As Labour’s Budget Drives Up Costs, Smarter Supplier Sourcing Becomes Essential for UK Retailers
UK retailers are weeks away from a major cost crunch. Following the Labour government’s 2024 autumn Budget, businesses across the country – especially those in the retail and hospitality sectors – are preparing for a sharp rise in operating costs starting in April.
The changes include an increase in employer National Insurance contributions (NICs) from 13.8% to 15%, alongside a lower contribution threshold dropping from £9,100 to £5,000. Meanwhile, the national minimum wage is set to rise to £12.21 per hour – with younger workers and apprentices also receiving significant increases.
Combined, these policies will cost the retail sector an estimated £7 billion per year. Unsurprisingly, supermarket chains are moving quickly to adapt, with leading players like Tesco, Sainsbury’s, Asda and Morrisons all announcing structural changes aimed at improving efficiency and protecting profit margins.
Some are turning to automation. Others are closing underused store features. But across the board, cost control is now front and centre – and one of the most overlooked, yet highly impactful, opportunities for savings lies in supplier sourcing.
The Hidden Cost of Inefficient Sourcing
In large supermarket operations, sourcing inefficiencies can cost millions. Whether it's sticking with legacy suppliers without benchmarking, wasting time manually qualifying new vendors, or missing better market options due to opaque processes – the impact on margins can be huge.
For buying teams under pressure, the time and resources spent managing supplier discovery, negotiations, and due diligence are often substantial. In many cases, retailers are leaving value on the table simply because their systems and processes haven't caught up with modern technology.
As the cost of labour and operations increases, these inefficiencies become more painful.
AI in Supplier Sourcing: A New Efficiency Driver
The shift toward AI and automation across the retail sector has primarily been visible in areas like checkout systems, distribution centres, and in-store technology. Tesco’s planned robotic chilled distribution centre in Aylesford and Sainsbury’s SmartShop handheld scanner rollout are just two recent examples.
But AI’s role in supplier sourcing is growing just as quickly – and arguably with even greater return on investment.
Traditionally, sourcing new suppliers has been time-consuming, fragmented, and relationship-driven. Buyers relied heavily on trade shows, existing networks, and manual due diligence to identify potential partners. But as pressure mounts to deliver cost savings without increasing headcount, this model is no longer fit for purpose.
AI offers a smarter alternative. Retailers can now use AI-powered tools to:
Rapidly match with qualified suppliers based on product, location, certifications, and pricing criteria.
Automate due diligence, saving buyers hours of manual work per supplier.
Benchmark offers in real time, helping teams make faster and more informed decisions.
Streamline RFIs, sampling, and negotiations, shortening time to shelf and reducing friction between teams.
For supermarkets trying to deliver savings without cutting corners, this is a critical advantage. It allows buying teams to focus on strategy, not admin, while still uncovering significant cost improvements across their supplier base.
Supplier Sourcing: A Strategic Priority for Enterprise Buyers
Tesco CEO Ken Murphy has been candid about the growing role of technology in keeping the business competitive, stating he wouldn’t be surprised if the tech team doubled in size by the end of the decade. Sainsbury’s and M&S are also targeting hundreds of millions in efficiency savings through digital transformation.
Supplier sourcing isn’t just a back-office function – it’s a strategic lever for cost control and resilience.
In complex, multi-category buying environments, sourcing processes can quickly become time-consuming, manual, and difficult to scale. That’s why buying team leaders are increasingly prioritising solutions that automate the sourcing journey, create transparency across teams, and enable smarter supplier decisions at speed.
AI-powered sourcing tools now offer buying teams the ability to:
Cut down on manual supplier discovery and qualification
Accelerate time to shortlist through automated matching
Track team activity and performance centrally
Identify cost-saving opportunities without compromising on compliance
When operating at scale, these efficiencies compound quickly – freeing up senior buyers to focus on strategic negotiations and high-impact initiatives.
Want to Make Your Buying Team More Efficient Without Growing Headcount?
Kwayga is an AI-powered sourcing solution that helps supermarket buying teams find better suppliers, faster – saving both time and money without increasing team size.
By automating key parts of the sourcing process, Kwayga enables more efficient sourcing, improves supplier transparency, and helps retailers stay competitive in a challenging cost environment.
