NATIONAL REPORT — It's been three years since the COVID-19 pandemic all but brought the world to a grinding halt, and retailers are still grappling with supply chain challenges. The convenience channel has not been immune, and all signs point to lingering problems.
According to Deloitte's 2023 Consumer Products Industry Outlook, the supply chain is still a top concern. More pointedly, despite improvement from the height of pandemic disruption, 62 percent of consumer packaged goods executives still expect supply chain issues to be quite challenging or extremely challenging in 2023. Almost half of companies (48 percent) think "just-in-time" as a supply chain strategy will need to be replaced, and even more (57 percent) are worried about the reliability of supply from once-dependable markets.
These numbers back up what convenience channel executives from both sides of the retail equation told Convenience Store News in its Forecast Study this year. More than 50 percent of convenience store retailers cited supply chain issues as one of their top three concerns for 2023, and 14 percent identified it as their No. 1 concern when weighing what challenges could impact their sales and profitability in the year ahead.
C-store industry suppliers and distributors are approaching 2023 with some measure of optimism; however, they also cite supply chain issues as a top factor threatening their bottom line over the next 12 months. Specifically, 15 percent of suppliers and distributors pointed to the supply chain as their foremost concern and 55 percent ranked it in their top three.
While today's issues seem to trace their roots back to the pandemic, whether coronavirus caused these stumbling blocks or unmasked existing problems is up for debate. More than likely, it's a little bit of both.
Retailers are not just dealing with one supply chain setback, but rather the culmination of multiple factors, according to Mike Weber, chief marketing officer at Upshop, a total store operations platform.
Among the factors cited by retailers are new shopper demand patterns (whether organic or due to the supply chain challenges), manufacturer shutdowns, warehouse and supplier "outs," faulty in-store processes affecting what's ordered, and the list goes on, he told CSNews.
"Many convenience retailers are also highly dependent on DSD [direct-store delivery] vendors providing items and support to ensure the stores stay stocked. There is a ripple effect on the entire industry when vendors — large and small — experience their own supply chain challenges. DSD vendors also don't always have the retailer's best interest in mind and can easily overstock for their benefit," Weber said.
Taken all together, the ripples turned into a tsunami that impacted store-level operations, he noted, while also pointing out that c-store processes were behind the times and still involved a lot of "pen and paper" and Excel sheets.
"When things aren't going right from supply and item replenishment, the processes aren't in place to make different moves — to actually zig and zag properly," he said.
With no signs that the struggles will let up soon, technology can ease the pain.
"Supply chain plus labor challenges make it more important than ever for c-stores to be flexible, constantly evolving to supply chain challenges," said Weber. "We find the industry is hungry for technology that can help solve these challenges because the labor is not available."
Adapting to Succeed
To overcome the obstacles, convenience store operators have switched suppliers where they could, adjusted their product offering to be able to provide more consistent items to their customers, and tightened up inventory and ordering processes in-store.
But, moving forward, more can be done. For example, retailers can take advantage of the "local" trend to ease some hiccups and appeal to consumers to drive sales at the same time. C-store operators shouldn't be afraid to try something new. "It's an opportunity for innovation to try new things that you might have been fearful of before," Weber noted.
With the right technology in place, operators can find better substitutions and quickly communicate those substitutions to the stores. In doing so, retailers also will have access to analytics and data to support merchandising decisions.
Weber advises retailers to use systems like computer-generated ordering, which ensures the right amount of inventory is in the store at the right time, reduces time spent ordering and tracking ingredients, and delivers on actual local demand.
Tampa, Fla.-based Upshop (formerly Applied Data Corp.) is helping c-store retailers with the kitchen management process in particular. The company provides a single operations platform across fresh, center store, DSD and e-commerce.
"They all want to do freshly prepared items, but they need to manage for the labor-light models and for what ingredients and products they can have in the store," Weber said, explaining that Upshop's kitchen management systems aid with ordering ingredients, inventory visibility across the supply chain, and making the process simple for store associates.
"Processes can only improve with a better under- standing of analytics and data," he said.