Demand this Christmas will be the highest since 2007, with retailers struggling to keep up with growing demand, resulting in expected delivery delays and inflated prices
Going to the store may be your smartest bet to navigate the supply chain crisis this holiday
The aftermath of the hurricanes and the strikes in Peru and South Africa have put several big retailers – including the UK’s Tesco, Asda and Morrisons – on the spot this Christmas.
In Argentina, Asda has announced this week that it will not meet its usual demands in terms of supply chain and shipping. This is after the US retail giant Walmart declined to meet this year’s new request for its Argentinian operations. It has suffered a bus strike in Argentina this month, which led to store closures in Buenos Aires and Manizales.
Tesco has suffered longer delays in its deliveries from the UK to Russia, with particularly severe delays in October and November. This comes in the middle of a market in which some goods were missing for several days this autumn because of the suspension of flights to the area by Putin’s military to combat jihadis and the disruption of cargo routes by low-cost airlines.
David Ford, Tesco’s UK managing director, apologised for the delays, saying that it had caused higher prices for its customers, especially during the holidays, and that it had managed to move some goods around the country without having to pay extra for the move.
Morrisons said last week that its delivery network had been disrupted by the disruption in Peru, where low snowfall had forced the company to order extra trucks and delay the opening of a warehouse. It also said it had lost the chance to sell a third of its Christmas offering of “cynics” balloons, which will launch this week instead of next, because of union strikes.
The company said it has been able to fill an average of 15% of its order capacity from Peru, compared with the 25% normal. It will be replenishing its shelves after Christmas.
Gareth Owen, a supply chain expert at RPS, said that the supply chain situation for retailers in general this year has been problematic.
“The extreme weather patterns in the UK have affected our exports, delaying deliveries, which put extra pressure on the UK’s logistical systems. With the winter months more severe than usual, the whole supply chain feels under a lot of strain. This means it will be hard to keep up, and some suppliers will have to compensate for this.”
He added that if retailers had been proactive in ensuring they had the right stocks of key items in time for the Christmas rush, this crisis might not have been felt as much.
“When it comes to the winter holidays, delivery times seem to have stretched a lot, so the queues and the concerns – and the price increases – will be more obvious. And the biggest logjam is going to be around the non-discretionary items, in particular food, drinks and gift items.”
According to the Federation of Master Grocers, or FMCG, manufacturers are paying out more to their suppliers, though it said some costs are down as international prices have decreased.
Andrew Ferguson, FMCG, said: “The costs of doing business are higher than ever. As manufacturers pass higher prices onto consumers we know that ultimately they won’t be happy about it. That being said, the move to online retailing means that product is getting fresher and cheaper all the time. There’s more choice, and the move towards ordering online, and on time, is helping to cut down on waste, and cut down on delivery costs.”
Asda is not the only retailer facing a logistics problem, with Iceland expecting to miss a quarter of its orders because of travel delays. Its national distribution centre in Canada, controlled by Goodfood, suffered a power outage last week, which meant that it was running on generator power and this forced it to do more deliveries from its UK operations. The delay means the supermarket has to ask its customers for temporary credit, but has since refunded all consumers so that customer relations will not be impacted.
Separately, online retailer Amazon has been hit by last-minute hiccups in parts of the US in its launch of its new order fulfillment centre in Wilmington, North Carolina. On the day, large numbers of customers had trouble ordering on Amazon’s website and trucks were unable to deliver.
“We are still experiencing technical issues on our North Carolina site,” said an Amazon spokeswoman.
She said that the company expected to have normal operations back up and running by tomorrow, and would not comment on whether the disruption was related to issues seen in Brazil.