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As most baseball fans know, a batter's "swinging for the fences" approach typically has little chance of knocking the ball out of the park, even for the game's best sluggers. Too many factors can get in the way, such as timing and pitch selection, not to mention a slew of distractions and other changing variables. An alternative approach, known as "little ball," charges each batter with producing a base hit and advancing the runners one or two bases at a time. This approach significantly increases a team's chance of scoring, and combined with a good defense and solid pitching, ultimately wins games.
The processes that make up today's retail global sourcing and supplier management landscape are often analogous to trying to hit every ball out of the park: little control, not enough teamwork and too many variables and unknowns. Like many industries, little integration between core functions and operational systems exists within retail organizations or with suppliers. For sourcing processes, retailers are still largely dependent on spreadsheets and phone calls, which by nature result in lost information, wrong/inconsistent data, and processes that remain slow and ineffective. Although this approach may land some retailers a respectable season record, or even push them into the play-offs, the chance of winning the World Series with this type of strategy is unlikely. On today's competitive, complex retail supply chain playing field, options exist, and there is a better strategy for winning.
Increased access to suppliers and low-cost products worldwide is presenting retailers across all sectors with new revenue opportunities, one of the most promising of which is private label merchandising. According to a recent study by Retail Systems Alert Group Research (RSAG Research), adding private label products to the merchandise mix improves gross margins and drives sales because it enables retailers to deliver differentiated products that offer higher margins at competitive prices for consumers. At the same time, innovating these new products puts more responsibility on the retailer to manage the entire design, development, and sourcing process from start to finish faster and cheaper than competitors.
As all retailers get smarter about global sourcing, they will face constant pressure to cut costs, protect margins and deliver innovative products that consumers value. These factors are driving companies to work more closely with suppliers than ever before. This means moving beyond lowest-cost sourcing to develop streamlined, collaborative processes that support creativity and engender brand loyalty within private labeling programs. In addition, sourcing and supplier management today takes on the added responsibility of quality and risk management, as retailers must ensure that suppliers meet socio-ethical requirements and deliver compliant goods to the marketplace.
Game Plan for Victory
Market leaders are learning to cut across geographic, cultural and time barriers to innovate new products and services. An effective, technology-based sourcing process helps to eliminate these barriers, ensuring a streamlined approach between suppliers, buying offices, agents and regulatory agencies that is proactive, synchronized and transparent to all stakeholders.
Building collaborative sourcing and supplier management processes that span the global retail supply chain will not be achieved with manual processes, spreadsheets and legacy systems. Successfully managing these extended activities requires a mission-critical technology platform, a unified database using real-time data, an integrated supplier network, and the ability to proactively manage critical-path processes-these will result in reduced demarcation lines, improved critical path visibility, and a 'single version of the truth.'
Collaborative techniques and technologies are enabling leading retailers to rapidly scale operations into new geographies while realizing the following:
• Faster time to market/reduced lead times
• Better product availability and prices
• More competitive offerings
• Increased efficiencies
Knowing Your Team
Successful retailers focus on driving the best performance from each supplier by working to improve performance in areas such as on-time delivery, product quality and regulatory compliance. Targeting on and helping each supplier perform to improve its weaknesses can help all members of the supply chain respond more quickly and effectively to changes in market demand.
Many companies, however, lack access to performance data, either because the key performance indicators (KPIs) haven't been spelled out clearly, or the data isn't collected in a systematic or useful way, or it is distributed across spreadsheets and paper-based systems. Recent studies have found that companies with formal assessment programs in place are better equipped to improve supplier performance than those with informal programs in place. In addition, this intelligence enables the identification of supply risks, the prioritization of supplier development, the segmentation and consolidation of their supply base and can even help predict supplier performance.
Market leaders also tend to be those that are aggressively establishing KPIs, monitoring results and driving performance improvements throughout the company and its supplier base. By building on best practices and leveraging technology solutions, leading retailers enjoy benefits such as:
• Reduced inventory
• Reduced operating costs
• Improved margins
• Better control of product quality
Playing by the Numbers
Volumes of data exist that prove retailers can improve gross margins; supporting technologies can help manage product development, audit suppliers, manage and track merchandise status, and self-manage freight. However, virtually any technology expenditure is contingent upon proving rapid return on investment. According to RSAG Research, a new barrier to technology investments has emerged: the inflexibility of aging infrastructures. The costs and complexities associated with integrating new solutions with legacy systems have become serious inhibitors to the adoption of new technologies. As a result, retailers expect vendors to help them overcome this hurdle by sharing costs and providing simpler integration tools that offer fully-scalable platforms and support both legacy and new business system modules.
Calling Your Pitches
According to several recent reports, retailers looking to improve response time to the constantly changing marketplace and capitalize on the opportunities associated with consumer demand shifts should consider revamping processes and implementing technology systems that enable trading partner collaboration across a common platform, and include the following functional requirements:
• Business Process Modeling: Easy-to-use visual authoring tools enable the rapid development and implementation of process models that illustrate functional flows, describe business rules and track the flow of information.
• Critical Path Management: Sourcing and supply chain managers must have the tools that enable them to establish critical path milestones based on historical performance and future estimates-and then monitor progress over time. They should receive alerts for any number of reasons, such as production delays, port strikes and customs delays, facilitating more informed and rapid decision making.
• Application Interoperability: Internet accessibility and real-time synchronization of processes spanning the enterprise and the supplier community is imperative. This requires the exchange of data in real time between legacy enterprise and supplier systems.
• Supplier Connectivity: Facilitates the self-registration and rapid on-boarding of new suppliers sourcing offices, agents and other trading partners. It also gives suppliers direct access to retailer systems, enabling them to improve their response and meet performance objectives.
• Scorecarding: Such tools not only provide the data needed to evaluate performance, but they can also drive improved performance by leveraging best practice templates and supporting the development of shared KPIs by enabling both the supplier and the retailer to review progress on a regular basis.
• Product Lifecycle Management: PLM capabilities must support trend and concept development, product design, design briefs, testing, sampling and production, as well as product packaging and technical requirements.
• Production Visibility: Access to data regarding test runs, production runs and ongoing health and safety of factories is imperative.
• Demand Management: The ability to manage demand includes not only closely tracking product performance by store, distribution center and supplier, but also integrating this information into customer service, returns, and customer relationship management systems to determine why (and to what degree) a product is succeeding or failing in the market.
• Supplier Portals: The supplier portal is an important tool for offshore factories and plants serving retailers. In addition to providing views into retailer plans, these portals manage the exchange information in a secured and controlled environment, as well as enabling retailer negotiations and collaboration.
• Dashboards: Uniquely configured dashboards should enable buyers to visually comprehend the overall well-being of their product portfolios in a timely manner. For instance, a dashboard might illustrate the design progress of next season's products, show progress relative to established critical path milestones and deliver real-time alerts on underperforming suppliers. Dashboards provide executives and other decision makers with a high-level view of all activities, enabling them to focus on the most important aspects of their jobs.
Consumers today are exercising their power of choice, and withholding discretionary spending dollars until they find products they like at a value. Rapid, nimble market response is critical in order for retailers to emerge ahead of the competition. Leading retailers are finding that the changing landscape of global sourcing presents a whole new realm of possibilities. Realizing and optimizing these possibilities requires leveraging strategies and tools that provide real-time visibility, control and collaboration throughout the global supply network to manage and track supplier relationships/audits, product demand and development, and merchandise status... all of which produce ROI by driving higher margins and long-term growth.
Jane Biddle is chief marketing officer for Eqos, a provider of global sourcing and supply management solutions. Visit www.eqos.com.
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