SUPPLY
CHAIN
GLOBAL SUPPLY CHAINS CONTINUED TO BE DISRUPTED BY THE IMPACT OF COVID-19 AND THE WAR IN UKRAINE, WHICH HAVE IMPACTED STOCK AVAILABILITY.
The closure of ports in China in the second half of the financial year due to sporadic outbreaks of COVID-19, most notably in Shanghai, further disrupted shipping patterns and compounded port congestion. This congestion impacted most global ports as vessels were not being unloaded on time and were therefore not reaching all destinations on schedule. The shortage of containers has continued to hamper sea transportation.
These logistical challenges have impacted Office’s imports from China where large volumes of both made-to-order (MTO) and branded product are shipped.
Sea freight prices have remained extremely high and are unlikely to decrease as businesses ship early from East Asia ahead of the Christmas 2022 season to mitigate extended transit times. Transport providers have also experienced a sharp rise in fuel costs owing to the war in Ukraine.
Service providers continued to struggle with the lack of heavy goods and other commercial vehicle drivers, which resulted in delayed stock deliveries and placed pressure on the e-commerce delivery network. Office’s main e-commerce carrier has moved to employing a higher proportion of company drivers rather than contractors to ensure driver availability during peak periods and to stabilise costs.
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 advantageous during this time while the business has demonstrated its ability to be flexible when transport opportunities have become available. It is encouraging that several major brand partners are expecting improved supply from the latter part of calendar year 2022 and into 2023.
CREATING SUPPLY CHAIN EFFICIENCIES
Office operates a centralised distribution model from its warehouse in Kilmarnock, Scotland. A second warehouse in Greenford, London, was closed during the period as it was considered to be surplus to requirements, resulting in cost savings. Management has initiated a project to develop a long-term distribution strategy and this will be progressed in the new financial year.
The carrier contracts for store delivery and online customer delivery were renewed at highly favourable rates during the year. A tender process is currently being undertaken for the international delivery carrier service.
Efficient e-commerce fulfilment is key to Office’s omni-channel offering. A same-day delivery service was piloted, but was not continued due to limited demand from customers. An express ‘click & collect’ service is currently being developed and will be rolled out in the second half of the 2023 financial year, together with a new returns platform.
RELATIONSHIPS WITH KEY SUPPLIERS
Office continues to build collaborative, strategic partnerships with key brand partners and suppliers, thereby ensuring 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 most components in the European Union, 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 time destinations in Asia to build relationships, align business strategies, improve communication and reduce development times. However, travel was restricted following the outbreak of the COVID-19 pandemic. Collaborative and innovative digital communication methods were implemented to enable product development, briefing and approval to continue over this time.
Refer to Material issues, risks and opportunities for more detail.
