Rising costs are pushing rivals across the UK food and grocery supply chain into closer cooperation, as businesses face mounting pressure to raise output while controlling spending, according to new research from IGD.
The industry body says labour, energy and fuel costs are climbing at the same time as demand continues to rise, creating what it describes as an increasingly unworkable gap between expectations and what supply chains can sustainably afford. That squeeze is forcing...
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a shift in behaviour, with collaboration and technology adoption becoming central to efforts to improve productivity, efficiency and resilience.
IGD says the early signs are already visible. Retailers, manufacturers and logistics providers are increasingly sharing infrastructure, aligning transport networks and pooling capacity in order to reduce waste, cut costs and make better use of assets. Those moves are also helping firms invest in lower-carbon transport, reflecting the growing link between cost control and sustainability.
James Rothwell, IGD’s head of supply chain, said the pressure on margins is exposing inefficiencies that businesses can no longer absorb. He argued that the biggest gains now lie in the connections between organisations rather than within them, adding that competitive barriers are being lowered as collaboration becomes a commercial necessity.
The research suggests the sector is being pushed into a new operating model in which companies are expected to move more goods, with greater accuracy and service levels, but on a thinner cost base. Manufacturers are under pressure to increase throughput while absorbing higher input costs. Logistics operators are being asked to hold service standards despite rising operating expenses. Retailers, meanwhile, have limited scope to pass on those costs to shoppers because margins remain narrow.
IGD’s wider analysis underlines how fragile those margins already are. In a separate assessment, it said the entire food supply chain made just 29p profit from a £20.24 basket of nine everyday grocery items, equivalent to about 1.5%, illustrating how little room there is to absorb shocks or fund investment. The organisation says that makes recent food inflation overwhelmingly cost-driven rather than profit-led.
That backdrop helps explain why IGD sees collaboration as more than a tactical response. Rothwell said the industry is moving into a “fundamentally different operating model”, where competitive advantage will depend less on individual performance and more on the strength of the networks businesses belong to. He warned that firms that continue to operate in isolation will struggle to keep pace.
The findings come from IGD’s Supply chain of the future report, which examines how food and grocery logistics are likely to change over the next five years. It concludes that cost pressure, resilience and sustainability will continue to reshape the sector, forcing businesses to rethink operating models and build more integrated supply chains.
Source: Noah Wire Services
