Supply chain – Office®
The global supply chain came under severe pressure owing to the continued impact of the COVID-19 pandemic in various countries of origin and the Suez Canal container ship blockage incident. This has been compounded by the impact of the Brexit transition which has made trading with the European Union (EU) particularly complex.
These major events have impacted Office’s supply chain operations in the reporting period, primarily affecting goods being imported into the UK.
COVID-19 AND BREXIT IMPACT ON SUPPLY CHAIN
The effects of COVID-19 continued to be felt throughout the supply chain, with lower manpower due to COVID-19 positive cases, individuals self-isolating and social distancing rules impacting production capacities.
Shipping schedules were constantly changing or being cancelled and there was no certainty on the arrival time of imported goods. There has also been a severe global shortage of shipping containers as container stock was bottlenecked in certain regions.
This has been a particular challenge for Office on imports from China, Vietnam, India and Brazil where large volumes of both made-to-order (MTO) and branded product are shipped.
The Suez Canal incident compounded supply chain challenges and caused major vessel backlogs which took months to resolve.
A shortage of heavy goods vehicle drivers has impacted all transportation, including moving containers from ports, road freight from EU countries and domestic line hauls. This is due to the Brexit transition as EU drivers are no longer working in the UK, as well as the general increase in demand due to the expansion of online deliveries as a result of the pandemic.
While measures have been implemented to counter the supply chain challenges and minimise the impact on the business, stock flow has been negatively impacted. Long-standing and strong partner relationships have proved beneficial during this time while the business has demonstrated its ability to be flexible when transport opportunities have become available.
The Brexit transition continues to prove challenging to navigate, although the situation has improved as border officials have become increasingly familiar with the new procedures.
RELATIONSHIPS WITH KEY SUPPLIERS
Office continues to build collaborative, strategic partnerships with a group of key brand partners and suppliers which ensures that good service levels are achieved.
Through trusted relationships Office has developed a quick response model with key partners. This allows the buyers and designers to react to trading conditions and trend information, making late styling changes. These strong relationships within the supply chain are developed even further within Office’s own-brand MTO footwear.
Office’s European suppliers source the majority of components within the EU, allowing fast product development and reduced overall lead times. Additionally, key suppliers hold production capacity, leathers and other components, which allow the buyers and designers to react quickly to sales information and reduce lead times further. Buyers and designers would ordinarily regularly travel to key sources within Europe as well as to sources in longer-lead destinations in Asia to build relationships, align business strategies, improve communication and reduce development times. However, travel has been restricted since early 2020 following the outbreak of the COVID-19 pandemic. Collaborative and innovative digital communication methods have been implemented to enable product development and briefing and approval to continue over this time.
ENHANCING E-COMMERCE FULFILMENT
Office’s contract with its main UK e-commerce carrier was renegotiated and renewed, and its services expanded. This has resulted in cost savings for Office and service improvements for the customer.
Owing to its large order volumes, Office enjoyed priority service during the COVID-19-related increased peak demand periods.
Services into certain EU countries have been discontinued to reduce losses which were incurred due to increased returns resulting from duties and taxes following Brexit.
IMPROVING WAREHOUSE EFFICIENCIES
As the planned warehousing and distribution project was halted due to the COVID-19 pandemic, management continued to identify opportunities to improve operating efficiencies on a smaller scale with low financial impact. Under-utilised warehouse space was identified for additional bays, increasing storage capacity and pick locations. Decreasing the number of carrier providers has facilitated more efficient dispatch and collections.
Staffing costs have been reduced by not filling vacancies of permanent staff, increasing the flexibility of existing staff and using agency staff as required in periods of high demand.
Contracts with waste service providers were reviewed which resulted in cost savings and environmental benefits.
Refer to Material issues, risks and opportunities for more detail.