this ever happens again, we can make sure we’ve got the right client base.”
Technology can play an important role in helping supply chain businesses reduce risk. More advanced systems can show the various ways stock levels and revenue could be affected. Companies can then use these forecasts to change supply sources and staffing levels to suit.
Some of our panel noted the impact of Brexit on the current situation. Businesses uncertain how the UK’s departure from the EU will affect trade have been stockpiling. This has put them in a stronger position during the coronavirus crisis.
Others on our panel use a lean or ‘just-in-time’ manufacturing approach, carrying only the stock that’s needed. These businesses have had to manage working capital carefully, and change or renegotiate contract terms when needed.
“There have been so many different moments where you can either take advantage of the situation or fail at it,” said Mathew Grey, managing director at OSL Cutting Technologies. “All this disruption will create a big gap in the market, and smart, nimble businesses will be the ones to benefit.”
The crisis has caused logistical problems for supply chain businesses. But as consumers have changed their buying habits, new possibilities have opened up.
One interesting example is the food and drink industry. During lockdown, customers visited supermarkets less frequently, but bought more when they did. These businesses had to quickly adapt to these shifting patterns.
Many people are also visiting smaller shops to avoid infection, increasing demand from local convenience stores.
For those supplying hospitality businesses, the closure of bars and restaurants had a huge impact. Many have switched instead to a direct-to-consumer (DTC) sales model. This new approach may continue as we come out of lockdown and beyond.
There are other areas where changing customer behaviours have had a positive impact too. With retail stores closed, online spending rose swiftly. One of our panellists reported that at the height of the crisis, their yearly online sales targets had been reached in a few short months.
Many high street businesses rely on physical sales. In mid-June, most UK shops reopened, with retailers worried whether shoppers would return. For many, there proved to be no cause for concern.
The retail experts on our panel anticipated a lower return on in-store sales when they reopened, but in some cases their stores were actually hitting normal targets. This was unexpectedly positive - they could start to recover the sales they'd lost during the lockdown.
The pandemic may also speed up the growth of alternative business models. Shop closures could lead to more investment in e-commerce. This could increase the dominance of both Amazon and other major e-commerce sites.
Direct-to-consumer models are on the rise in other industries too, with many inspired by the successes of some early adopters. Mattress company Casper avoided retailers and wholesalers, selling all products through its own website. Other companies like Harry’s and Tails.com sell products direct to consumers through a subscription service.
The crisis has undoubtedly changed the future of retail and manufacturing. In a post-pandemic world, the most agile businesses are likely to be the ones enjoying lasting success.
Facing a new type of challenge
The pandemic has proved a unique challenge for manufacturers, in both supply and demand. Where product demands changed, some producers thrived through the crisis by adapting to make goods they may never have considered before.
For example, many companies quickly adapted their usual production lines to make items to help in the fight against the virus:
- Hand sanitiser
- Personal protective equipment (PPE)
- Ventilators.
Of course, it makes financial sense to make and sell something, rather than nothing. But by playing such a key role at this crucial time, UK manufacturers have proved their importance to the economy and society alike.
Innovating with new products and routes to market can open up lots of exciting new opportunities for businesses. But it’s important to follow proper regulation and protect intellectual property to avoid exposure to risk. We help businesses build the best possible supply chain relationships, protect their assets and finances, and give you the strategic commercial advice you need to succeed.
Rob Coleridge
Senior associate solicitor and commercial law expert, Irwin Mitchell
What Global Trading Will Look Like Post-Coronavirus
The local and international issues caused by the crisis, and what retailers and manufacturers should do to gain advantage.
What Global Trading Will Look Like Post-Coronavirus
The pandemic has impacted retail and manufacturing on a global scale.
What will be the short and long-term effects of the crisis on the supply chain? And what steps will UK businesses need to take to adapt?
Our panellists agreed there were challenges ahead, and shared some insights into the changes they’ve made to ensure success.
Many retail and manufacturing commentators have questioned whether businesses will stop operating internationally in future. Will domestic trading replace cross-border supply chains?
According to our panellists, the simple answer is no.
Today, businesses of all sizes deal with overseas partners at some point. Even the coronavirus crisis won’t change this anytime soon.
But the pandemic has highlighted some issues that businesses need to consider in future.
China is classed as an emerging superpower, with many industries relying on its goods and services. The disruption caused when it became the epicentre of the coronavirus crisis was felt around the world.
The Chinese New Year always has some impact on the global supply chain, as workers down tools and factories close for the holiday. In 2020, Chinese New Year coincided with the coronavirus pandemic, something no-one could have planned for.
As the virus spread, travel ground to a halt. For businesses, this made sourcing goods harder and more expensive.
At the height of the pandemic, many travel hubs closed completely. One of our panellists reported that from their usual airport, just a single cargo aeroplane was flying out a week.
The crisis also affected sea freight, with fewer tankers in use and delays at shipping ports. A panellist revealed they’d rented consolidation space in Southampton and Shanghai as a result, leading to extra costs they’d not budgeted for.
With less transportation available, shipping costs have soared.
Businesses may want to ensure their supply chains allow for this in their future contingency plans.
Other industries have been impacted in unique ways. Food and drink businesses source many raw products grown in only one place. When that place is locked down, some orders were unable to be filled. These businesses may want to ensure their revenue streams aren’t dependent on these products.
The crisis is an extreme example of supply chain disruption. But for retailers and manufacturers, it highlights the importance of spreading risk.
The broken global supply chain has forced many retailers and manufacturers to seek alternatives.
Some businesses are unable to source from producers in the UK and Europe. But the crisis has made every industry consider the benefits of having supply chain links closer to home.
Our panellists discussed the advantages of a multi-tiered supply chain. Businesses with different suppliers both in the UK and abroad put themselves at lower risk.
According to our panel, it’s in the national interest for UK industries to avoid relying solely on overseas suppliers. Simply put, the longer your supply chain in distance, the more chance there is of it being hit by overseas restrictions or other risk factors. Our participants stressed that the government needs to put the right infrastructure and investments in place to mitigate this.
The crisis has been a wake-up call for supply chain businesses. If retailers and manufacturers embrace new ways of working, they could see greater success than ever. The key consideration, though, is how to meet the demands of an increasingly conscious consumer.
Why Sustainability Matters Now More Than Ever
The benefits of making and selling sustainable goods for businesses, customers and the planet.
Why Sustainability Matters Now More Than Ever
Before the crisis, most people would have thought it impossible that the modern world could be brought to a halt by an infectious disease.
One consequence of the pandemic is that people are now more aware of their impact on their surroundings, and each other.
As a result, retailers and manufacturers could be under more pressure than ever to do business ethically and sustainably.
The challenge, according to our panellists, is to balance doing what’s right with doing what’s profitable.
Keeping the planet healthy
For some industries, lockdown has sped up the adoption of eco-friendly practices. Food producers unable to get ingredients from abroad have sourced them in the UK instead where possible. Many now understand the importance of a reduced carbon footprint.
Other industries were sustainable even before the crisis. In steelmaking, for example, 80% of all scrap metal is recycled.
From a supply chain point of view, the crisis has proved that relying too heavily on overseas suppliers is risky.
As a result, there’s increased interest amongst the business community in the ‘circular economy’ system:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems.
A circular economy has clear benefits for both businesses and consumers. To take advantage, companies will need to gain a better understanding than ever of their target audience.
More and more, consumers need to feel they can trust the companies they buy from. People want to know where their food was harvested and where their clothes were sewn, but also the ethical credentials of the business behind these products.
Many retailers and manufacturers have changed their business practices to suit. One of our panellists explained their buyers get bonuses for sourcing or developing sustainable products.
There can be financial advantages to making or stocking sustainable goods. Conscious customers may be willing to pay more for items with better provenance.
But consumer demand for sustainable products varies, according to our panel. Shoppers may prefer an eco-friendly facemask to one made from non-recycled materials, for example. Customers buying more complex technology-based products may not care as much about where their goods come from.
There are other benefits to be had from a sustainable approach, though. One of our panellists revealed their company had made big savings by swapping packaging on one of its products from plastic to cardboard. The latter carries a lower import tariff.
Businesses that produce less waste also reduce their tax liabilities, which our panellists thought was a good incentive. But they also agreed the government should do more to encourage companies to be sustainable, and to innovate in this area too.
If the government puts policies in place to support sustainable business, the UK economy may get the kick-start it needs. And with more sustainable products on shelves, the post-coronavirus generation will live more responsibly as well.
How Supply Chain Businesses Have Supported Staff Through The Crisis
The impact of furlough on retail and manufacturing, and the ways technology has brought the industry closer together.
How Supply Chain Businesses have Supported Staff Through the Crisis
As with any industry, people are at the heart of retail and manufacturing.
But the coronavirus crisis has hit employees in supply chain businesses harder than many, thanks to the complete closure of shops, and disruption to global trade.
Our panellists discussed the staffing issues they’ve faced during the pandemic, plus some of the opportunities that have arisen as a result.
When the UK government announced a nationwide lockdown in March 2020, many retailers had to close their shops and put staff on furlough for the first time.
With shops closed but some warehouses still open, employers had to deal with difficult questions around which members of the workforce had been furloughed and why. There were also queries about what would happen when stores reopened.
In manufacturing, the impact was just as great. Despite advances in technology, it’s still a hands-on industry. But for smaller factories in particular, with no chance of social distancing, furloughing staff was unavoidable.
In the face of this, some retailers and manufacturers have found ways to streamline their operations. One of our panellists described lockdown as a “lightbulb moment” in making their company more efficient.
With the lifting of lockdown restrictions, many businesses could successfully bring their staff back from furlough. For others, lockdown has provided an opportunity to have some difficult but important discussions.
All our participants recognised how important it is to be sensitive when dealing with redundancies and restructures. The wellbeing of those still working also needs to be considered before any long-term reductions are made. The effects of upping production significantly, or increasing shift patterns, can lead to employee burn-out.
Retailers and manufacturers of all sizes often have workers across the globe. In these industries, then, technology has played an important role in keeping colleagues connected for many years.
But the coronavirus crisis has forced even the most advanced business to stay in touch with employees more regularly, and in different ways.
Our panellists acknowledged the vital role platforms like Microsoft Teams and Zoom have played during lockdown. Video conferencing software has made it easy for retailers and manufacturers to speak to colleagues working from home.
A number of our participants suggested working from home could become more widespread even after the crisis. With no stressful commute, staff may feel they have a better work-life balance than when they spent five days a week in an office or factory.
Businesses have put a strong focus on employee wellbeing during the crisis. Many have used video conferencing for team quizzes and other virtual social events. And employee newsletters have helped to keep staff up to speed with important developments.
Our panel also agreed that managing workplace culture was more important than ever during lockdown. This can help avoid a split between furloughed staff and those still working.
The pandemic has helped many businesses identify opportunities for the future. But more importantly, the crisis has highlighted the importance of making the most of what they have. As the world returns to a new normal, retailers and manufacturers are likely to value their best employees more than ever.
Employers have faced many new challenges as a result of coronavirus, from furloughing staff to dealing with a remote workforce. Businesses need to stay up to date with the latest guidelines on health and safety and employee wellbeing, or risk facing a tribunal. We can help businesses ensure they’re following the right regulations, and share tips about how we’ve supported our own colleagues through the crisis.”
Elaine Huttley
Partner and employment expert at Irwin Mitchelln
Supporting You Through COVID-19
We share the latest legal updates to help you and your business in these unprecedented times.
Supporting You Through COVID-19
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