June 28, 2007, 12:00 AM

Getting the kinks out of retailer-supplier connections

Management of supply chains often can make or break a merchandising strategy.

Invisible for the most part to shoppers, who usually see only the products and advertising messages that retailers display, the management of supply chains often can make or break a merchant’s merchandising strategy. And to compete in today’s crowded retail environment, more retailers are realizing the value that a web-based supply chain management system can bring to a retail operation. A system that offers real-time communication with suppliers ensures the best products are on their way in time to satisfy shoppers.

The lack of such a system can result in lost sales and disappointed customers. “Many retailers sit down with suppliers and share sales forecasts and let them know more or less what’s happening, but as sales forecasts change, suppliers are not up to speed,” says Rena Granofsky, founder and CEO of Retail IT, a Toronto-based consulting firm specializing in retail technology systems.

While many suppliers may not become aware of changes until they receive a new purchase order, she adds, a web-based supply chain system can update them in real time as soon as a retailer changes its forecasts, giving a supplier valuable extra lead time to prepare production and send revised orders.

The universal access to web-based supply chain systems through browsers, meanwhile, ensures all players can quickly access real-time updates to information on what’s been ordered and where it is in the supply chain. “The more transparency the better,” Granofsky says.

Changing plans

If interruptions occur in expected deliveries-for example, because of production problems or transportation hold-ups caused by weather or equipment failure-managers at both the retailer and the supplier can receive immediate alerts through retail systems as well as via e-mail and mobile phones. They then can take steps to mitigate losses by changing a planned promotion, substituting different merchandise or re-routing a shipment to a different group of stores where demand is suddenly hotter.

The ability to constantly monitor supply chain activity along with information on orders and inventory records enables a retailer to better allocate inbound shipments to particular distribution centers and stores based on changing sales forecasts or new promotions.

Web-based supply chain management systems offer additional benefits as well. Because their web architecture can integrate enterprise applications, including product lifecycle management and pricing systems, they support a single version of the truth in product descriptions and pricing records across several departments including logistics, marketing and merchandising. So when new products are ordered and begin working their way through the supply chain, it’s more likely that distribution, marketing and merchandising managers will effectively coordinate plans to introduce new merchandise in stores and on web sites.

Such coordination backed by an effective supply chain management system is even more critical as retailers migrate from a single selling channel to multiple channels, says Steve Poplawski, director of retail industry marketing for Sterling Commerce, a subsidiary of AT&T; Inc. that provides web-based supply chain management and other business operations software. Indeed, a recent survey conducted by Sterling Commerce found 80% of consumers said that when making an initial purchase at a retailer, they wanted the option to shop across multiple channels of web, store and catalog. “Shoppers said it was important to have that choice,” Poplawski says.

In addition, web-based supply chain systems can provide real-time views into the status of inbound inventory shipments and the ability to reconcile them with purchase order details, including price, product materials and requested delivery dates. This enables retailers to better rate the performance of each supplier.

Although not universal in the retail industry, web-based supply chain systems are gaining more recognition, Granofsky says. “For retailers in the 21st century, there’s a greater need for transparency across the supply chain,” she says. “Retailers are starting to better understand this.”

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