Retailers and suppliers need to prioritize collaboration now

Photo: Getty Images/mihailomilovanovic
Mar 18, 2022

Supply constraints have increased over the past year, so retailers must lay a groundwork that will help ensure adequate inventory on shelves (both physical and digital). One crucial step is for retailers to move away from adversarial relationships with suppliers and prioritize collaborative ones where data is shared early and often via a secure communication channel.

Suppliers often sent representatives in the past to work in the stores of their larger retail customers. That’s no longer necessary because we have the technology to create accurate forecasts, automate ordering and allow for data sharing without needing to be in the same place at the same time.

The trick is to find a solution that will enable retailers to work with suppliers in the way that suits each relationship best. Retailers, at the most basic level, should be able to share forecasts automatically and regularly with each supplier in their network. For the largest suppliers most important to the success of the business, they may also want to use a collaboration portal with near-real-time data sharing that provides greater supply chain visibility and enables both parties to proactively address potential challenges and opportunities together.

When retailers use technology to collaborate consistently and transparently with suppliers, everyone benefits. Up-to-date retail data helps suppliers react to sales shifts, gain insight into planned promotions and understand the start and end of seasons in different regions to better tailor their manufacturing and raw material procurement cadences to meet fluctuating demand.

At the same time, retailers that prioritize collaboration with their suppliers open a channel of information that can give them a competitive edge. With early knowledge about availability and manufacturing issues, retailers have a better chance of avoiding out-of-stocks, minimizing last-minute plan changes and improving promotion planning, all leading to a better end-consumer experience. Improved collaboration also improves supplier-retailer relationships at the ground level; the better the relationship, the more likely a supplier will be able to prioritize a retailer’s requests.

When suppliers can make informed, intelligent decisions about manufacturing and production, retailers can ensure that they’re getting the products they need to meet demand. In the end, this all makes it easier to move goods through the entire supply chain while improving long-term working relationships — with less strife.

  • What Happened to Supply Chains in 2021? – Council on Foreign Relations

DISCUSSION QUESTIONS: How can retailers and suppliers best improve collaboration as supply chain disruptions continue? What are the biggest benefits from sharing trade data in near real time?

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13 Comments on "Retailers and suppliers need to prioritize collaboration now"

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Ken Morris

Real-time retail is the key to solving the massive disruption in the supply chain. With “just in time” meaning “out of stock,” we need a different model—one that allows collaboration in real-time and leverages RFID. The time has come to take advantage of technology that allows us to understand where the product is in this broken model. RFID is the key to gaining supply chain visibility. Yes, the price of RFID tags has finally come down to a few cents each, so tags can and are being used on products. But suppliers can also use tags on shipments to get a broader view of what’s on its way.

The further back retailers can see into their supply chain, the better. I should say “supply chains.” Every vendor will have a different path back to the source. Of course, suppliers who can see into their retail customers’ inventory can better anticipate demand. The trick is to protect one’s data, only sharing what must be shared. This goes both ways.

Brian Delp
6 months 17 days ago

To paraphrase my ol’ pal Einstein — time is relative. Lead times and development cycles can no longer be trusted. Retailers and suppliers first need to acknowledge the risks and volatility while dropping the blame games. The standards of OTB commitments and loose POs need to change and work off of a much more advanced longer schedule. Macy’s which used to work on shorter standard times has well advanced their development cycles to be on similar cadence to mass merchants such as Walmart and Target who work a year + ahead. Added collaboration on key year round SKUs to create a safety stock on the supplier side can also help to pad for peaks in demand and shortened turn around, however an understanding to clean up the balance is needed should any changes happen. This is a risk both need to acknowledge however, it is often a one-sided equation.

Bob Amster

B2B collaboration doesn’t lack the tools. If anything, it lacks the desire and conviction of either or both parties to implement it. CPFR (collaborative planning, forecasting, and replenishment) has existed in practice for at least 15 years. The tools to make it work are even better today (real-time/near-real-time data sharing) than they were then. There are few or no reasons to not implement it, only poor excuses.

Brad Halverson

Well said. If retailers and suppliers really want to optimize their effectiveness, there is no end to avenues or tools to improve. It requires commitment, time and investment from both parties. Important to ask, does our business strategy or core values require us to do better for our customers, and for each other? Or are we just going to be transactional, buying and selling stuff with one other?

Jeff Sward

The data flow has to be a highly transparent two-way street. Sales data flowing to the supplier/manufacturer and production data flowing to the retailer. We have to find a way to tighten time/action calendars. Factories will cooperate but the one thing they will always demand is operating at or near capacity. Long lead times make that easy. And that will be especially difficult in apparel, where aside from seasonless basics, there is always something new going through the pipeline. Changing seasons and changing fashion don’t naturally lend themselves to predictability.

Lisa Goller

Retail giants have gained power as their partnerships evolve into robust, integrated industry ecosystems.

Investing in supplier communication and coordination helps retailers save time, reduce risk and boost competitiveness. Sharing near real-time data across integrated supply chain systems and processes helps companies boost agility and manage disruption.

Zel Bianco
I had just done a bit of research on this topic and found the following from Kane Logistics: “Retailer-Supplier collaboration: Identifying and eliminating barriers to improve supply chain performance,” to be spot on. Some consideration suggested by the research: “For Suppliers: Retailers would like more contact with your sales reps so there are no surprises. No single issue was raised more often than having more direct communication. Product availability is a hot button. Retailers want to know what you know, when you know it. Improve your systems if you lag in this area. Online portals with detailed information like product availability. For Retailers Your projections could be more reliable. Suppliers want to avoid inventory overages, costly liquidations, and other negative fallout from bad forecasting data Empathize with suppliers, particularly second tier suppliers. As a group, retailers are perceived by supplies as inflexible and heavy handed. Take more time to explain rationale behind decisions. Get better aligned internally to promote alignment between buyers and logistics staff. Said one retailer: ‘For collaboration to have an impact, we… Read more »
Michael La Kier

“Now?” Retailers and suppliers ALWAYS needed to collaborate! Today it is even more critical given supply chain disruptions and changing conditions. Sharing data and constant communication are critical — and always have been. Just, hopefully, now more are doing so.

Gene Detroyer

Andrew’s first paragraph speaks volumes. “One crucial step is for retailers to move away from adversarial relationships with suppliers and prioritize collaborative ones.”

It isn’t just a matter of supply chain disruptions, but collaboration on every segment of the business. No retailer has been better at this than Walmart. They have been sharing data for over 20 years. They made it a requirement for the manufacturers to monitor their own products by store. But it seems that the trend of cooperation is accelerating, perhaps boosted by the challenges of the pandemic.

Those parties that work collaboratively will be the winners in the end. All the data is there, it is just a matter of using it properly.

Allison McGuire

In a normal environment this is a great strategy, but forecasting doesn’t help when materials are in short supply or when the next COVID strain hits a city in China and manufacturers and ports close. We are in an unprecedented time where planning and relationships can only get you so far.

Rick Wilson
6 months 17 days ago

The concept of getting past “adversarial” relationships with suppliers is a really insightful way of understanding the issue of supply chain, and is totally the way forward for retailers. It can’t be understated how valuable it is to look at resource producers as team members working towards a common goal. It’s very similar to the difference between a business that tries to “get one over” on its customers with manipulative tactics, vs viewing the business and customer as partners trying to solve the same problem. Why in the world would you want to hide your intentions/budget/needs/forecasts and real-time results from the entities whose participation is utterly required for the product to exist at all? More transparency, more communication, and more sharing will equal stronger relationships, and the ability of all parties to weather the intense conditions out there right now, as they arise.

Brad Halverson

Early in my career, I had the advantage of working for a family who hired good people and built an incredibly customer-centric multi-billion $ distribution business. One of the core principles was “Treat your suppliers like customers.” Which was to say, nurture the relationships and develop plans to help suppliers succeed too. Doing this resulted in open factories when we needed it, open books on data, preferential terms when it was crucial and product when our competition didn’t have it. Collaboration is there for the taking. It requires leadership and structure to commit.

Oliver Guy

Retailers and consumer goods companies both have data that can be used to help each other. Retailers know which consumers buy which products in which stores — something useful to CPG companies to determine recommended assortments. Meanwhile CPG companies potentially have access to multiple retailer’s data sets to further enhance the output and give a better recommendation to retailers.

In supply chain too, retailers and CPG companies have the ability to share data for mutual benefit. Shelf-level sales data provided to CPG companies could help them fine-tune supply chain plans in terms of where product is to be allocated to. Attaining similar levels of granularity and accuracy could help them sell more by providing better in-retailer availability.

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