Supply chain professionals 'braced for insolvencies'

1 August 2019

UK supply chain professionals are bracing for a rise in insolvencies as increasing fuel costs and pressure for quicker deliveries erode margins, a survey has revealed.

More than eight in ten (85%) of those surveyed by law firm Weightmans for its Supply Chain of the Future report said they expected to see an increase in insolvencies over the next five years.

The survey, of 100 senior UK supply chain professionals, found only 69% were confident in how to deal with the impact of insolvencies in their supply chain and just 33% had experience of dealing with them in the past.

Half (49%) of respondents, who worked in supply chain, shipping, receiving and transportation roles across multiple sectors, said they had difficulty monitoring for modern slavery.

The most common reason for the difficulties – cited by 57% – was limited visibility of suppliers’ businesses. 

Two fifths (38%) did not have processes in place to check if a supplier has been convicted of modern slavery infringements.

This figure rose to 47% among C-suite respondents, which Weightmans said “shows that the industry is struggling to get to grips with risk despite four years having passed since the introduction of the Modern Slavery Act”.

Matt Williamson, partner at Weightmans, said: “While cases of businesses being prosecuted have, so far, been rare, the consequences of being associated with modern slavery are likely to be significant in terms of reputational or contractual costs.

“Our research shows many businesses are exposing themselves to unnecessary risk and suggests the government needs to do more to help businesses monitor the issue.”

The rising cost of fuel emerged as the biggest cause for concern for supply chain professionals today, with 58% of respondents naming it as one of the top three problems they face.

However, 59% of respondents expected to have greater access to new technology over the next five years, which will help them improve efficiency.

The technologies expected to have the most positive impact on supply chains over this period were artificial intelligence, cited by 22% of respondents, big data analytics (20%) and autonomous vehicles (20%).

Williamson added: “Fuel is one of, if not the, main drivers for the growing cost of transport and distribution in the UK supply chain industry.

“With retailers reluctant to pass on additional charges to their customers, many manufacturers and third-party logistics providers are having to shoulder the burden. The upshot is that already tight margins are being eroded further.”

He said that suppliers had been forced into a race to the bottom on price for a long time, as clients demand tighter terms.

“It’s little surprise then that for 31% of our supply chain professionals the pressure to operate more efficiently is among their biggest concerns,” he added.

Three quarters (72%) of respondents expect demand for shorter delivery times to increase in the next five years, yet 78% believe consumers will be unwilling to sacrifice either the quality of products, speed of delivery or cost.

Peter Ward, chief executive of the UK Warehousing Association, which contributed to the report, said: “The research elicits the age-old question of speed versus quality.

“The growth of the e-commerce market has been exponential, and the focus on efficiency – trying to deliver next day or even within the hour – has almost certainly contributed to the casualties on the high street.”

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