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How to Drive Performance Metrics by Partnering with Suppliers

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Jennifer Beasley, GM Retailer Programs

As retailers are trying to find ways to squeeze every ounce of improvement out of the system--without adding headcount, IT projects, or sacrificing customer service--many are turning to their suppliers for help. Even though a larger percentage of retailers already share data, most are not doing so efficiently or leveraging it as an existing tool for the greatest ROI. This is evidenced by the struggle that retailers and suppliers are still facing with out-of-stocks, forecasts, excess inventory, and maximizing promotional opportunities, among other key business issues (or use cases as we like to refer to them).

If you look at the way most retailers engage, it’s mainly about sharing the data but not truly collaborating with it. Also, most suppliers are not given goals or instructions for what the retailer expects them to do with the data. This means suppliers work on what they think is most important rather than the retailer’s primary goals. In addition, historically, there have been challenges with the retailer trusting supplier insights, with an “us vs. them mentality.”

The creation of formal collaboration programs by some forward-thinking retailers has helped bring a new level of transparency and alliance to the dynamic. These retailers are:

Working together with strategic partners to solve several strategic opportunities. For example: Reduce out of stocks by 3% while reducing excess inventory by 5% this year

Ensuring their mid-tier partners have access to tools to work on those goals as well, even if collaboration meetings aren’t held regularly

While increasing numbers of retailers are moving to Data Collaboration rather than simply Data Sharing, what are the key barriers that have presented limitations to others?

IT Resources: Retailers don’t typically have the manpower in their information technology teams to build sophisticated collaboration modules that can handle the complexity and nuances of big data.

Merchandising and Supply Chain Labor: They also are concerned about the time needed to collaborate on the part of their merchant and supply chain teams.

The truth is, however, where retailers have instituted these programs, they’ve used third parties to alleviate the development burden and merchants now use the suppliers’ IQ points and labor to do work on their behalf. It winds up actually saving the retailer time and does not add to capital projects.

Each of the barriers listed above results in lost sales opportunities – whether it’s managing inventory levels, promotion allocation, pricing compliance, etc. Collaboration with key partners is critical to achieving success for both the retailer and the supplier.

When evaluating your initiatives and seeking to create collaboration programs, real-time, daily point-of-sale data, in-store and e-commerce, is essential. By sharing data daily, suppliers can respond more effectively, ramp up production and distribution of popular items, help to recommend allocations, and work to reduce excess. They can also rapidly identify out-of-stocks or predict what will go out of stock and minimize the impact. It's with these types of collaborative processes using real-time, daily data sharing and collaboration that retailers and suppliers can bring more value to the table.

Summary: 

Collaboration within the supplier – retailer environment is accelerating because of the growth in competition, the need to improve supply chain operations and the emergence of new technologies. Collaboration programs oriented around data, if done well, are a huge win for the retailer – resulting in reduced costs (and improved margins), and increased customer satisfaction and sales.

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