Supply and demand in disrupted marketplace

October 2021



Mark specialises in providing practical, tailored restructuring and turnaround advice to businesses, lenders and other stakeholders as well as formal insolvency work.

 

“The sequence of processes involved in the production and distribution of a commodity.” – the meaning of supply chain.

The key words in this sentence are ‘sequence’, ‘production’ and ‘distribution’ and, if one fails, then the entire process is disrupted. Things need to be done in the correct order; products need to be made on time and to the right standard; and supplies need to reach their end destination. It’s precisely those three parts of the supply chain that are being tested like never before, something that’s sitting heavily on the shoulders of the directors of many businesses in the Yorkshire region.

The culmination of a global pandemic, operational challenges at international ports, material shipping/transportation cost increases, logistics driver shortages and Brexit has created a damaging ripple effect throughout the supply chain, leading to delays from international and domestic suppliers, and ultimately stock shortages.

Our latest Rethinking the Economy survey of 500 mid-sized businesses has highlighted those precise issues, with stock shortages and supply chain problems piling increasing pressure on Yorkshire businesses. The survey has shown that more than a third of Yorkshire companies (37%) admitted that unexpected delays from domestic suppliers were significantly affecting their ability to operate at normal levels, with 30% citing low stock levels.

These figures are being played out in shops, warehouses, and on petrol forecourts, a very real reminder of the problems facing the region’s businesses. One of the reasons driving this disruption is a lack of people. The government has been at pains to point out that there’s not a shortage of fuel, but a shortfall in the number of HGV drivers who can deliver it to the pumps. The same can be said across other sectors.

The Rethinking the Economy survey showed that a lack of overseas workers, exacerbated by the pandemic, was the biggest issue when recruiting staff in Yorkshire, with 40% of mid-sized businesses stating that talent and skills issues in the region were also fuelling the problem.

As a result, all respondents said they intended to reduce their product lines or services to help manage staff shortages, with 47% admitting they would have to act within the next month if the situation doesn’t change. Many businesses anticipate that this reduction in services will only be a temporary measure, with 40% of companies exploring incentive schemes, such as referral bonuses, to help plug the skills gaps.

While many businesses are thinking creatively in order to circumnavigate this growing issue, and a reduction in services and products is a real possibility, how can you proactively respond, in order to weather the storm?

Redesign of products or a focus on new or contingency supply sources may help you overcome shortages of raw materials or components.

Contingency Plan for different demand scenarios both internally and with your suppliers over the coming months. Planning for different outcomes will help you and your supply chain react quickly to meet customer demand.

Cashflow Forecasts  are a critical tool for managing through times of uncertainty.  Whilst a basic management tool, it can often be overlooked.  Ensuring robust cash management strategies are in place and scenario planning for the future will help maintain business stability and allow management teams to respond quickly should circumstances change.

If you would like to discuss the latest Rethinking the Economy survey, or you have any questions about how to respond to supply chain challenges more effectively, contact Mark Thornton.

 

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