Supplier Collaboration – Why it is needed more than ever
Written by Helen Spencer – MCL – June 2015
Greater Supply Chain Challenges
Supply chain challenges have increased for many retailers due to globalisation and uncertain economic times. Executives involved in the retail supply chain have found that an increasing number of products have to be moved more expediently than ever before, whilst costs have to be minimised in today’s competitive marketplace.
With the increased use of social media by consumers, retailers are also under more pressure to manage the supply chain productively and ethically to avoid or counteract negative publicity.
In today’s volatile markets, collaboration is becoming more and more vital as suppliers and brand owners struggle to keep up with all the demands on their time and infrastructure.
Some of the more successful retailers have taken steps to work more closely with their core suppliers. They have worked out that to help minimise the pressures in the supply chain, they need to forge stronger and closer working relationships to help them bring their product to market more quickly, whilst reducing unnecessary production and logistics. Increasing profitability and potentially growing market share can then be achieved by each partner.
Retailers and their supply partners are able to collate information from consumers more quickly through the rise of social media and on-line discussion groups. This vital feedback compared to the more traditional focus group approach, has given both partners new ways to collaborate and meet the demands of their customers. Finding out about customer preferences, can help to minimise mark downs and over-stocks, thus increasing profitability.
More retailers are now more willing to share key information with their suppliers at every stage of the product cycle. By working together on promotional campaigns and production planning, they have found that the promotions have been more successful.
Scorecarding is also an important tool for both supplier and retailer. At MCL we have found that many retailers scorecard their suppliers in an Excel spreadsheet. KPI’s are written and much time is taken to input all the necessary data to create a meaningful score for the vendor.
A recent Aberdeen Group report titled ‘B2B Collaboration: No Longer Optional’, found that B2B collaboration was ranked as number two and four strategies by best-in-class companies. Out of the 83% of industry leaders researched with B2B collaboration initiatives in place, 18% were set up in the past year and 42% in the last two years.
The report highlighted the performance advantages of leaders versus followers in B2B collaboration, revealing significant gains for leaders, including lower landed costs and better service levels.
Addressing strengths and weaknesses in the partnership can help to decide which partner takes the lead in certain functions. For example, if IT systems are not a strong point for one party, the other partner can take the lead in the relationship. Fees can be charged according to the time and work involved.
With the rise of omnichannel retail there is a need for technology that enables both suppliers and retailers to share information so they can react quickly to trends and consumer demands. Ensuring that all the necessary critical path procedures are recorded and visible to other executives is vital and one that MCL can help you to with.
Merchandising and Product Development
There is also a trend towards more collaboration on merchandising and product development. Accenture reports that this can help to achieve benefits for both retailer and suppliers in:
• Marketing – Collaborating on campaigns means that companies can work together towards mutually beneficial promotions. Such as Lurpak’s Cook’s range being sold with a brownie tin made by a private label.
• Analytics-driven information – Finding out about customer behaviour and the way they purchase items. Profiles can be built which can help to target specific areas. Information can be passed to the manufacturer so that both parties have one view of the customer.
• Range planning – Shelf space in stores is a competitive area and bringing together data on consumer habits and each partners capabilities can help to plan the best use of space.
Partnership: Virtual and face-to-face
There is nothing new about the term “Collaboration” but it is now taking on more resonance with retailers and their supply partners. Mutual growth and increased bottom line are obviously desired goals, but also building a business that has clear lines of communication, transparency and a shared ethical stance are of real importance too.
Technology must not however replace face-to-face communication. Retailers need to build relationships with their vendors and ensure that operations are visited and direct contact is made throughout the supply chain.
MCL’s product ‘Supplier Collaborator’ allows both supplier and vendor to share key data on ethical and technical compliance, capabilities, capacity and relationships in the supply chain. Centralising key data helps retailers and suppliers to access information quickly and see who is responsible for each task which helps to avoid confusion and mistakes. Information is also accessible to high level executives which enables faster decision making.