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Total Transparency

Online collaboration portals provide retailers and their supplier partners the insight they need to make win-win decisions for each.

The Internet has helped increase the transparency of business processes, helping enable several collaborators — often spread out over different geographic regions — to work on projects together via a centralized online hosting system.

One area of food retail that can benefit tremendously from such collaboration is the supply chain. However, this kind of collaboration is exponentially more complex than a few individuals sharing spreadsheets. Now you're involving hundreds — if not thousands — of suppliers, each with their own business process, tens of thousands of products, the logistics of moving these products from the supplier to the distribution center to the store shelf, and promoting those products when they get there.

Such supplier collaboration has tremendous productivity and efficiency benefits by streamlining and automating the traditional paper- and time-intensive activities associated with order management, procurement and delivery, product information management, vendor performance, product development, inventory management, promotion programs, rebates, customer insight, and new product introductions. Because the food retail supply chain has so many moving parts, however, the execution of such collaboration is a monumental task. Fortunately, retailers can leverage the Internet to help make this collaboration a reality via an online portal through which all parties can work.

Margins and Discounting

In a typical category, 20 percent to 30 percent of SKUs contribute to 80 percent of category sales. The remaining 70 percent to 80 percent contribute to 20 percent of the category sales. It's not uncommon for retailers to know that some SKUs sell as low as one piece a month per store, while the amount of product in-stock could cover as much as 12 to 24 months, requiring a heavy markdown to liquidate.

While retailers try to balance between the need to liquidate and the need to maintain the average gross margin percentage, retailers often call on suppliers to pitch in and share the loss due to the markdown. However, because of the lack of retailer-supplier transparency regarding inventory and sales data, the retailer is seldom successful in getting the supplier to agree. Here, the lack of collaboration may result in distorted inventory, leading to a huge crunch in the cash cycle.

Adding to this difficulty, different products often require different levels of markdown. A supplier portal enables the retailer and supplier to arrive at pricing strategies together, and provides a window of opportunity to liquidate slow-moving stocks effectively, with both parties sharing the costs.

Plotting Promotions

A common portal enables retailers to collaborate efficiently with many suppliers on the development and execution of promotion campaigns. Suppliers and retailers can use portal tools to schedule and track the dates when the promotional items reach the store, and when they're moved to the sales floor along with inventory to optimize the promotion's effectiveness. It also enables both parties to analyze the cost-effectiveness of the executed promotions, as well as to provide information on how to increase promotion sell-through, feedback on in-store execution, and information on how they can lower the cost of future promotion management.

Rebates and Discounts

A retail-centric collaborative supplier portal helps in analyzing the sales patterns of proposed SKUs, the incremental cost of holding the stocks against incremental margin earned and open-to-buy status, among other issues. Again, the result is more informed decisions on the part of both retailer and supplier, and agreements that satisfy each. PG

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