UK companies reveal supply chain disasters
A number of UK companies have blamed recent poor results on the performance of their logistics functions.
The country’s largest furniture retailer MFI warned that its UK operations would be making a substantial loss this year caused by problems related to the implementation of a new £50m (€75m) supply chain system. Hitches have meant that the retailer was unable to fulfil complete orders, leading to lost sales and compensation claims. The new IT system had replaced a number of legacy systems which had built up over the years.
At the same time Compass, the world’s largest private caterer, issued a profit warning blaming problems at one of its UK distributors for a large proportion of a forecast shortfall in operating profits. The company provides meals for a range of private and public clients (including defence and educational establishments). Its unnamed distributor apparently ran into financial difficulties which meant that it was unable to fulfil its obligations and despite temporarily providing financial assistance, Compass was forced to move the contract to another supplier at considerable cost.
The logistics industry tends to hit the national and international headlines only when things go majorly wrong. In most cases supply chain problems remain closely guarded secrets with clients and suppliers highly sensitive to negative publicity. Logistical issues only tend to make it into the public domain when they affect publicly listed companies which are beholden to release information on their performance to their shareholders. Over the past few years this has included Mothercare, another large UK retailer of baby clothes, and Scottish & Newcastle, a brewer. One of the most recent companies to report problems was J. Sainsbury, one of the country’s largest supermarket chains. In its case a new automated warehousing system had difficulties in reading barcodes on packaging. This led to stock-outs in its stores which in turn resulted in disappointed customers and lost sales.
The cases outlined above demonstrate what an important factor logistics has become to the success, or otherwise, of the largest manufacturers and retailers. Despite this the function is still regarded by many as a poor relation in corporate management, a hangover from the time when high levels of inventory made inefficient supply chain practices less critical. Although this view is slowly changing, logistics has very little direct representation in company boardrooms, and its influence on corporate strategy is still limited.
