Solutions - Retailers are ignoring holes in their supply chain processes

A significant number of retail organisations still do not have adequate supply chain controls to cope with the spikes in demand over Christmas, according to a report by Ernst & Young.

The company studied the responses of 50 organisations across the US, Europe and Asia, and found that nearly a third of respondents never conduct internal reviews of their supply chain processes and controls. Neither were they sure that disaster recovery processes exist in the event of systems failure at crucial times.

The report emphasised that such processes are crucial at times when the supply chain is put under abnormal stress, such as over Christmas.

The survey paints a worrying picture, because more retailers are moving to closer collaboration with their suppliers in an effort to be more flexible in making products available on the shelves.

Ernst & Young head of consumer products Howard Martin said: 'Over the festive season we saw numerous examples of retailers running out of stock, then having to buy from competitors to satisfy consumer demand. This was supported by the results of the survey, which indicate that companies are still struggling to deliver on customer service and productivity.

'For example, the majority had significant working capital issues, which indicate poor planning processes. More worrying was the number of companies still not delivering service levels above a 90 per cent service threshold.'

According to IT research house Gartner, annual global spending on supply chain software licences will rise to US$2.18 billion (£1.18 billion) by 2006.

However, the Ernst & Young survey found that only half of respondents had processes in place to measure value for money in their supply chain systems projects.

This means that a significant number of retailers and suppliers worldwide could be wasting money on inefficient supply chain control systems without being aware of the problem.

A factor which could be contributing to this is the survey's finding that a significant proportion of workers in the supply chain are not sufficiently trained in the IT tools they need to do their job. Slightly less than a fifth of retailers in the survey said this was the case.