The pandemic might be close to the end thanks to public health programs, inflation may be easing and supply chain disruptions may be on the wane. But 2023 is nevertheless going to be defined by uncertainty, according to Michelle Evans, Euromonitor International global lead of retail and digital consumer insights.
One of the main reasons for this is ever-evolving, shifting consumer priorities. While most retailers know the significance of front end systems that help them acquire customers effectively, a majority of them also realize the importance of supplier networks in improving profitability and maintaining customer loyalty.
Nothing is more frustrating for customers than not finding a product on the shelf. In the best case scenario it is a lost sales, the worst is a lost customer.
According to our internal survey, over 42% of out of stocks could be avoided with collaborative decision-making involving suppliers and partners. Moreover, scaling up supplier networks today requires retailers to re-tool themselves to be more efficient and effective across the supplier lifecycle processes.
No wonder then that supply chain collaboration today has become a hot topic of conversation in retail. While the term itself isn’t new, its definition has certainly changed. Most people confuse it with operational collaboration (such as supplier checking with retailers on status of invoice).
However, supply chain collaboration envisions a highly aligned and deeper relationship beyond daily transactions. It focuses on collaborative goals, communication, and activities that foster virtuous cycles that deliver strategic value to both supplier and retailer.
We ask our expert Manish Das, who has been at the helm of supply chain and supplier collaboration initiatives for several noteworthy retail clients, some of the most pertinent questions on the topic.
What does supply chain collaboration mean to a typical retailer? What has changed? Why should they care?
Even as the effects of the pandemic have slowed down, we’ve seen that consumer expectations have shifted irreversibly. What a retailer sells to consumers is sourced from suppliers. Unless you have a robust, agile, and responsive supplier network, you cannot respond swiftly to ever-changing consumer needs. It is as simple as that.
As most people in this business know, the secret to building an effective supplier network is mutual trust and collaborative decision-making. A retailer not caring about supplier collaboration is one of the most counterproductive attitudes in retail.
While a retailer’s objective is to increase sales in a cost-effective manner, suppliers also intend to do the same. This leads to a zero sum game instead of a healthy collaboration.
What are the challenges that retailers face in supplier management and collaboration ?
On the face of it, retail looks simple. Retailers stock shelves and consumers buy, but it’s not that simple, is it? In a way, retail appears simple thanks to complex solutions doing their job in the background.
Just to give you an example, a decent sized grocery store has approximately 10-15k different SKUs sourced from 300-400 suppliers. Now, collaborating with these 300-400 suppliers for replenishments, promotions, new product launches, etc. in store can become a nightmare unless you solve it by bringing seamless collaboration.
One of the key challenges in supplier management is to bring everything to one place. Sales, order, inventory, promotions, item info, invoice, payments, etc. are few of the key entities where supplier visibility is required. In the context of quick replenishment, real-time collaboration becomes challenging. In a nutshell, the challenge is to be transactional as well as analytical at the same time.
What do you think is the biggest gap that retailers are looking to fill to tackle these challenges?
Progressive retailers are working towards changing the paradigm of their relationship with suppliers. Instead of approaching this relationship as buyer and seller, they are approaching their suppliers as stakeholders in the business with a common goal to improve business performance.
A supplier’s business growth will result in category growth. Now, to enable suppliers with the kind of transparency and visibility required, is a huge challenge for retailers and they are looking at technologies which can help them.
Talking about technology, what do you think are some of the technologies that can help streamline vendor processes?
Before 2020 (pre-covid), no one ever imagined that the entire organization will work and collaborate remotely. As always, technology stepped up real fast to deliver what we never thought would be possible just a few years back.
Supplier processes have always been fragmented across departments and stakeholders, almost operating in silos. There is a growing consensus amongst retail leaders that supplier collaboration will unlock the next wave of growth and profitability.
Given the scenario, top retailers realize that they need to re-tool themselves with a new age platform that enables real-time and seamless exchange of information with thousands of suppliers. There is also a strong emphasis on the mobility aspect and overall cost structure of running procurement and supplier processes.
The end goal for most is to move to a much more consensus based decision-making for the benefit of both retailers and suppliers rather than relying on “each one on their own” approach.
Such a centralized and modern platform can help retailers realize great benefits. Some of the low-hanging fruits but highly impactful as well in my experience are getting new products faster on the shelves, optimizing supplier funded promotions, and streamlining accounts payables and receivables.
You talked about low-hanging fruits. Can you expand a bit more on the use cases you’ve come across that customers have shown great interest in?
Some use cases most of the customers are interested in are:
- Getting product information directly from manufacturers.
- Price book maintenance by suppliers.
- Real-time visibility of purchase orders.
- A central interface for supplier funded promotions, proof of performance, and most importantly sales, inventory, category, and competition insights at a granular level.
Providing insights to brands in itself opens up a Pandora’s box of possibilities. We are working with several retailers who have gone to the extent of monetizing it. This is completely unheard of in many retail circles, but we’ve actually been doing this for over 5 years now!
Why do you think a company like Algonomy is ideally suited to solve these challenges?
We at Algonomy have been making an impact for retailers in this space for over a decade now. Our heritage in retail and deep domain expertise makes us not just a solution provider but also a partner in our client’s journey to go digital-first.
Across the globe, over 50,000 suppliers are using our platform for collaboration with retailers. Our solution Vendor Link has demonstrated success by impacting key KPIs for our customers, be it reducing cycle time of new product launch by 90% (from 12 weeks to 1 week), or reducing out-of-stock instances by 3%, or increasing rebate revenue by $2 million in a year or generating additional revenue of $1.8 million from data monetization.
Learn more about Algonomy’s Vendor Link.
Manish Das
Supply Chain Expert
Manish Das leads the supplier collaboration practice for Algonomy and is an active participant in client consultations and customer success in the domain. He has 15+ years of experience in the retail industry, having worked both in retail companies such as Levi’s and Future Group and retail technology companies such as Algonomy.