Last winter, Europe was hit by a devastating cold snap which played havoc across the continent. As the snow moved west across continental Europe and over the UK, thousands were left stranded without food and electricity. Conditions were so severe, entire nations were left at a standstill as emergency crews desperately tried to reach those most vulnerable. Given that the UK has already been warned to expect the worst snow fall in over 60 years, businesses should prepare for another season of bad weather.
While long range weather forecasts can help organisations plan ahead, weather is extremely volatile and forecasts tend to become increasingly less reliable the further forward you look. Given the effect unexpected changes in weather can have on both supply and demand, failure to prepare for bad weather can hold huge consequences for businesses. Take for instance the impact of the unexpected heavy snowfall last winter: the disruption caused by the arctic conditions was so severe that it almost forced the UK into a triple dip recession.
High street retailers were hit particularly hard as the deteriorating weather placed great strain on their operations. Given that the cold snap gripped Europe at the very end of the winter season, many retailers had already started stocking spring clothing lines in preparation for a warmer climate. However, when forecasters first started issuing warnings about the prolonged cold weather, fashion outlets faced a huge surge in demand for thermal attire. As consumers went into panic mode, retailers saw sales of sweatshirts and hooded tops increase by 300%. Many fashion outlets struggled to meet the sporadic demand and quickly sold out of winter clothing.
However, as soon as the snow started to settle, shopper’s heeded advice from the U.K’s national weather service and avoided all but essential travel. As footfall dropped and sales slid, stocks of spring season clothing started to pile up. With limited storage space and the summer season just weeks away, many retailers were left with huge amounts of excess stock. In order to clear this over supply, stores had to heavily discount spring lines and renegotiate summer stock orders with suppliers. Businesses within the retail sector reported huge reductions in profits. M&S, for example, saw a 5% fall in revenue while the department store, Debenhams, reported a 10% reduction in like for like sales compared with previous winter seasons.
Although the chartered institute of logistics and transport (CILT) reported that the UK was reasonably well prepared for the blizzard like conditions, given the reoccurring pattern of severe arctic conditions, simply installing winter tires and gritting the major transport networks is no longer enough. Although it may be too late to take action to prepare for this season, in order to minimize disruption caused by wintery weather in the future, businesses will need to take a far more strategic approach.
Before optimal inventory levels can be realized, organizations must develop a comprehensive understanding of demand. This can be achieved through utilizing advanced analytics which enable businesses to analyse vast amounts of supply chain data. With a clearer picture of both seasonal and sporadic trends, organizations can ensure that their levels of safety stock are sufficient to meet changes in demand.
Although last winter was exceptionally cold, businesses should learn from the retail sector and look for ways to mitigate the impact of bad weather. While businesses will never be able predict the weather with perfect accuracy, through achieving optimal inventory levels businesses will be better positioned to manage any sudden changes in behaviour.
As we approach the worst of the wintery weather, many businesses will have already started to prepare for snow. Given the disruption caused by the icy conditions last winter, what steps has your business taken in order to protect the supply chain this winter?