How to: Proper supply chain management

“We are forced to work against our will” said the message in the Christmas card opened by a young English school girl planning to write her own wishes in the card. After the discovery of this message from a worker in a Chinese prison, Tesco’s supply chain management has been scrutinised for compliance with modern slavery laws. It is a timely reminder of the importance of having appropriate measures in place to monitor the working environments of your suppliers.

Proper supply chain management can be hard work. As this story shows though, it’s worth investment, because the risks to retailers’ brand of getting it wrong can be tremendous. Conversely, get it right and you’ll enjoy greater efficiency across your supply chain and an enhanced reputation among ethically aware customers. 

Taking the example of modern slavery, let’s start with the basics. Large retailers (those with at least £36m turnover) must publish a modern slavery statement each year, which explains what steps a company takes to prevent modern slavery in their business and supply chains. 

Merely publishing this statement isn’t enough though. You need to actively police your supplier network to ensure you drive out unlawful practices. Consider undertaking factory inspections or unannounced audits and ask your suppliers to sign compliance statements on a regular basis to monitor their behaviour and minimise malpractice which could instigate the sort of negative publicity that forced Tesco to halt production. 

Modern slavery is one example of an issue of which the modern consumer is increasingly aware. Another is the environment. As focus on sustainability continues to grow, retailers find themselves under increasing pressure to adopt more environmentally friendly operational measures. 

Research has shown that building circular economy principles into your business model can increase customer loyalty. In a circular economy, products have multiple lives and materials are recovered and recycled, principles which some retailers and manufacturers are already embracing. Dell, for example, is using plastic which would otherwise end up in the ocean in packaging for new products, while Boohoo incentivises customers to recycle unwanted items by offering discount codes if they return them. 

Data shows that retailers who can offer consumers this kind of sustainable initiative are likely to benefit from longer term customer loyalty so it’s worth considering similar solutions in your business. It’s not just about reputation though – the fundamental principle of a circular economy is that it is more efficient to reuse secondary materials than to consume new resources. If your supply chain can incorporate that efficiency principle, then you can transform waste, in effect, into profit. 

Indeed, efficiency is one area where supply chain management can yield a more measurable financial return. “A record breaking festive season” is how Amazon has described its 2019 Christmas period, after deliveries climbed significantly compared to last year, resulting in its shares jumping more than 4% on 26 December. 

It credits this boost to recent investment in its logistics network, allowing quicker delivery times and better availability of collection points for parcels, which should be an inspiration for other retailers to drive out operational inefficiencies with a view to improving customer satisfaction.  

Speed of delivery has proved to be a key factor in customer satisfaction, so you should ensure you work with chosen suppliers who can deliver a high quality service to tight timescales. Multi-channel retailers who manage both online and in-store demands for products will need to balance stock levels appropriately in order to meet customer orders. 

Of course, supply chain initiatives are changing and evolving all the time, so those retailers who recognise this and invest time and resource to continually review and refresh their supply chain management will be best placed to maximise benefits. If you can get this right you will enhance your customer experience, your profit margin and the likelihood of repeat business.

Alex Hammond, managing associate, Foot Anstey