1
COVID-19: How SMEs
in the UK’s Grocery Retail Industry are Coping with Supply Chain
Disruption
By
Youssef Kobbacy
A Thesis
Submitted to Newcastle University (Business School) and
University of Groningen (Faculty of Business and Economics) In partial fulfilment for the Degree of
2 Abstract
3 Acknowledgement
4 Table of Contents
1.Introduction ... 5
2.Theoretical Background ... 7
2.1 Supply Chain Disruption ... 7
2.2 Supply Chain Resilience ... 8
2.3 COVID-19 ... 10
2.4 The Grocery Retail Industry ... 12
2.5 SMEs ... 13 2.6 Research Questions………..14 3.Methodology ... 15 3.1 Research Design ... 15 3.2 Data Collection ... 17 3.3 Data Analysis ... 18 4. Findings ... 20 4.1 Qualitative Analysis ………..20 4.1.1 Proactiveness ……….……20 4.1.2 Reactiveness ……….….25
4.1.3 Managing Power Dynamics ……….29
4.2 Quantitative Analysis ………..32
4.2.1 General Questions ……….32
4.2.2 Intro Questions ……….32
4.2.3 Strategy Prior to COVID-19 ………..34
4.2.4 Strategy During COVID-19 ……….35
4.2.5 Managing Power Dynamics ………..…..39
4.2.6 Key Findings ………41 5. Discussion ……….43 5.1 Theoretical Contributions ………..43 5.2 Managerial Contributions ………..45 5.3 Policy Implications ………..45 6. Conclusion ………47 6.1 Concluding Remarks ………47
5 7. References ... 50 8. Appendices ... 58 1.Introduction
The introduction of mitigating measures in the UK has meant that its economy, much like the rest of the world, is being plunged into a self-made recession. Similar to any other recession, organisations must evaluate what they can do to be more resilient to weather this crisis and ensure business continuity. This applies most of all for companies with complex Supply Chains (SCs), such as those in the retail and manufacturing sectors (Strtis and Kosowska, 2020). Araz et al (2020) remarks that COVID-19’s dispersal has broken many global SCs, and the UK’s grocery industry is amongst them. Much media attention has been focussed on the impact of COVID-19 on the grocery industry and the resilience of their supply chains. Hobbs (2020) identifies the urgent need for the grocery industry in particular to respond to shocks from both the supply and demand sides. Grocery items are stuck upstream while consumer purchase behaviour is in disarray. The disruption among small and medium sized enterprises (SMEs) has been particularly severe, to the point that a recent Mckinsey report indicates that between 25%-36% of SMEs could close down permanently as a result of the disruption caused in the first four months of the pandemic alone (Albonico, 2020).
Whether naturally occurring or man-made, disruptions are an inherent feature of the global context of all SCs and are therefore embedded within academic literature. Golan et al (2020) identified that there has been a ramp up of relevant papers since 2017 and even more so in 2020 due to the pandemic. Moreover, they observe that studied disruptions have generally been localised, and in comparison, this pandemic is a disruption of unprecedented magnitude for global SCs; reasons for such disruption are elaborated on in section 2.2 of the theoretical background. As a result of this uniqueness, COVID-19 specific literature which is in its infancy is by far the most relevant to this study. The grocery industry has been discussed but not at length in the UK and also largely in the context of food safety during the pandemic such as in Rizou et al (2020). There is the opportunity for studies to contribute knowledge that is new, meaningful and applicable to future situations for SC managers.
low-frequency-6 high-impact events such as COVID-19 by reducing their dependence on external entities and as such, the RDT goes hand in hand with SC research. Nonetheless, the fact that it was developed in 1978 means there are existing research gaps when it comes to the daunting effects of a global pandemic. Till now this knowledge was not needed, so it is important that we revisit the research dependence concept in two ways:
1) Strategies used to manage dependencies (and therefore maintain resilience) may be effective in normal circumstances, but it is unclear if they are well-equipped enough to cater for a global pandemic which offers time-pressured situations where alternative external partners are also a major constraint. The RDT suggests that a focal firm will be constrained by the external entities which control their resources.
2) The dependencies themselves may also evolve during a pandemic due to the extreme shifts in supply and demand, how they will evolve is also unclear. Typically, retailers enjoy a power advantage and use this to leverage suppliers (Huang et al, 2002). The extent to which these power dynamics persist rather than new ones where retailers are more dependent on suppliers in unknown.
7 2.Theoretical Framework
Although COVID-19 is of course a new area of interest, SC disruption and as a result SC resilience are areas steeped in academic literature. SME’s and more specifically the grocery retail industry have both been subject to major attention from the media and as a result are topics which have a
plethora of literature available pertaining the COVID-19 pandemic. The following section will seek to review literature relevant to these topics and limit the scope of our study with respect to Pfeffer and Salancik’s RDT.
Tremendous progress in communication and transport technologies have led to new and
unprecedented levels of dependence between focal firms and their outside partners, and as such the applicability of the RDT to the different sub-sections of this theoretical framework is both
relevant and important. According to Pfeffer and Salancik (1978), the RDT posits that an organisation depends on outside actors within its environment for access to crucial inputs such as materials, labour, or cash. This dependence is a source of potential uncertainty as the flow of resources might stop due to those actors’ failures and therefore cause disruption. Meaning the importance of managing relationships with actors in the SC and reducing dependence is seen as paramount. As such it is prudent to use this theory in SC resilience research (e.g. Jean et al, 2012), and given the widespread nature of the effects of COVID-19, in the context of a pandemic.
2.1 Supply Chain Disruption
8 Van Hoek (2020) identifies various examples of disruption caused by COVID-19 (See table 1), this study identified 4 key disruptions in particular which SMEs in the UK’s Grocery Retail industry are facing due to COVID-19: Shortage of Supply, Stockpiling, Extended Delivery Lead Times and Inability to connect with customers.
Although COVID-19 is of course a new area of interest, SC resilience during a crisis is a topic which is widely discussed in literature. Craighead et al (2020) illustrate how the extent of the disruption caused by the COVID-19 is iteratively different from any other major disruption before it and as such, academics should take a different view from what is given in existing SCM literature. Fortunately, as the year has progressed many COVID-19 specific works have been published; this fresh view
alongside some grounded theory will result in studies which help SC managers become better prepared for the next pandemic and better able to foster ‘transilience’. This is the ability to simultaneously restore some processes while changing others (Craighead et al, 2020). 2.2 Supply Chain Resilience
SC resilience refers to an SC’s ability to be prepared for unexpected risk events and respond/recover quickly in the face of disruption (Takamuhabwa et al, 2015). The Covid-19 pandemic is a perfect example of a low-frequency-high-impact event which poses huge risk for SCs (Ivanov et al, 2017). When these events occur, SC managers strive to implement strategies in response that will
ultimately improve financial performance. Tang (2006) notes that many SCs fail to recover from low-frequency-high-impact events and proposes a selection of strategies to maintain a resilient SC, some of which are potentially relevant to the plight of the grocery retail industry during the COVID-19 pandemic. These Include:
• Strategic Stock: Maintaining safety stock inventories to ensure the SC can still function smoothly in the face of disruptions such as stockpiling and a shortage of supply (Tang, 2006). • Flexible Supply Base: Sacrificing the cost efficiencies of a single sourcing policy to deal with demand fluctuations and major disruption e.g. Shortage of Supply (Billington and Johnson, 2002). • Flexible Transportation: Using one of three basic approaches to ensure closed borders and restricted movement are not the Achilles heel to your SC. This includes using multiple modes of transportation, working with multiple separate carriers and using a variety of routes, this can offset various SC disruptions, particularly longer delivery lead times (Lee, 2004).
9 perfect combatant to disruptions such as stockpiling and the inability to connect with
customers(Cook, 1998).
Bode et al (2011) apply a resource dependence perspective to identify strategic response to SC disruption. They find that over time there are two generic categories of responses (Fennell and Alexander, 1987) (Mentzar and Nigh, 1995):
1) Buffering Actions: These actions attempt seek to gain stability by establishing safeguards which protect an organisation from the uncertainty that an exchange relationship presents 2) Bridging Actions: These are actions which look to control uncertainty by engaging in “boundary spanning” or “boundary-shifting” measures with a partner
Buffering is not concerned with the current management of a relationship, rather it is an attempt to mitigate the consequences that relationship could potentially cause (Carroll, 1993). As such, these responses tend to involve building up resources as “shock absorbers”, for example, bigger
inventories, redundant suppliers, flexible processes such as transportation, and product
designs/portfolios which are not dependant on a specific supplier (Tang, 2006). These responses are more proactive and could serve SMEs in the UK’s grocery retail industry well as they look to move away from a single-sourcing model in the event of a second wave of COVID-19. Bridging on the other hand is more reactive and is concerned with the current management of a relationship to cater for resource dependencies by enlarging a partner’s influence over them (Pfeffer and Salancik, 1978). Amongst others, actions might include forming closer alliances with powerful individuals in the partner firm, joint initiatives (e.g. in risk management or information sharing) or vertical integration (Ulrich and Barney, 1984) (Flynn and Flynn, 1999). The extent to which a firm chooses to pursue buffering strategies rather than bridging strategies depends on if they are passive or active (Daft and Wiek, 1984) (Bode et al, 2011). Passive firms are those with limited information processing
capabilities; SMEs are known to lack these capabilities (Anja et al, 2009) (Dyerson et al, 2009). Bode et al (2011) posit that the firms in our study will initially use buffering strategies when dealing with SC disruption without realising they are ineffective, and as they gain experience implement more bridging strategies (Isabella, 1990).
10 the typical buyer-supplier relationships (Kumar, 1996). This means they can use this power dynamic to gain more favourable contract terms on aspects such as price and payment structure as well as dictating which products they want and in what quantity (Huang et al, 2002). Craighead et al (2020) speculate that during a global pandemic this may shift in favour of suppliers due to the fact that retailers depend more on their suppliers to stock their shelves, citing the example of Walmart who have been implementing their famous ‘full-protocol’ with leniency during the pandemic (Souza, 2020). It is unknown whether it will be the case for SMEs in this industry and if it is, to what extent. 2.3 COVID-19
As to be expected, recent months have also seen plenty of COVID-19 related literature. Previous SCM literature contains an abundance of work relating to preparation for, managing and solving the issues associated with events that cause large-scale SC disruption. The likes of Bode et al (2011) discuss events such as natural disasters, supplier bankruptcy and terrorist attacks, and yet still the vast majority of firms seem completely unprepared for the COVID-19 pandemic. Craighead et al (2020) suggests that this is because of the qualitative differences between pandemics and other forms of supply chain disruption. This is broken down into 3 interrelated dimensions:
1) Scope: Typical disruptions are concentrated with a sector or geographical location (or both). A pandemic on the other hand is indiscriminate, all sectors and industries absorb its impact. As one of the only industries able to continue operating during the UK’s initial lockdown, the scale of disruption in the grocery retail industry was easy to observe.
2) Spillover: Usually a SC disruption starts with a large initial shock and slowly disappears after a series of smaller ripples. In a pandemic however, a “torrent of roughly equivalent waves” keeps coming, effecting all regions and sectors. This can be observed already by the UK governments decision in September 2020 to reinstate certain lockdown measures. Many of these mitigating actions draw out this spillover even further.
3) Shifts: In a normal disruption, this refers to how the SC effects are usually concentrated upstream or downstream and in a unilateral fashion. In a pandemic, the disruption is heavy enough to impact both the upstream and downstream of a supply chain, and in different ways (high or low). Table 1.1 below demonstrates the generic supply-side and demand-side impacts of COVID-19 which are elaborated on specifically in section 2.4 for the grocery retail industry.
11 overcome their effects. Many of which are largely focussed around improving systems of
collaboration and accelerating technology implementation (Van Hoek and Lacity, 2020) (Linton and Vakil, 2020).
12 Table (2.1): Adapted from Van Hoek (2020) based on a survey of supply chain executives
There are very few studies which deal with the impact on businesses of previous pandemics e.g. Sheffi (2015) whoi discusses flu pandimics and the distinct difference between a global pandemics and more common localised disruptions.
2.4 The Grocery-Retail industry
14 Matopoulos et al. (2019) remark that during an economic downturn is when relationships with partners outside the firm are placed at particular strain, and uncertainty is at its highest. As such, maintaining collaborative relationships with upstream partners is a key response and a classic example of a bridging response. Other bridging responses suggested for Grocery retailers in Hobbs (2020) include switching to a more local supply base and quickly moving away from a single-sourcing structure. Dannenberg et al (2020) and Castange et al (2020) emphasise the importance of quick digital ramp up in the grocery retail industry, which is the best example of an effective response available to firms in the grocery retail industry. While not available to everybody, this response leads to process flexibility and therefore can reduce uncertainty.
2.5 SMEs
In the UK, 99% companies are categorised as SMEs, 20% are predicted to go bust this year (Chapman, 2020). SMEs suffer disproportionately in times of economic crisis due to their limited stock of resources and as such it can be inferred that they are more dependent on the resources of outside actors than bigger firms (OCED, 2009). They therefore have more to gain from studies which take a resource dependence perspective. SMEs lack the same levels of influence over suppliers and labour markets, which leaves them more vulnerable to the supply-side effects of COVID-19 (Hobbs, 2020). As the RDT dictates, robust and reliable relationships throughout the SC are crucial to
maintaining and improving SC resilience, for smaller companies it is expected that having less power is an obstacle to developing these kinds of relationships and as a result it is more difficult to achieve resilience. As expected, power dynamics can often be skewed in favour of the supplier when it comes to SMEs, Mudambi et al (2004) confirm that size asymmetry in the buyer-supplier relationship will affect the level of cooperation a purchasing SME can control from a larger supplier and given the current times, it is possible that COVID-19 may exacerbate this problem.
15 suppliers have found the effect of COVID-19 to be threatening to their survival and a further 47% who see collapse as a legitimate possibility, which raises considerable concerns for the grocery SMEs themselves.
2.6 Research Questions
Based on the information found in the theoretical background and considering the research gaps detailed in the introduction the following 3 research questions have been identified:
1) How effective have buffering strategies in place prior to the COVID-19 pandemic used by SMEs in the UK’s grocery retail industry to manage dependencies and therefore maintain SC
resilience been, and have new strategies been implemented to cater for this in the event of a second wave or future pandemic?
2) Have new bridging strategies emerged during the COVID-19 among SMEs in the UK’s grocery retail industry that have been effective in managing dependencies and therefore maintaining SC resilience, and what are they?
3) To what extent if any have stereotypical power dynamics in buyer-supplier relationships between SMEs in UK’s grocery retail industry and their suppliers changed since the impact of the COVID-19 pandemic?
In answering the above 3 questions we hope to contribute towards SC management practice at the SMEs concerned. Section 3 breaks down the proposed methodology we will use to achieve this.
3. Methodology
3.1 Research Design
16 The study begins by collecting qualitative data through semi-structured interviews. Zikmund et al (2013) cite interviews as the most useful method to understand the concept of supply chain resilience.Following this, quantitative data will be collected via a survey-based questionnaire. Descriptive analysis will follow to substantiate the findings from the semi-structured interviews and identify other trends. Supply chain research methodology reviews such as those by Croom et al (2000) and Pilkington & Meredith (2009) report that surveys are by far the most used quantitative method in SC research, identifying that they are more useful in drawing broad insights from large samples. However, it should be noted that available time and access to respondents in this study was constrained due to the pandemic situation.
Traditionally SCM research is heavily based on quantitative methods alone such as surveys (Kahn and Metnzar, 1996). Golcic and Davis (2012) notice that since the turn of the 21st century, qualitative
methods in SCM have been embraced. Previously mixed research methods within a single SCM study was rare, but is now growing. Naturally all research methods have their pro’s and con’s (Boyer and Swink, 2008), and as such selecting a mixture of methods with different drawbacks helps assure the inferences made from each method can be trustworthy. Our research design followed a qualitative path meaning this was the stage of our data collection which came first, this is elaborated on in further detail in section 3.2. Mello and Flint (2009) best articulate the benefits of using a qualitative approach as a starting point in a mixed methods study, citing the importance of human interactions. Di-Ciccio-Bloom and Crabtree (2006) breakdown the classification of different types of qualitative interviews: Structured, structured and unstructured. We opted to proceed with a semi-structured interview which entails a set of prior-determined and open-ended questions whilst leaving the door open for further questions and discussion based on the direction which the dialogue goes in. A total of 5 interviews were conducted as part of the study; the minimum number of interviews is subject to wide discussion and is addressed by Shari Dworkin (2012) who findings suggest that anywhere from 5 to 50 participants as adequate depending on the situation.
When speaking in a report commissioned by the National Centre for Research Methods titled ‘How many qualitative interviews is enough?’ (Baker and Rosalind , 2012), Patricia and Peter Adler bring to light the fact that there are certain types of research where larger numbers are easier to recruit, as such they give a broad guideline of 6-12 interviews.
17 The process established consists of two steps, first the sample size for a large population is
estimated; and then the result will be used to estimate the sample size for a finite population i.e., of Trafford Borough. This is shown below:
n
0= Z
2. p . q / e
2 n0 = the sample sizeZ2 = the standardized normal random variable at the desired confidence level
e.g. Z= 1.96 at 95% confidence level. e is the desired level of precision,
p is the estimated proportion of an attribute that is present in the population, q= 1-p. For maximum variability q=p=0.5
In this study it was opted for a lower confidence level of 90% which implies an increase of the potential error from 5% to 10%. This led to reduction of the minimum sample size which did aid overcoming the difficulties related to obtaining questionnaire results given COVID-19. At this point it is appropriate to mention the comment of Chisnall (1986) that "sample size does not guarantee accuracy". It is also the design of the questionnaire and the way it is applied that also contribute to the accuracy of the results.
At a confidence level of 90%, Z = 1.64. Assuming low variability in the sample, we take p = 0.1 and hence q=1-p = 0.9 .
n
0= (1.64)
2* 0.1 * 0.9 / (0.1)
2= 24
This means a sample size of 24 of unlimited population. To estimate the number of grocery SMEs in the borough of Trafford in order to calculate the sample size for its finite population of the region we have established from a public report that the total number of grocery SMEs in the UK in 2018 was 42,091 and the population of the UK was approximately 66 million (IGD, 2018). At that time, the Trafford borough population was around 240,000. Assuming the number of grocery SMEs are spread as per the population we estimate the number of stores in Trafford borough as:
18 To be on the safe side we round this figure up to 200 grocery SMEs in the borough of Trafford. Therefore, the sample size required to achieve the confidence level of 90% in the borough of Trafford is:
n
0= {24 / [1 + (24-1) / 200]}= 21.5
Therefore, the sample size is rounded to 22.3.2 Data Collection
As mentioned previously we opted to plan for qualitative research path, although largely the interview data collection ran concurrently with that of the questionnaire. It should be noted that it was not possible to conduct all of the interviews prior to the rollout of our questionnaire as intended, due to difficulties caused by national restrictions pertaining to the pandemic. As prescribed by Di-Ciccio-Bloom and Crabtree (2006) our interview respondents were homogenous and shared important similarities which relate to the purpose of the research, in this case they were all representatives from grocery-retail SMEs who have experience in the forefront of the day-to-day operation of their business.
19 Table (3.1): Interviewee Profiles
Both the qualitative and quantitative data which this study is based on were collected during September and October 2020. When distributing our questionnaires, short periods of physical communication took place in line with national guidelines restrictions when building a rapport and obtaining contact details from the SMEs which took part in the study. The questionnaires were based almost entirely on closed questions, offering the option of ‘Other’ where necessary to allow respondents to express experiences which may have been unique to their SME. The protocol
outlined by Dillman (1978) was adopted with questions that were filled via email rather than face-to-face.
3.3 Data Analysis
20 the identification of these quotes, second-order codes or, ‘actions’ are identified to describe and summarise the first-order codes. Following suit, actions are grouped together based on their shared meanings to form third-order codes, which are termed as ‘components’ of each dimension. That concludes the data reduction stage of the process as presented in full detail in section 4. Data display is the second stage of Miles and Huberman’s qualitative data analysis process and it simply refers to “an organized, compressed assembly of information that permits conclusion drawing”. Our information has been assembled and can be seen in Appendix 3. The third and final stage of the process is data conclusion and of course involves exploring the analysed data means and its implications for the research questions and are discussed in the final section of this thesis. The analysis of our quantitative data was undertaken using Microsoft excel. After questionnaire responses were received, data capture processing took place. This is the process of transferring the data into a file which can be interpreted using a computer (Lyberg and Kasprzyk, 1997). This involves the process of data coding, Jones and Hidiriglou (2013) remark that this can be done both
automatically and manually, we took the path of the latter. Our questionnaire involved two types of questions. First, we had simple yes or no questions where responses were coded as 0 (no) and 1(yes). We also used Likert Scale responses which were coded from 1 to 5 as prescribed by Peter Chisnall (1986) e.g., 1 = strongly disagree and 5 = strongly agree. Following our data coding and entry, the process of data cleaning was undertaken to identify any inconsistencies or outliers (Jones and Hidiroglu, 2013). Various univariate analysis techniques such as developing statistics for
21 4. Findings
4.1 Qualitative Data: Thematic Analysis
Please refer to Appendix 3 throughout this section to match each action (2nd order code) to its
corresponding quote (1st order code) taken from our qualitative data.
Dimensions
Responding to the effects of a low-frequency-high-impact event is grounded in academic literature as presented in section 2.2 of our theoretical background and is generally split into two broad sets of responses: Proactive and Reactive (Bode et al, 2011). Therefore, proactiveness and reactiveness have been selected as two of our dimensions. However, a small number of our first-order codes which fall outside the scope of these two dimensions have been grouped in a new dimension which has emerged from our qualitative data that relates to our third research question, this dimension will be referred to as ‘Managing Power Dynamics’.
1) Proactiveness (SC resilience prior to low-frequency-high-impact event): The focal company’s ability to be ready for SC disruption by establishing safeguards which shield them from uncertainty.
2) Reactiveness (SC resilience following the incidence to low-frequency-high-impact event): The focal company’s capability to respond effectively to SC disruption and control uncertainty by engaging external partners.
3) Managing Power Dynamics: The extent to which the focal company is able to control and benefit from the ‘buyer-supplier relationships’ they have with their first-tier suppliers both prior to and following the incidence of a low-frequency-high-impact event.
4.1.1 Proactiveness
Three key components of proactiveness emerged from the semi-structured interviews:buffering strategies prior to covid-19, buffering strategies following covid-19 and identifying dependence among external partners. Each action found to make-up these components can be seen in Table 4.1 alongside the summary of key findings in this dimension at the end of this section.
Buffering Strategies (Pre COVID-19)
22 meant that largely there was very little in place to combat the pandemic prior to its incidence. Two actions have been observed as part of this component: Contingency Planning (or a lack of it) and Holding Larger Inventories.
One manager best summed up the thoughts of our interviewee’s when asked about the existing contingency plan they had prior to the impact of COVID-19:
“No, it came on us like a ton of bricks, we were not prepared. We also didn’t expect it to last this
long.” (Company A)
The SMEs we spoke to were clearly unprepared, citing similar reasons, that with such small
organisations it is hard enough already to focus on the day-to-day running of the company and there isn’t enough time to focus on activities which don’t require immediate attention. SMEs lack the resources to deal with crises in the way that larger companies do (OCED, 2009), and Parnell (2015) extends this to preparedness, there was evidence of this amongst interviewees. Aside from one respondent, there was almost complete bemusement at the idea of a company like theirs having in-built contingencies for SC disruption of this scale prior to its occurrence. The owner of company C noted:
“We like to keep stock levels high [To act as a buffer], but we knew as time went on that it was
going to be a difficulty getting stock over.” (Company C)
This respondent was the former night manager of a major supermarket brand here in the UK and it is known that knowledge and experience is an advantage when it comes to overcoming disruption (Sheffi, 2005).
Buffering Strategies (Post COVID-19)
Regarding a possible second wave we observed much more preparation from respondents, with 4 key actions arising as part of this component: Holding Larger Inventories, Using Back-Up Suppliers, Using Alternative Transport Methods and Dynamic Pricing.
Table 4.5 in section 4.2.2 shows that a shortage of supply and stockpiling by customers were the two most frequently cited SC disruptions faced by SMEs who answered our questionnaire. We’ve
23 Keeping strategic stock is a key strategy noted in Tang (2006), a marquee paper in this field and our interviewees showed this is very much desirable to SMEs in this industry, this was the only buffering strategy which participants had considered both before the pandemic and in the event of a second wave. Only one respondent was able to implement actions of Using Back-Up Suppliers and Using Alternative Transport methods, since their SME opened during the initial lockdown. They explained why they had this flexibility as follows:
“In some ways it was easier for us because we hadn’t opened. We were able to reassess and work with what was available. That meant we were flexible in terms of our supplier choice and
transport.” (Company D)
Levy and Powell (1998)note SMEs cannot deploy a big range of tactics that make a company flexible as it can be a costly endeavour, survival is their central concern. Our evidence supports this assertion and casts doubt that these types of buffering strategies are suitable for SMEs, and as such they should focus on building stronger bonds with their existing supply and logistic partners.
One respondent was adamant that the size of his SME and their lack of influence was a contributing factor as to why they couldn’t use this strategy even if they needed to:
“Even if we could, I don’t think we would do to be honest [look for back-up suppliers], fortunately our suppliers have understood it is a difficult time and have been lenient with payments. (Company C)
Our interviewees gave the impression that their ability to create effective buffers for SC disruption was out of their hands, indicating they are too dependent on their key external partners, which will be discussed in the next component of this dimension. Dynamic pricing on the other hand is not reliant on external partners and as a result is observed frequently in our quantitative and qualitative results; including at Company B where it was used to combat lockdown restrictions:
“We’ve also dropped prices on essential items in order to attract customers” (Company B) Identifying Dependence Among External Partners:
We also asked our respondents about exactly how key stakeholders/external partners had impacted their capability to be proactive pertaining to both the initial wave of COVID-19 and the possibility of a second wave. Customers, Suppliers and The Government ranked by far the highest among
24 After the initial stockpiling stage, a lack of footfall has been cited by respondents as a big concern, which is having dangerous knock-on effects for the day-to-day running of some of these SMEs, for example on respondent told us:
“I saw a Facebook video of Theo Pathetis from [The TV programme] Dragons Den and something he said stuck with me; ‘Cash flow is key’ Yes, I need supplies, but I need to be able to pay for their supplies. Some people will not pay, but that is not good business sense, I want to build my
relationships because ultimately COVID-19 will pass. It is Important to get a plan together to cope with these issues” (Company C)
This manager made it very clear that dependence on customers is a crucial consideration, even to the extent that it affects his relationships with suppliers. This evidence suggests proactively managing relationships and capability to connect with customers is important and falls in line with the work of Hobbs (2020) who emphasised the demand-side risk caused to firms in this industry. The same applies to suppliers, one manager summed up his SMEs dependence on suppliers when discussing external actors:
“The suppliers tend to look after the big boys rather than the small boys. They [supplies] are going like hot cakes basically, they know that what they don’t sell it to me they’ll just sell it to anyone” (Company E)
This respondent made the point that even the UK’s large grocery retailers are dependent on the same suppliers in some cases, indicative of the uphill battle they face. A wealth of literature
discusses the importance of relationships with consumers and suppliers, even in the context of Food SC’s (Cranfield, 2020) (Hobbs, 2020). The government however is an rarely touched subject, who stood out amongst a range of stakeholders during the interview discussions. Responses like the quote below gave us the impression that the government were crucial external partner:
25 Key Findings/Observations from the Proactivness Dimension
• Interview respondents by enlarge had no contingencies in place to deal with the impact of a sudden large scale SC disruption and as a result were not able to respond quickly enough to maintain resilience and continuity of supply in the immediate aftermath of COVID-19’s initial wave. Craighead et al (2020) questioned whether strategies in place to manage resilience prior to an event like COVID-19 would be equipped to cross over into situations like this; the answer is that for SMEs, they simply fail to get strategies in place before and must therefore look to maintain resilience after the fact.
• Interviewees lacked sufficient levels of process flexibility to deploy back-up suppliers or alternative methods of transport in the event of a second wave of COVID-19. This falls in line with the assertion of Levy and Powell (1986) that SMEs struggle to implement practices which require flexibility due to issues related to cost and resources.
• Holding larger inventories where possible is perceived as an important buffering strategy to be prepared for a potential second wave of COVID-19. Van Hoek (2020) is one of several authors to prescribe this as a remedy to the COVID-19 pandemic, however it should be noted that this pandemic has led to a supply shortage which is unheard of among our respondents, and as such holding bigger inventories is not always viable.
• The use of Dynamic Pricing is also seen as a useful strategy to cater for demand-side disruption caused by COVID-19 and can be easily deployed. Elmagarby and Keskinocak (2003) complete a thorough review of dynamic pricing literature and remark that this has long been the case for industries where capacity is both perishable and fixed in the long term, as is the case with the grocery retail industry and particularly our questionnaire (See figure 4.1b)
• Out of all key external partners which the SMEs we have spoken to are associated with, they perceive themselves to be the most dependent on Customers, Suppliers, and the
26 emerged from this project as existing literature focusses largely on customers and suppliers alone (Cranfield, 2020) (Hobbs, 2020).
Table (4.1): Breakdown of the Proactiveness Dimension
4.1.2 Reactiveness
Key components of the reactiveness dimension have emerged from this project: Bridging Strategies (Prior to COVID-19), Bridging Strategies in response to COVID-19 and Engaging External Partners. The breakdown of each component into actions can be seen in Table 4.2 with the summary of key findings in this dimension at the end of this section.
Bridging Strategies (Prior to COVID-19)
This component is concerned with direct responses to previous situations which may be comparable to COVID-19. One of our managers responded conclusively when asked if he has seen any disruption comparable to that caused by COVID-19 in his 35 years managing his SME:
“No, and I don’t think I ever will again, not in my lifetime” (Company A)
This is supported in our quantitative research where all of the 22 respondents answered the same question by saying no (Section 4.2.3). This has implications for firms’ ability to maintain resilience during times of disruption as prior experience and learning is crucial (Sheffi, 2005). Our respondent who opened during the pointed to Brexit as a learning experience. In response to this disruption (With Brexit’s Date Looming) they found it crucial that they build closer bonds with suppliers (many of whom are abroad) to sure up their supply chain and maintain SC resilience. This is what he had to say:
“Having watched Brexit unfold, we already decided to work very local where we can, so in one respect it has been good because it has allowed us to forge closer bonds with our
27 Bridging Strategies in Response to COVID-19
There are 4 actions which make up this component: Rebalancing the SC to include more local suppliers, focus on the supply of critical items, closer collaboration/information sharing with suppliers and accelerating the use of digitalisation. It is important to note the use of bridging strategies were much more prevalent among our respondents than buffering strategies.
Van Hoek (2020) emphasises the incentive for companies to respond to COVID-19 by restructuring the supply chain in response to travel restrictions. While there was not a lot of evidence of this, the ethnic-based grocery SMEs we spoke to did not had little choice but to do exactly that, for example: “We have important products coming from France and America, I knew that if we didn’t procure them from somewhere in the UK we’d be in trouble [referring to lost sales to competitors]” (Company C)
This quote also alludes to how important specific products can be. Lacking essential items of course leads to lost sales and presents an immediate problem to any company (Krajlic, 1983). One manager we interviewed informed us how fruitful it can be to focus on the supply of critical items:
“People were panic buying oh my god, cleared out on the shelves” [Referring to the importance of keeping critical items in stock] “Ever since we’ve managed to stock everything our take in has quadrupled every week” (Company A)
The importance of next action, focussing on closer collaboration/information sharing with suppliers is similarly ingrained within SC resilience publications. Interview respondents explained this action is implicit in responding to disruption. One of our respondents has explained how they’ve gone about this:
“Since COVID we’ve had to become closer to make sure we receive orders, we’ll let them know once we’re running out of stock more regularly and they will make it up” (Company B)
A common theme throughout the qualitative section of this study has been that the SME
respondents are more focussed on improving their association with existing suppliers rather than seeking replacements.
28 just over a year explained to us how this SC disruption has been his queue to bring forward plans for digitalisation:
When I first opened, you have a 3-4-year plan. One of my visions was to eventually start an online ordering process in roughly 3 years’ time. But I’ll actually be launching my online ordering this week. Will it be successful? I don’t know. But it would be silly not to put it out there in preparation for winter.” (Company C)
The use of digitalisation has emerged as being a crucial channel to managing the customer relationship which is not always expected to be the case in SMEs (Delloite, 2020).
Engaging External Partners
As mentioned, the external partners which our respondents have deemed themselves to be the most dependant on were made clear in this project, namely: customers, suppliers and the government. As such the three actions which make up this component are: Engaging Customers, Engaging Suppliers and Engaging government.
Overwhelmingly customer relationship management has had to be through digital means, the same owner we interviewed who has had to push forward his plans of implementing an online ordering system explained to us how he plans to use social media to help it gain traction:
“I’ve got a facebook and Instagram page for the shop, those are my main platforms I use to engage customers. With local businesses it is always important to create a community because we depend on our recurring customers so much, particularly in times like these.” (Company C)
Social media was a popular tool used by respondents, but this is noy an option when it comes to engaging suppliers. This has been a much more direct endeavour amongst respondents, for example one has taken his efforts to engage his suppliers to new and unexpected heights:
“But the growers had to furlough the staff and so they put the prices up because they couldn’t pick enough stuff. Even I’ve been in touch so I can go pick the stuff myself” (Company A)
29 This also applies for potential aid opportunities on offer from the government. Our evidence
suggests that when SMEs do their research and tap into the government’s resources when possible, it can be beneficial to maintain SC resilience during the effect of big scale SC disruption like COVID-19.
Key Findings/Observations from This Dimension
• Respondents mostly believed the disruption caused by the COVID-19 pandemic to be unlike anything they have previously had to respond to. Brexit (which has impacted UK SC’s substantially) was the only comparable event any of our interviewees have experienced. Craighead et al (2020) posits that as a SC disruption the magnitude of the COVID-19 pandemic may be different from anything seen before.
• The use of bridging strategies as a whole was observed much more frequently among the SMEs which took part in our study. Bode et al (2011) argue that with increased experience, passive companies (which grocery SMEs fit the profile of) will shift from the use of more buffering strategies to bridging strategies. We have observed the opposite, where a lack of prior knowledge has led to respondents acting reactively as opposed to proactively in regard to the first wave. Moreover, firms have opted to implement more buffering strategies in preparation for a second wave knowing what they know now.
• Respondents believed their lack of relative power and influence, substantiated by the pandemic, has left them unable to effectively change their supply base, either to be more local or less reliant on certain suppliers. This provides further evidence that SMEs often lack the capability to implement flexible practices (Levy and Powell, 1986).
• Forging closer relationships with suppliers prior to a potential second wave of COVID-19 and going forward ranks highly among the priorities of our interviewee’s. Purchasing publications have emphasised the shift from transactional relationships to collaborative relationships with suppliers (Sheth and Sharma, 1997), and based on the interview analysis this shift is more evident than ever during the pandemic situation.
30 • There is clear evidence that the SMEs we have spoken to are actively trying to manage their
relationships with stakeholders they are dependent on in the lead up to a potential second wave of COVID-19. This falls in accordance with the belief of Pfeffer and Salancik (1978) that managing relationships with external partners is paramount.
Table (4.2) Breakdown of Reactiveness Dimension 4.1.3 Managing Power Dynamics
The two components identified from the interviews which make up this dimension are: Power Dynamics Prior to Frequency-High-Impact Event and Power Dynamics Following Low-Frequency-High-Impact Event.
Power Dynamics Prior to Low-Frequency-High-Impact Event
Our interview respondents interpreted the term power to be largely concerned with their ability to negotiate prices in their transactions, order sizes and payment terms were also referred to, albeit less frequently. Based on our qualitative data, 2 actions have been identified as part of this component: Positive Price Negotiation and Payment Term Negotiation
Respondents perceived themselves to have more bargaining power than their suppliers during normal circumstances, as is the case in traditional buyer-supplier relationships. The assistant manager who we interviewed for Company B who stock a huge variety of generic grocery items had this to say about the state of power dynamics prior to the COVID-19 pandemic:
“Before the pandemic hit there were certain suppliers, whom we could bargain with and drive down their price, especially when we made large orders” (Company B)
31 dependence of our interviewees’ suppliers on them for bulk orders prior to the pandemic. As
mentioned, one of our respondents told us the extent of his SMEs power over their suppliers goes as far as being able to dictate their terms of payment:
“ To a certain degree yes [when asked if his SME generally holds more power than its suppliers], I’m able to bring in new suppliers on a ‘sale or return’ basis, where I can see if their products are selling before I make a call” (Company C)
The term ‘sale or return’ means that they only have to pay for the units they sell, the remaining units are sent back to the supplier in circumstances where the product does not perform well. This is an indication of a buyer-supplier relationship which is heavily in favour on the buyer.
Power Dynamics Following Low-Frequency-High-Impact Event.
We found that disruption caused by COVID-19 has impacted power dynamics in buyer-supplier relationships among our SME respondents to be largely dependent on their circumstances and the products which they sell. As such, the two actions identified as part of this component are: Negative Price Negotiation and Positive Price Negotiation.
Multiple interviewees found that after the pandemic, the balance of power in their relationships with suppliers had flipped. This was the case for Company A, who shared details of this in the below quote:
“Sometimes the stuff was still there but shot up in price because everyone was after it. For example, Broccoli went from about £5 a box to more than £14 a box” (Company A)
In a lot of cases, it seems that suppliers are taking advantage of the opportunity to charge higher prices, safe in the knowledge that somebody else will pay for it. In contrast, company D, who supply a range of high-quality artisan products found that the effects of the pandemic had left the power dynamics in some of their relationships with suppliers even more skewed in their favour, stating: “Because we’re one of the only outlets for a lot of these products and we take a lot of stock from them, we’ve had the opportunity to leverage our suppliers on price as a result of the pandemic” (Company D)
Nonetheless, it should be noted that this trend wasn’t observed for the standard products which all 5 of our interview respondents keep in stock.
32 • Respondents believed overwhelmingly that prior to the COVID-19 pandemic, their
buyer-supplier relationships were traditional (Kumar, 1996), meaning they held more bargaining power.
• The way that the power dynamics which govern these relationships was dependent on the specific circumstances of each company and the nature of the products which they stocked. • There was evidence of power dynamics in buyer-supplier relationships swinging in favour of
both the buyers and the suppliers after the impact of the COVID-19.
33 4.2 Quantitative Analysis
This section presents and discusses the results of the survey-based questionnaires and seeks to ascertain whether the results of the quantitative research substantiate those of the qualitative research and to identify any trends or issues which were not identified by the interviews. The questionnaire was based on the loose structure of our interviews and as such our analysis will follow the following 5 sections: General Questions (Which establish the profile of our respondents), Intro Questions, Strategy prior to and during the COVID-19 pandemic, and Managing Power Dynamics.
Table (4.4): Questionnaire Respondents’ Profile 4.2.1 General Questions
All 22 respondents answered the first question by stating they had between 1-10 employees, which confirms that 100% of responses came from SMEs according to the definition of a small business given by the European Commission (EC, 2020).
Table 4.4 shows the spread of respondent profiles. The majority of responses came from managers and assistant managers (68%), roles which are ingrained in the day-to-day affairs of an SME. Furthermore, 59% of respondents had already between 1- and 5-years’ experience in their role which also speaks to the knowledge and awareness of individual respondents about their SME. 4.2.2 Intro Questions
34 experienced by more than half of our 22 respondents (See table 4.5) indicating the difficulties seen by our SME respondents were homogenous by enlarge. Importantly, 19 out of 22 respondents had seen a shortage of supply at their SME as a result of the pandemic, moreover none of our
participants indicated to us that they had not felt any disruption from COVID-19.
Table (4.5) SC Disruptions Faced by Respondents
When asked about their worst impacted product lines (Figure 4.1a) and where the majority of their supply base was located (Figure 4.1b) participants gave similar answers. 63% of respondents told us their perishable items were the worst effected at the SME. They require more frequent
35 grocery retail industry (Fillis and Johansson, 2005) and offers an explanation for trends seen further along in our questionnaire.
4.2.3 Strategy Prior to the COVID-19 Pandemic
All 22 respondents told us they had no contingency plan in place before the pandemic. This evidence supports the assertion from our semi-structured interviews that SMEs from the grocery retail industry cannot afford to look so far forward and consider tasks which don’t require immediate attention.
Only two participants disagreed or strongly disagreed when asked if being excessively dependent on external partners was to blame for their lack of preparation (Figure 4.2). Mudabi et al (2004) posits that SMEs can struggle to generate cooperation from suppliers due to their size, our results support this and suggest that this stretches to other external partners such as customers.
Perishable Food Items Non-Perishable Food Items Non-Food Items 0 2 4 6 8 10 12 14 16
Figure (4.1a) Worst Impacted
Prodcut Lines
36 The questionnaire also showed that among all 22 participants, none could cite a previous situation which they could compare to the COVID-19 pandemic. This substantiates what was found in our interviews. Interviewees quotes attest to the fact that the effects of the pandemic have had global scope, been drawn out much longer than expected and had severe implications both upstream and downstream for the SME participants in this study (See Appendix 3).
4.2.4 Strategy During the COVID-19 Pandemic Proactiveness
First, we wanted the understand the extent to which the SMEs who had no contingency plan in place for the first wave of the pandemic, decided they wanted to implement one in preparation for a potential second wave. When asked, 18 out of the 22 participants in this survey responded that they had a new contingency plan in place. As part of this question, we also asked respondents on their opinion of how helpful they perceived certain buffering strategies to be. Figure 4.3 shows how many of the 18 participants who have planned for a potential second wave of the virus agree or strongly agree that each of these strategies is useful in controlling the disruption caused by COVID-19.
Strongly Disagree Disagree Neautral Agree Strognly Agree 0 2 4 6 8 10 12
Figure (4.2) Respondents vs. Excssive Dependence on External
Partners
Holding Bigger Inventories Using Back-Up Suppliers Alternative Transport Methods Dynamic Pricing 0 2 4 6 8 10 12 14 16
37 These findings were consistent with the interviews, respondents deployed the strategies they
perceived themselves to have the most control over. Quayle (2003) found that UK SMEs are aware of proactive SC management and the importance of long-term alliances in doing it effectively. However, our results suggest that they lack sufficiently strong relationships with their suppliers to deploy the most flexible SC management practices such as using back-up suppliers and transport methods. Hobbs (2020) questions how firms in this industry will look to mitigate panic buying behaviours and other demand-side disruption in the event of a future crisis, this evidence suggests holding larger inventories and implementing dynamic pricing will be a viable and realistic solution for SMEs facing this problem.
Following this we presented host of different external partners and asked respondents to rank them based on the extent that their dependence on each group had made it tougher for them to prepare for a potential second wave. Responses ranged from 1 (Not at all) to 5 (A very large extent) and have been analysed and presented in table 4.5.
Table (4.5) Analysis of SMEs dependence in preparation for a second wave of COVID-19
The mean responses given by the participants of our questionnaire are shown in the first row. Our SME respondents found themselves to be the most dependant on the government (mean =3), suppliers (mean =3.5) and customers (mean =3.09 when it comes to being prepared for a potential second wave of COVID-19, these results uphold the responses given in our interviews.
The Coefficient of Variation to see how dispersed the responses given by our participants are from the mean value. Lower values indicate less dispersion, and as can be seen in, table 4.5, the most consistent thoughts of participants were that customers, suppliers and the government were the external partners they depend on the most. Proactively building trust in relationships is vital for food supply chains to be able to respond to a second wave of the pandemic and other unexpected
disruptions (Hobbs, 2020), this evidence suggest these are the three relationships UK SMEs in this industry should concentrate their efforts on our those emphasised above. SCM literature
38 and customers in order to simplify decisions, reduce costs and make the acts of buying and selling goods easier (Bordonaba-Juste and Cambra-Fierro, 2009) (Wagner and Alderdice, 2006). Building such relationships with governing bodies remains far less touched on in this field, further shifting the spotlight to how SMEs can achieve this which will be looked at in detail in section 5.
Reactiveness
Much like when asking about the implementation of a new contingency plan in response to COVID-19, we also asked the participants if they have reached out actively to external partners to control the extent of the disruption caused by the
pandemic. All 22 respondents answered yes and indicated which of the three key external partners they have engaged with, this is shown in figure 4.4. Suppliers and customers were clearly more
accessible to our respondents than the
government who only 5 participants engaged in response to the COVID-19 pandemic.
Figure 4.5 shows the number of our 18 respondents who have implemented a new contingency plan to prepare for a possible second wave of COVID-19 that agreed or strongly agreed that each key buffering strategy identified in our theoretical background was effective in helping control the disruption caused by COVID-19.
39 As with our interviewees, questionnaire participants struggling to restructure their supply chain. Our qualitative analysis brought to light that in these times suppliers are more inclined to look after the “big boys” (Section 4.1.1), this could be an explanation for the lack of traction behind strategies which require restructuring the SC. SMEs lack capabilities in terms of personnel, management and information technology (Anja et al, 2009) (Dyerson et al, 2009), often this is why they rely so heavily on suppliers and may offer further explanation for why respondents are not looking to restructure their supply chain. It should be noted, the SC’s of the firms we took our questionnaire were already majority based on local suppliers meaning it is unlikely they would seek to become more local. Other bridging strategies were very popular among respondents including focussing on the supply of critical items. When supply is scarce it is natural to focus on the supply of a company’s most
important items (Van Hoek, 2020) as is seen with our respondents. As expected, we have also seen a rise in closer collaboration and information sharing with suppliers, our interviewees gave frequent examples of how they directly are managing their relationship with suppliers to combat disruption (Section 4.1.2) and there is a similar trend to be seen in our quantitative data. As with our
interviewee’s digitalisation was prevalent, which is likely to be down to large recurring customers bases whom they can use to build increased visibility during times of lockdown restrictions (Castagne et al, 2020), perhaps this is one channel that more grocery SMEs in the UK should be exploring. Hendrickson (2009) suggests that SMEs often rely on outdated technologies, however it seems like this is not the case in 2020 where technology is so easily accessed.
0 2 4 6 8 10 12 14 16 18
40 Table 4.6 below shows how our participants responded when asked which external partners that they depend on that made it tougher for them to respond directly to the initial wave of the pandemic.
Table (4.6) Participants views on external partners that made it difficult to respond to the disruption The same three key external partners stood out again as those who our SMEs were dependant on and detrimental to their response to COVID-19’s initial wave. As the results from table 4.6 match the results from table 4.5 quite closely, it can be inferred that responses to a potential second wave of the pandemic is very much directed by responses to the first pandemic, this is evidence of learning. Learning is implicit in definitions of SC resilience (Takamuhabwa et al, 2015) (Schollten et al, 2019) and evidence of this bodes well for SMEs in this industry when responding to a second wave of COVID-19.
4.2.5 Managing Power Dynamics
41 Our respondents largely felt that under normal circumstances their buyer-supplier relationships were traditional, meaning they held more negotiating power over their suppliers and did not struggle to drive down their prices and potentially dictate the terms of their order. Which is to be expected as per Huang et al (2020). As we know from our interviewees however, issues relating to cash flow for retailers and shortages of supply have been the source of a lot of renegotiation in the terms of these relationships. 14 out of the 22 respondents said yes. Based on those negotiations we asked if they agreed that the bargaining power has swung in favour of their suppliers, the responses are depicted below in figure 4.7.
The extent to which this was the case was previously unknown but there was unanimous agreement among the 14 respondents who found themselves having to renegotiate that the bargaining power had swung in the favour of suppliers since the impact of the pandemic. Our interviews revealed that where the SME retailers in this industry previously were spoiled for choice, this was now the case for their suppliers, hence why the nature of their buyer-supplier relationships have changed. However, it should be noted that 8 of our 22 respondents were able to remain in a position where they did not
Strong Diss Disagree Neutral Agree Strongly Agree 0 2 4 6 8 10
Figure (4.6) The extent to which SMEs perceive themselves to
hold more negotiating power in the buyer-supplier
relatshionship (Priot to the COVID-19 Pandemic)
Agree Strognly Agree
0 2 4 6 8 10 12
Figure (4.7) The extent to which SMEs perceive themselves to
hold more negotiating power in the buyer-supplier
42 have to enter new negotiation with their suppliers. This is likely to be due to the fact that they already held strong and collaborative relationships with their suppliers, this is of course vital to SC resilience (Van Hoek and Lacity, 2020) and would explain how they were able to avoid the
inconvenience of having to find new suppliers or renegotiate with their existing suppliers. 4.2.6 Summary of Questionnaire Key Findings
Before listing the key findings and observations from our quantitative analysis it is important to confirm that we have found consistency between the quantitative and qualitative analyses in this study. Our main findings are;
• SMEs in this industry were not only completely unprepared for the SC disruption caused by the COVID-19 pandemic but also lacked experience in managing their business through times of crisis in the past. Clearer avenues of communication with the government and better resources for learning are needed as we move closer to a second wave of COVID-19. Despite this, respondents have demonstrated some degree of learning from their lack of preparation and have sought to take proactive measures to protect their SC resilience and reduce their dependence on external partners.
• Strategies which were reliant on external partners were less popular than those which did not. As mentioned, SMEs also lack capabilities related to management, information
technology, personnel and finance (Anja et al, 2009) (Dyerson et al, 2009), which may inhibit their ability to reduce dependence on external partners while collaborating effectively. In turn SMEs in this industry should be looking to build up trust and reliability in their relationships with their key external partners: suppliers, customers, and the government. For instance, stronger relationships with suppliers or logistics providers would allow for better success in deploying back-up suppliers or transport methods.
• Strategy selection from questionnaire respondents fall in line with that of the interview respondents. Bridging strategies were more prevalent which attests to the fact that SMEs in this industry were far more reactive than proactive in their attempts to overcome COVID-19. This reiterates respondents lack of knowledge and experience (Bode et al, 2011) and
43 • In comparison to our qualitative results, a more prevalent trend of participants having to
44 5. Discussion
5.1 Theoretical Contributions
Large scale SC disruption is almost unavoidable when it comes around, and COVID-19 has shown the world that maintaining a resilient SC is a critical aspect to ensuring business continuity after it has passed. COVID-19 is seen to have caused unprecedented disruption (Craighead et al, 2020), and as such useful research on this matter is limited but growing. This study explores how SMEs in the UK’s grocery retail industry are responding to this disruption, while taking a view to which key
relationships are impacting these responses.
The first research question of this study pertained to buffering strategies. Existing literature
emphasis the importance of taking a strategic approach (contingency planning) to control the effects of SC management (Skipper and Hanna, 2009). This led to an expectation that there would be evidence of buffering strategies in place to cater for possible disruption prior to the pandemic but this was not the case at any SME in our interview or questionnaire samples. Hong et al (2012) find that SMEs will proactively deal with crisis despite their limited resources, this study has found this assertion not to be the case. Rather it has been observed from the interview analysis that SMEs in this industry certainly lack both the time availability and experience to effectively prepare for events such as COVID-19 prior to their occurrence. Be that as it may, this study has shown clear evidence of learning from the first wave as respondents have looked to implement buffering strategies to prepare for the possibility of a second wave of COVID-19. Bode et al (2011) predict that with greater experience organisations of this ilk will pursue more bridging strategies, but we have seen the opposite. Nonetheless, this bodes well for SMEs in this industry given the importance of learning in SC resilience (Schollten et al, 2019). Holding larger inventories and dynamic pricing emerged as the most popular buffering strategies that SMEs in this industry are using post-pandemic. What these two strategies had in common was that they required less flexibility than other buffering strategies. Literature in this field is quick to write-off the capability of SMEs to implement flexible practices (Levy and Powell, 1986) and rightly so in the eyes of this study. Perishable food SC’s should be inherently flexible (Castro and Jaimes, 2017). Ali et al (2017) however find that flexibility can still be a barrier to resilience for SMEs who deal in perishable food items, as has been the case for the
respondents in this study.
45 not draw on a comparable experience to COVID-19 which backs up the statement that the
magnitude of disruption caused by COVID-19 is unprecedented (Craighead et al, 2020), but again contradicts Bode et al’s (2011) suggestion of how passive firms will strategically respond to SC disruption (Section 2.2). This study aims at understanding which strategies were working for SMEs in this industry and it was observed that bridging strategies were used much more frequently than buffering strategies. This further backs-up the finding that SMEs will deal with disruption reactively as opposed to proactively, like Hong et al (2012) suggest. In terms of specific strategy, our findings fall in line with that of Van Hoek and Lacity (2020), who suggests that the route to overcome the SC disruption caused by COVID-19 lies in collaboration and digitalisation. However, this is not specific to SMEs, recent publications like Castagne et al (2020) and Dannenberg et al (2020) agree that
digitalisation is key for firms in this industry, but they cast doubt on the ability of SMEs to pursue this. Our findings suggest this is a very viable strategy for SMEs in this industry, similar to increased collaboration (Van Hoek and Lacity, 2020). This study identifies the 3 external partners who SMEs in this industry need to focus on collaborating with the most: Suppliers, Customers and the
Government. Publications specific to the effect of COVID-19 on this industry emphasise the
importance of engaging customers (Hobbs, 2020) (Cranfield, 2020), but fail to take into account the government which is surprising given the extent to which government support is available to SMEs in the UK (Gov.UK, 2020). Furthermore, strategy selection in terms of bridging is also constrained by flexibility for SMEs in this industry, meaning they are unable to restructure their SC quickly in response to large scale disruption. Thakkar et al (2009) suggest that small firms depend on the competency of their managers when it comes to changing their practices and restructuring their SC. Aspects of the qualitative findings of this study are in accordance with this. For example, we found the owner who had the most experience in this field (Company C) to be one of the only respondents able to restructure his SC to become more local in response to COVID-19.
46 pandemic. This places further importance on developing collaborative relationships throughout the SC for SMEs in this industry.
5.2 Managerial Contributions
One of the studies’ main areas of focus centred around understanding how SMEs in the UK’s grocery retail industry may have fallen short in terms of responding resiliently to the COVID-19 pandemic and pinpointed where they may have had success, and as such there are several implications for managers of SMEs in this industry. Firstly, the lack of prior knowledge and preparation was evident among our respondents, contributing to their inability to deploy flexible processes in response to COVID-19. Skipper and Hana (2009) identify that management supporting contingency planning has positive effects on flexibility which helps minimise the effects of SC disruption. To implement effective strategies such as those which require restructure of the supply chain which our participants were scarcely able to make use of, managers should have a strong dedication to
planning and focus on involving key external partners early (Zsidisin and Smith, 2005). A key point to take forward for SME managers in this industry who cannot overcome the constraints of their external partners is that their buffering strategies for the future, e.g., for a second wave of COVID-19, should involve holding strategic stock and plans for dynamic pricing for key items.
As well as knowledge and experience, we also observed that managers should look to uphold coordination and trust in their relationships with their key SC partners to be more flexible and therefore more resilient in response to disruption. Possibly the most important implication of our findings to managers is the emerging importance of digitalisation as a tool to cope with large scale SC disruption, particularly that of a pandemic. Literature has already shown a quick digital ramp-up to be a vital response for firms in this industry who can afford to peruse it (Castangne et al, 2020), but this is generally seen to be beyond the capabilities of SMEs. As with suppliers and governing bodies, SME managers in this industry should look to collaborate closely with recurring customers through the use of social media so as to help implement an online/mobile ordering systems to cater for future lockdown measures.
5.3 Policy Contributions
