This is part four in our series about the negative impact that COVID-19 has had on retailers’ technical foundation. In this blog, we’ll take a look at your interaction with suppliers and how you might consider streamlining your process.
The pandemic shutdown found most retailers ill-equipped to flex their pipeline of incoming orders and vendor commitments. This stressed their relationship with trusted suppliers and distorted their inventories. Why were the majority of retailers caught by surprise?
The problem here is workflow. The underlying assumption of most retail ERP systems is that a vendor purchase order is a static transaction. Once entered, it is assumed that the data remains unchanged until the order is either received or canceled. We, however, do not look at it that way. The order sets off a dynamic series of processes that are anything but static.
GOAL OF EVERY RETAIL SUPPLY CHAIN: NIMBLER AND MORE INFORMED
Hidden behind the apparent static nature of the purchase order are six complex processes that should be adaptable to sudden changes in supply or demand.
· DESIGN. Many of our customers are striving for, or have achieved, a unique product line. This might take the form of a private label, wholesale outlet, or brand exclusive. In any case, as a retailer, you take on the responsibility for design down to the blueprint level. This information is sent out to prospective or exclusive suppliers for bid. Accompanying this work are early sales projections. This leads us to the first question regarding your supply chain workflow: How do you integrate data about your design activity with planning and purchasing?
· SOURCE. In parallel, or in advance, you might be among the growing number of retailers/brands that acquire the raw material and arrange to ship to the source. This might involve going deep into the supply chain to manage the cost and delivery of raw material. Changes to the design can occur as the sourcing company gears up to produce the product. Part of the bid will be a more refined estimate, or sales forecast, of how many to make over a defined timeframe. This could include the use of the material across many products or purchase orders. The question arises: How nimbly are you able to adjust sourcing commitments in coordination with sales performance?
· MAKE – Suppliers make products either in response to or in anticipation of purchase orders. Retailers must have access to information about every step of the manufacturing process. In apparel, this can mean several sequential steps broken down by sub-contractors. For example: cutting, dye, fabrication, etc. Decisions on size and color, for example, might not be necessary at the time of the order. For manufactured goods, it is the production of multiple sub-assemblies. This level of complexity becomes a major concern when the supply chain is potentially disrupted, giving rise to the question: How informed are you of your suppliers’ progress in fulfilling your orders?
· DISTRIBUTE – This is the often-complex series of processes that involve labeling, pack size, containerization, insurance, currency changes, tariffs, duties, taxes, and shipping costs. Often an important aspect of this step is the decision about pack size, on how much product should go to individual stores or other channel-specific destinations. Ideally, the supplier and retailer would collaborate at this point based on information about local demand. But most retailers have extremely cumbersome processes to exchange such information, leading to the question: How do you engage your suppliers in final decisions about distribution?
· CONSUMER FULFILLMENT. In the era of omni-channel, this process is becoming increasingly vital. Suppliers are sometimes involved in fulfillment, in which case the customer order and supplier order may be synonymous. In any case, it is the last mile from fulfillment location to order-specified location; whether that be the shopper’s home, local stores, or a gift recipient location. The question is: How smoothly does your order fulfillment work especially when the work may involve multiple disjointed systems?
· RETURN or DISPOSE – Our survey of supply chain would not be complete without looking at how you dispose of defective or unwanted merchandise. This is often a complex procedure that requires stock counts, back room inventory, store to DC transport, inspection, and packaging. As in every step in the supply chain, the questions are: Has the responsible party complied? What are the relevant costs to assemble and ship? Has quality been compromised? And did the event happen on time, early or late?
At RIBA-AYDEPT we have been involved in dozens of projects to smooth out our clients’ disjointed processes over the years. We have watched as they have become nimbler and more responsive, and we can help you in meeting those same objectives.