According to Ged Futter, an expert in GSCOP and former Senior Buyer at Asda, the current supply shortages in British supermarkets are primarily due to retailers’ obsession with prices at the expense of product availability. While there are no reports of shortages in France and Germany, British supermarkets are struggling to keep their shelves stocked with fresh produce. Although weather is a factor, it is not the only reason for the shortages. The main problem is that British retailers have made poor decisions regarding their procurement strategy, and they are hindered by a business model that prioritizes fixed prices over flexibility.
Supermarkets are fixated on achieving the lowest possible prices, which has led to a situation where their buyers are under pressure to maintain low prices while also keeping availability levels high. However, buyers are not evaluated on their ability to maintain product availability, which is their primary responsibility. Instead, they are evaluated on their ability to maintain low prices while meeting profit targets.
The British retailers’ business model is based on annual fixed-price contracts, which are effective only when inflation is low. When inflation increases significantly, as it is currently the case, producers and suppliers are expected to absorb the additional costs. However, this is no longer sustainable, and British supermarkets are now facing a crisis due to their inability to adapt to changing market conditions.
Futter argues that British supermarkets need to focus more on product availability and the flexibility of their procurement strategy, rather than simply prioritizing low prices. They should be better prepared for unforeseen events, such as unfavorable weather conditions or supply chain disruptions. Additionally, they should be willing to work with their suppliers to find mutually beneficial solutions that can help ensure a consistent availability of fresh products.
Can supermarkets really manage supply chain issues effectively? It seems that they are actually more adept at creating problems than solving them. Additionally, it is not clear which farmers they are actually working with, as it certainly is not the producers in the Lea Valley who are struggling to keep their greenhouses well-stocked. If supermarkets were really working with them, there would be more young plants grown in these greenhouses rather than empty spaces.
Shooting oneself in the foot is one thing, but doing it repeatedly is simply foolish.
Ged Futter is the Director of The Retail Mind, a grocery consultancy that aims to improve relationships between retailers and suppliers. He shows businesses what it’s like to be a retailer, by putting suppliers in their shoes, and then demonstrating the best approaches to working with them. Prior to this, Futter was Director of the Grocery Supply Code of Practice (GSCOP) and Senior Buying Manager in Grocery then Frozen Foods at Asda.