Please enable JavaScript.
Coggle requires JavaScript to display documents.
Collaborating with Suppliers (E-procurement in the context of retailer…
Collaborating with Suppliers
E-procurement in the context of retailer-supplier relationships
E-procurement has offered opportunities to reduce costs and 'do more with less'
Online purchasing systems evolved from the concept of Electronic Data Interchange (EDI) which emerged in the 80s and allowed companies to electronically communicate via computers, both internally (across departments within firm, store outlets and distribution points) and externally (suppliers and other relevant players in supply chain).
Ran into problems though - e.g. Ford's special system made it costly and complicated for their suppliers to use, for if they were liaising with other companies with the same practice it would be expensive and difficult to adapt to so many different interfaces
Another problem was the danger of accentuated power dominancy in the form of a powerful retailer forcing suppliers to participate with the costly and time consuming EDI interface
Unlike EDI, e-procurement systems rely on the internet and are not faced with the same level of restrictions associated with EDI - they step outside of procurement and can be used also to manage all aspects of the supply chain, from logistics to store inventory replenishment, customer service management and transportation.
E-procurement allows both parties to interact with each other and perform a number of essential functions within the nature of relationship - retailers can use the systems for ordering merchandise, replenishing inventory, forecasting, invoicing, payment and taking delivery of merchandise
Benefits
- Creates greater market transparency by allowing buyers to discover more sources of supply, gauging product availability and obtain more accurate and lower prices
Benefits
- Improves purchasing control by allowing inclusion of corporate purchasing policies, lists of preferred suppliers, and volume purchasing agreements
Challenges
- getting 'buy-ins' from suppliers, they need to be convinced that there is benefits for them as well
Areas of Collaboration and Co-ordination
Efficient Consumer Response (ECR)
Stems from research carried out by Wal-Mart and Procter & Gamble in the US in 1990s - found a number of deficiencies and inefficiencies in the supply chain, leading to large inventory levels and clear evidence of lack of coordination in supply chain
They saw that many savings could be made
ECR = a global movement in the grocery industry focusing on total supply chain - suppliers, manufacturers, wholesalers and retailers all working closely to fulfil the changing demands of the grocery consumer better, faster and at the least cost
General focus was reducing cost in supply chain and identifying areas where there was unnecessary duplication with the overall objective of becoming more efficient and effective across the supply chain
Such ECR initiatives have focused on = development of collaborative arrangements, joint business plans, shared sales forecast, and continuous replenishment orders generated
Category Management
Food sector in particular - how do you manage such a large volume of product in an effective manner? CM = Instead of trying to manage each individual item, group each brand into specific categories or strategic units
Both retailers and suppliers jointly develop and manage these category plans - also extending to buying and merchandising decisions where a category manager takes on this responsibility
Essence of CM is a collaborative venture between manufacturers and retailers with the overall objective of satisfying needs of the customer = optimising the role of particular category e.g. body care, over time across the areas of price, promotion, merchandising and shelving
Role of lead supplier can pose questions as to if there is an unfair advantage when it comes to competitors in that category due to close relationships with key retailers
Vendor Managed Inventory (VMI)
VMI responds to the challenge of reducing inventory in the supply chain
By entering into collaborative arrangements with key suppliers and making use of IT systems and sharing real-time info, retailers can manage inventory more effectively
Also allows retailers to maximise selling space within stores, and such sophisticated software allows for detailed appraisal of optimum returns per square meter of space
Criticism = VMI is a convenient way for retailers to pass on the costs of inventory holding and replenishment to their suppliers
Radio Frequency Identification (RFID)
An extension of the barcode concept - creates intelligent barcodes that can 'talk' to a networked system and track a specific product item, pallet, or case as it moves from point of manufacture to the time it ends up in a shopper's basket at the retail store
Enables retailers to keep track of orders and products as they move from place to place, which can frequently get lost and disappear
Allows inventory to be quickly checked via a tag on each item, reducing the time factor
Plays a critical role in the new era of omni-channels and online retailing so that customers can track orders etc and they can be found if they get lost
Price Promotions and Advertising Campaigns
As more info on shoppers is captured, the retailer is in a position to share this with selected suppliers and develop targeted price promotions
Promo campaigns can involve existing brands or new product launches by suppliers
Central element of B2B marketing
This technology allows for detailed analysis e.g. propensity of shoppers to respond to offers, price cuts etc.