Tag: retail procurement

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Top 5 Challenges in the Retail Supply Chain

The retail supply chain is the one of the busiest supply chains in any industry. They have to constantly innovate to serve the changing needs of customers, shift retail formats, and focus on both price and quality. It is very important that retailers closely monitor the supply chain to ensure that the products are free from defects and are always on the move to ensure a low cycle time. In a global economy, the retail supply chain is affected by country-specific politics, trade and tariff law, international relationships, and quality control. Also, the fact that the retail landscape is experiencing a massive shift in their working model due to the rapid emergence of e-commerce players such as Amazon. The value proposition provided by such e-commerce giant on all three fronts of price, quality, andSE_Demo2 service has disincentivized people to shop on the store. This phenomenon has complicated the retail supply chain, and retailers are continually looking for ways to optimize their supply chain.

Challenges in retail supply chain

#1 – Tight profit margin

The profit margin in the retail industry is one of the lowest across all sectors as retailers face constant pressure to deliver a razor-thin profit margin. Top executives working in the retail industry are prioritizing increasing profit margins for their operations. However, that remains a herculean task for retailers as the majority of the consumers are highly price sensitive. Additionally, the advent of online shopping has given the consumer a tool to compare prices across various retailers, which makes it impossible for retailers to sell for a higher price. The increasing cost of raw materials, overheads, and operations add to the misery of retailers who are already struggling with a meager profit margin.

#2 – Meeting customer expectations

The modern-day customer is very insistent on getting the best quality goods at the lowest price possible. Availability of goods through multiple channels, customer support, and choice variety has urged the customer to seek more options and variety while making a purchase. The retail supply chain struggles to keep up with varying customer demand as they have to stock more seasonal rages and assortments in order to keep their customer satisfied. Additionally, they have to provide such large variety of goods just-in-time to serve customers scattered across multiple markets and channels.

#3 – Operational inefficiency

Achieving operational efficiency in the retail industry is not an easy task. The retail supply chain lacks visibility across key business departments with silos of information existing across each business units. Companies have to opt for latest ERP systems as traditional spreadsheets just cannot keep pace with the operations function. Running the retail supply chain on static spreadsheets profoundly impacts the operational efficiency and may lead to multiple errors.

#4 – Quality & compliance

Quality in terms of product offering from retailers has changed in the last few years. The quality of a product today is a function of brand name, the point of origin, quality marks, customer feedback, and online reviews. Brands simply cannot claim their product to have certain qualities; they should meet certain criteria to be able to do so. Also, retailers need to comply with rules and policies set by governments and consumer bodies which mandate greater quality standards.

#5 – Omnichannel integration

The traditional brick and mortar store is not the only place where consumers can buy goods. Consumers have multiple channels to choose from, and on average they shop from at least three channels. Logistics and flow of goods from each of these channels will incur the different cost and have a varying delivery schedule. The problem in retail supply chain arises when retailers have to maintain consistency across product offering, quality, and customer experience. This has to be implemented from a strategic viewpoint as retailers have to streamline their inventory management and orders and transform business processes.

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What’s in Store for the Future of Retail Supply Chain?

Professionals working or managing retail supply chain can tell you just how challenging it can become to optimize and bring efficiency to the supply chain. The complications that exist in the retail supply chain are far complicated than the supply chain in any other industry. But the advent of digital technology and other innovations have brought about landmark changes in the way retail supply chain operates. Majority of the big names in the retail industry are jumping on the bandwagon to embrace digital technologies that can assist theirSE_Demo2 supply chain. For instance, Google and Walmart have joined forces to offer thousands of Walmart items on its voice-controlled Google Assistant platform. So, what does the future hold for the retail supply chain?

The Future of Retail Supply Chain

Home Try-ons

One of the persistent problem troubling online retailers is the sheer number of returns and their expenditure on reverse logistics. The cost of reverse logistics becomes significantly high when it comes to fashion retailers who encounter high amount of returns due to fit, color, size, design issues. Recent reports have suggested that online fashion retailers in the US report a return rate between 20%-40% costing them millions of dollar. Retailers are looking at home try-one as a fix to this problem, where customers try the fashion item and return it instantly if any issues persist. For instance, Warby Parker offered its consumers options to try up to 5 frames online before making a purchase. This home try-on option enabled the company to offer its product at a price range of below $100.

Voice-based Orders and Other Innovations

Although voice-based order is in its nascent stage, the adoption rate looks to increase at an unprecedented rate. Currently, voice search on Google already accounts for 20% of the total search volume. Machine learning, natural-language question answering, and virtual personal assistants are set to take over the future in terms of customer demand fulfillment. Google Assistant and Amazon Alexa already have product lines that are highly responsive to voice commands. On the other hand, Amazon has made ordering easier with its new product named Amazon Dash, which automatically orders items that are out of stock with just a push of a button.

Solving the Last-mile Problem

The last-mile delivery problem has been troubling retailers for a long time now. The future, however, looks set to tackle such retail supply chain problems with multiple solutions. One solution that has received much appreciation from the retail industry is drones. Drones can solve the last-mile connectivity problem with ease and also allows the shipper to operate it remotely or even autonomously. Also, some retailers have looked upon uberization to solve such problems. Based on the principles of sharing economy, retailers are sharing the delivery vehicle in order to optimize the delivery and reduce cost base for the company. Additionally, retailers have also implemented crowdsourcing programs by rewarding customers to deliver the parcel on the way to other customers.

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Leveraging Category Management to Develop a Strategic Procurement Intelligence Report for a Retail Industry Client

Category Overview

In recent years, retail industry players are facing uncertainties in terms of frequent fluctuations in the economy and rapidly changing demographics. As a result, retail industry players have started looking for strategies to drive traffic and gain traction in this ever-changing dynamic competitive environment. Also, to understand the spend patterns across the supply chain, leading organizations in the retail industry space have started adopting category management studies. Category management studies ensure better visibility into the procurement process by allowing the category managers to focus on decreasing their procurement lead time efficiently.

With the help of robust category management solutions, players operating in the retail industry space can enhance supplier performance, mitigate supplier risks, and administer innovations.

Moreover, the category management solutions offered by SpendEdge help retail industry firms reduce their overall inventory spending.

The Procurement Pain Point and Insights Offered

A global retail industry client was facing predicaments in gauging the customer data and make informed business decisions. As a result, they wanted to develop a strategic procurement intelligence report to analyze the customer data efficiently. The client also wanted to gain strategic insights into the suppliers’ diversity, suppliers pricing, cost structure, and assess competitors’ best practices.request free proposal

To address the specific business requirements of the retail industry client, the category management experts at SpendEdge carried out a two-step blended research methodology, which involved primary and secondary research coupled with qualitative and quantitative data collection methodologies.

This category management study helped the retail industry client gain better visibility into the procurement process. Additionally, with the help of a comprehensive SWOT analysis, the client was able to evaluate the dynamics of the market and gain insights into the supplier’s pricing and cost structure across the supply chain.

Fundamental questions answered in this category management study include

Category ManagementBusiness Outcome

The client was able to create a robust strategic procurement intelligence report after a comprehensive data analysis. Furthermore, the client was suggested with tools to improve their supplier selection decisions and reduce maverick spends across the supply chain.

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Best Procurement Practices in the Retail Industry: Managing Pennies to Save the Dollar

The retail sector is a fiercely competitive industry which operates on a tight margin. Procurement teams need to be on the top of their game by creating a seamless value-added experience for the customer. In the retail industry, sourcing and purchasing account for almost 80% of the total cost. Marginal savings in this cost could result in superior ROI. As a result, most teams are focusing on maximizing ROI for their business by optimizing their sourcing and supply chain practices.

Here are some of the procurement best practices for the retail industry:

Segmenting the Spends

Categorizing the organization’s spends is one of the fundamental concepts in sourcing management. Spends should be segmented as SE2required by the business into logical groups of similar items or services from suppliers. Spend categories differ vastly within each organization in the retail industry due to its highly multi-variant nature. With the increasing complexity of the spend category and supply market, the need for sophisticated segmentation models has increased. Consequently, procurement managers need to consider supplier performance, sourcing type and nature of demand, supplier risk, demand volume and variability, and regulations to create a proper spend segmentation.

Evolution of Managed Services

The retail industry is relying on Managed Service Providers (MSP) as an alternative to on-demand outsourcing to improve operations and cut down on the costs. MSPs with expertise in the retail industry can evaluate a supplier based on pre-defined parameters such as compliance of suppliers against assigned roles and responsibilities, utilization of enterprise management tools, and their ability to efficiently deploy service models and define standards for categories.

Advanced Sourcing

Advanced sourcing enables both buyers and suppliers to work together to drive costs out of the system instead of squeezing in margins. Advanced sourcing helps control indirect spend procurement such as merchandise display, transportation and logistics, store facilities services and materials, and corporate service. Advanced sourcing coupled with spend aggregation, supplier collaboration, stakeholder and business alignment, and staff efficiency and innovation can deliver impressive results in identifying and eliminating avoidable costs.

Retailers are highly reliant on procurement best practices to get rid of unwanted costs and squeeze more profits to add to the overall revenue. They are always on the lookout for maximizing returns on investment by striking the right balance between deploying innovation versus optimizing the value they deliver.

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