octobre 21, 2021

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Supply chain stress threatens Christmas gifts and festive foods

Don’t tell me you’re going to say the C word? Is it too early to talk about Christmas for sure?

It isn’t, but it mostly isn’t. Supply chain issues stretching all the way from Sligo to Shanghai mean we could face a winter of discontent.

What kind of deficiency?

Anyone looking for new cars and tech will struggle with the chronic shortage of silicon chips around the world, while Ikea’s kings and queens have forecast a shortfall in Ireland of around 10 per cent this winter.

But what does any of that have to do with Christmas?

Because the next three months is when most Irish consumers spend the most money and when everything is in demand. Anyone keen to decorate their halls with the sweetest plastic might be advised to stock up soon as industry sources at home and across the Irish Sea anticipate a supermarket shortage that may not rival Soviet-era Russia but will be noticeable.

What is behind the shortage?

A hellish trio of Brexit, Covid and container shipping.

container shipping?

Costs have exceeded the ceiling. The impact of the Ever Geffen jamming in the Suez Canal earlier this year continues to be felt up and down the supply chain, while the cost of chartering containers has risen with demand over supply in many places. According to an article in The Economist this week, “the average cost of shipping a standard large container (40-foot equivalent unit, or FEU) has exceeded $10,000, four times higher than last year.”

IThe cost of the image container the only problem?

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No, Covid-related closures at major ports in the Far East have significantly slowed traffic. Then there are companies that keep container ships in ports in the European Union and the United States instead of returning them empty to China, affecting traffic in the other direction.

But Santa Claus is not impressed, is he?

It would be great, and it has its own unique shipping model to rely on. However, toy makers, sellers and of course parents face challenges. This week, Smyths Toys warned people to settle themselves sooner than ever. He stressed that this year will be “particularly significant…as the lack of global freight and containers is causing supply problems in many parts of our lives.”

What is the story of the food?

We were all enjoying the summer heat wave when Marks & Spencer started pouring cold water on Christmas. And she warned that many festive foods may not make it to Ireland this year – or at least not at the scale we’re used to. Its chairman, Archie Norman, said it had already had to “cancel sales of Christmas food on demand, which is our first-class service, to Northern Ireland because we don’t know if we can get it there”.

Then this week it blamed “complicated rules and excessive paperwork” for the 800-line cutoffs in its Republic stores, including items such as chicken, orchids or Parmesan-containing goods. Meanwhile, it has closed 11 of its branches in France.

but This is just Northern Ireland, right?

wrong. M&S ships products from Scotland to Larne and from there throughout the island.

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Is this the point at which Brexit enters the European Union?

Yes it is. While many retailers found Brexit challenging, it was probably more pronounced at Marks & Spencer. It’s smaller than a retail giant like Tesco and has very different suppliers to European-facing companies like Lidl and Aldi, which explains why it has more problems than most.

What is the problem?

In a recent letter to suppliers, he blamed the large number of paperwork needed to move goods from the EU to the UK and the other way, and highlighted a shortage of vets to conduct basic checks.

How complicated could that be? It’s just a few shapes sure?

Because of the strict rules imposed on the import of fresh food into the European Union, the correct documentation for every product in every shipment must be present and correct. An M&S truck may contain 700 products and if there is a problem with paperwork on only one of these products, the entire shipment will be refused entry into Ireland.

M&S has to fill out about 40,000 pieces of paper each week. Since a lot of inventory is perishable, stocks cannot accumulate in warehouses here, and this can lead to significant disruption and gaps on the shelves.

What kind of size are we talking about?

Marks & Spencer sends 450 trucks from Scotland to Ireland every week and every product in every truck requires a corresponding piece of paper – the processes aren’t digital – every time. And each “I” and each cross “T” must be dotted, in the correct manner and with the appropriate colored ink.

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But what can be done to improve it?

Perhaps the system could be completely digital and use instant checks instead of checking every truck every day. M&S is making more products available in Ireland – obviously good news for the economy here – and becoming more adept at identifying problematic products.

But it’s not just Marks & Spencer, is it?

No, there are problems across the entire UK food supply chain – and we do a lot of business there. Food and Drink Association chief executive Ian Wright said – not that – that the shortage of truck drivers and staff across the supply chain, Brexit and Covid mean the disruption “will only get worse and not get better” after it gets worse anytime soon”.

Toymakers, sellers and of course parents will face challenges this Christmas. Photo: iStock

Enough over there, how about here?

According to TU Dublin retail expert and academic Damian O’Reilly, food in Ireland never goes out of style.

Well, that’s good news, isn’t it?

Yes, but we are facing a constant wave of shortages in some areas and we can look forward to higher prices across some lines. “There are some products that are not as readily available as they used to be,” O’Reilly says. “But we can have alternatives, so we don’t lack anything fundamental, we’ve seen increases – flour, which is imported from Britain and made using ingredients sourced from Canada, is up 9 per cent because it is subject to additional tariffs.

“Coffee, chocolate and cocoa products are on the rise due to the sharp rise in commodity prices and the price of other products will rise due to supply chain problems.”

How much are prices likely to go up?

It depends on the products and where they come from, but we’re facing a period of food price inflation, with more and more food and agriculture companies saying they’ve seen prices go up, which will inevitably pass on to us. A recent report by the accounting and professional services firm Ifac said the increase in costs, ranging from transportation, energy, raw materials and packaging, is “a problem that – in some cases – could contribute to food price inflation in the coming months”.

Meanwhile, inflationary pressure in the Irish economy is now at its highest level in more than a decade, and according to the latest figures from the Central Statistics Office, the inflation rate is at 2.8 per cent.

So where do we go from here?

When it comes to food supplies, it is in the best interest of retailers to resolve the issues soon. But systemic problems will remain and much will depend on how the UK-EU relationship develops in the coming months. And it does not rule out another epidemic, an exacerbation of the current epidemic or even a large boat slipping in a large channel. So who will say for sure what will happen next?