Retailers in the GCC must come together with their banks to provide easier access to working capital to suppliers and manufacturers, according to a retail industry think tank.
In a new white paper, the UAE Retail Industry Think Tank called for retailers and bankers to introduce supply chain finance programmes to make it easier for retail suppliers and buyers to gain access to capital.
The call for improved supply chain finance mechanisms is one of the 26 recommendations detailed in the second white paper published by UAE Retail Think Tank.
The think tank said that retail suppliers are facing increasing financial pressure from the need to satisfy consumer expectations of the instant delivery of online purchases.
The need to hold increased volumes of stock to meet just-in-time delivery requirements is locking up the working capital of suppliers and manufacturers, making it increasingly difficult for them to finance their day-to-day operations, it said.
It added that the situation has been made worse by the disruption to shipping times caused by the Covid-19 pandemic.
The resultant tightening of liquidity is pushing many suppliers, many of which are small and medium sized enterprises (SMEs) to the point of bankruptcy, added the think tank.
The UAE Retail Industry Think Tank warned that without permanent support mechanisms in place, many businesses in the supply chain will collapse, damaging the entire retail ecosystem.
The white paper highlights the need to improve the resilience of the retail sector in the GCC and recommends several strategic actions that will introduce improve flexibility and efficiency in the retail industry supply chain.
These include dual sourcing of raw materials to reduce dependency on a single source, increasing inventories of critical products, increased investment in digital infrastructure and greater use of data.
The white paper said retailers need to adopt a hybrid model that combines both lean and agile practices and allows them to balance costs and demand. Achieving this will require diversification of supply base, third-party partnerships and outsourcing, and moving finishing processes closer to consumers.
It also recommended that industry stakeholders need to implement digital technology across the supply chain, to streamline feedback, transactions and monitoring processes. Greater investments in digital infrastructure are needed to enable this.
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