Lessons from the Pandemic – Aligning business to changing demand

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By Dr Kyle Alves, Senior Lecturer of Operations Management and Information Systems, Bristol Business School

A year ago, we watched as many customer behaviours changed dramatically.  Demand curves spiked and then dropped.  Traditional customer engagement channels were rapidly left unused while new digital channels were hastily constructed.  Necessity was once again the mother of invention.  Behaviours changed because there was no other option; forcing business models to rapidly adapt to the new ‘normal’ associated with lockdown commerce.

What emerged from all the shaking was a good picture of how important it is to have the correct alignment between customer, channel, and the organisation’s delivery system.

As customers were shifted to online shopping, virtual customer channels had to keep up with the sudden surge of heavy traffic.  This is one of the benefits of using Cloud-based systems that can rapidly adjust to record-setting change.  Research by market researchers Gartner showed that customer-acceptance of online grocery shopping advanced a decade in only six months. 

While customers piled into online channels, the operations structures for many companies struggled to keep up with that surge in demand.  In the food supply chain, resources became sparse, mostly because they were committed elsewhere.  In many cases, inventory and logistics resources were focused on supplying restaurants and hospitality, where demand had disappeared.  Those operating the food supply chains knew there was enough food, but simply couldn’t get it on the shelves fast enough.  However, some quick thinking helped correct this misalignment in a few cases, and this is where a simple, effective lesson can be learned about when to break with tradition.

While workers in food service, hospitality, and entertainment were languishing with little to do during lockdowns, an opportunity was spotted.  In Germany, a deal was struck between McDonalds and Aldi to temporarily redeploy the restaurant’s workers to the grocery chain in order to keep shelves stocked.  This was a brave and practical deal, made possible by employers and the employees who were able to see the bigger picture and address the bigger problem.

In other areas, existing operational delivery systems were rapidly changed and repurposed to align to the new demand: distilleries making alcohol for sanitisers, taxi/uber drivers and vehicles delivering groceries instead of passengers, and B2B suppliers pivoting to become B2C retailers among many others.

Many of the issues that escalated during the pandemic, such as the fading of the high street and the availability of labour in some sectors were already issues beforehand and must be considered as part of the changing landscape.  Bearing this in mind, what are some of the lessons learned about business models from the past 18 months?

First, market behaviour is still changing.  As we emerge from the pandemic, challenges like Brexit are forcing a review of long, global supply chains.  Nationalistic, re-shoring approaches will continue to gain traction, impacting supply chains and ultimately product availability as we learn to adjust.  Supply chain disruption is not ending in the near-term.  This begs the question… is your supply network robust enough to withstand multiple possible outcomes? 

Second, it is obvious that customer behaviour is still open to change.  Many customers are much more comfortable with online channels of engagement, more willing to veer from ‘traditional’ business models.  Customer segments that might have previously avoided online channels are now much more accessible.  Ask yourself… is that online channel available, dependable, and secure for your business? Third, the shift away from cash has accelerated and digital payment methods are now much more accessible to smaller businesses.  This will have a knock-on effect to those businesses that rely on cash (such as charities that rely on spare change jars) as well as affect those customers who have little trust or faith in mainstream finance (older customers and those who’ve chosen not to use banking).  Another question … are your customers able to use digital payment approaches?

Tackling Food Sector challenges post COVID-19

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By Vikas Kumar, Director of Research and Professor of Operations and Supply Chain Management

The ongoing COVID-19 pandemic crisis is having a major impact on the global food supply chains affecting segments such as farm production, food processing, transport and logistics, retailers and final demand. The sudden increase in demand for essential products triggered by panic buying/hoarding and the slow reaction of retailers to replenish them has exposed the limitations of cost-efficient and streamlined supply chains when it comes to being agile and adapting to unforeseen shocks. Therefore, it is important to draw attention to the challenges that COVID-19 related supply chains disruptions bring to the businesses.

For instance, the ongoing pandemic has meant labour demand in food production, food supply, grocery retail, transport and delivery services is massively outstripping current supply. In the UK, this has been further complicated by the shortage of seasonal agricultural workers, who hail from European regions. Some other potential challenges the food sector is currently facing are supermarket supply chain struggles, food delivery issues, food price hikes, risks to jobs and livelihoods, food waste and challenges imposed by shifting consumer behaviour. As the food sector has been severely impacted globally, it is essential that it develops a mitigating strategy to deal with these challenges.

This could include applying a holistic approach to managing supply chains. Food organisations need to develop higher resilience, which is needed if they are to build sufficient flexibility in their supply chains to protect against future disruptions.

In building this resilience, they also need to realise the potential benefits of digital technologies. IoT sensors for soil and plant monitoring, warehouse automation, blockchains for traceability, drones for delivery, data analytics for demand and supply management, are all examples of industry 4.0 technologies across the food supply chains that could bring numerous benefits to organisations. A combination of digital technology assets – data collection, data storage and management, analytics, and decision modelling – could help unlock farming’s potential as well as strengthen the resilience of supply chains.

Another step in the right direction might be a transition towards more sustainable practices such as the adoption of circularity in food systems, which advocates reducing the amount of waste generated in the food system, reuse of food, utilisation of by-products and food waste, and nutrient recycling.

The pandemic has also exposed the dangers of relying on a single supplier or single geolocation – the equivalent of putting all eggs in one basket – thus diversification of the supplier base is encouraged. Talking of eggs, the last few months have also shown a growing reliance on farmers markets and farm shops (called short food supply chains or SFSCs) for essential food, and their popularity will continue to grow as consumers are getting health conscious and more concerned about food safety and transparency.

The ongoing pandemic has created several challenges for the food system and many lessons still need to be learned. How these lessons are reflected in UK food policy will determine how effectively we deal with similar situations in the future.

The content of this blog is based on the following recently accepted paper, due to be published early 2021: Kumar, V. (2021, in press), Adjusting to the new normal: Challenges of the food sector in the wake of COVID-19. Journal of Supply Chain Management, Logistics and Procurement

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