The potential benefits of global sourcing and supplier management that have been discussed for retailers in this series so far are not that easily achieved across the board. To recap, these benefits can be seen both at the top line and at the bottom line. At the top line, benefits include growth of private label business, faster time-to-market, better product availability and fewer stockouts, more competitive offerings and improved customer value, and broader access to global sources and growth of direct imports. At the bottom line, decreased costs of goods sold (COGS) and improved margins, improved efficiencies and reduced operating costs, reduced inventory and tied-up cash, better regulatory compliance, and better ability to manage risks can all be seen.
To learn more, please see The Blessing and Curse of Global Sourcing and Supplier Management, Distinctions and Benefits of Strategic Sourcing, and The Promise (and Complexities) of Private Labels.
As noted at the end of The Promise (and Complexities) of Private Labels, the “inconvenient truth” of retailers' reality is that there is still a bevy of diverse (yet highly interdependent) tasks that require spreadsheets or other rudimentary personal computer (PC)-based tools, if not still needing to be performed manually. These tasks include product specification, design briefs, product quote sheets, product range plans, new product concepts, trends and ideas, requests for quote (RFQs) and bid management, response management (both to and from a supplier), new vendor forms, new line forms, supplier setup, supplier audits, pack copy, product setup, buying briefs, product tests—and the list goes on.
To illustrate a typical modus operandi (MO), during the design brief process, the retailer's designer or buyer performs a variety of tasks. These tasks include creating an initial design brief, which might entail selecting the item type, and then entering shipment dates, volume estimates, and target prices in a certain currency, while also selecting style, color, etc. Following this, the quality manager completes a technical review that may consist of entering testing requirements, specifying packaging requirements, and adding or reviewing various style and quality data, such as for grading, size, curve, etc.
At the end of the day, the buyer signs off the design brief and notifies the remote sourcing office, which then initiates the sourcing brief process. Accordingly, the merchandiser or agent reviews the sourcing brief and selects suitable suppliers to provide quotes. If necessary, he or she may add further comments or requirements. Once this process is complete, the merchandiser or agent accepts one particular sourcing brief and notifies the “lucky” supplier that an order is likely to be placed with it. However, a rapid on-boarding of selected new suppliers requires that retailers have transparency into the suppliers' factory operations so they can minimize the risks associated with product safety, regulatory compliance, and potential late deliveries. Retailers also remain responsible for maintaining audits and ensuring that ad hoc testing is performed throughout the product life cycle.
This then starts the supplier brief process phase, where the supplier reviews the supply brief and, if necessary, adds comments, inquiries, or requirements. After some back-and-forth, the supplier will eventually accept the supplier brief, which then initiates the quoting process phase.
The quoting process phase begins with the supplier creating a preliminary quote with a starting price (most likely based on its internal costs) and submitting it to the sourcing office. The merchandiser then reviews the quote and either approves it, returns it with modifications, or rejects it. Once an agreement is reached between the merchandiser and the supplier, the supplier then submits a much more detailed quote with complete technical details (specifications), ordering information and instructions, and dimensions, as well as complete pricing information. The merchandiser again reviews the quote, and if acceptable without further negotiation or modifications, sends it to the buying office. Once the buyer completes a comparison of the quotes and approves one, the ordering process phase begins.
During the ordering process phase, the buyer confirms the preliminary order, sometimes updating certain information (such as style, size, and color buying allotments and channels), and then signs off the order and creates stock-keeping unit (SKU) numbers. The planner must then update quantities and delivery destinations by creating purchase order (PO) lines, while the quality manager reviews and signs off the required technical details.
Once the purchase orders are placed, buying departments need to maintain control over any purchase order revisions made—regardless of whether chosen suppliers are large or small, or whether they are information technology (IT) savvy or have minimal access to technology. The buying departments also need assurances that the correct information is transmitted throughout the company and its trading partners, and that advanced shipping notices (ASNs) trigger the relevant sequence of events.
When the supplier confirms and signs off (commits to) the order details, the order delivery process commences. The quality assurance department tracks and updates testing and sampling requirements (that is, it manages the sampling process and updates testing completion status). The supplier then begins actual production once it receives permission.
After this, the supplier will select the freight forwarder and the destination distribution center (DC) once it receives permission to ship from the retailer. Finally, the (hopefully correct) order will arrive at the DC at the expected time. Successful retailers have been those that continually focus on driving the very best performance from each supplier, and that work collaboratively to improve performance in areas such as on-time delivery, product quality, and regulatory compliance.
How These Realities Affect Retailers
To see how these realities affect retailers, consider a hypothetical garment retailer that has outlets in major cities across several continents—one that targets young shoppers by offering a full line of moderately priced clothing and accessories. Its stores are thus designed to reflect the tastes and “culture” of these young shoppers, and the retailer's buyers order products at quarterly shows from a variety of vendors. The problem here is that the retailer is always chasing changing fashion trends. The retailer's stock must reflect the very latest fashions, since its target market is likely to be aware of and seek out these fashion trends. For example, if the shopper sees a particular T-shirt in a new music video spot, he or she will want to buy that T-shirt right away, not next season.
To learn more, please see The Blessing and Curse of Global Sourcing and Supplier Management, Distinctions and Benefits of Strategic Sourcing, and The Promise (and Complexities) of Private Labels.
As noted at the end of The Promise (and Complexities) of Private Labels, the “inconvenient truth” of retailers' reality is that there is still a bevy of diverse (yet highly interdependent) tasks that require spreadsheets or other rudimentary personal computer (PC)-based tools, if not still needing to be performed manually. These tasks include product specification, design briefs, product quote sheets, product range plans, new product concepts, trends and ideas, requests for quote (RFQs) and bid management, response management (both to and from a supplier), new vendor forms, new line forms, supplier setup, supplier audits, pack copy, product setup, buying briefs, product tests—and the list goes on.
To illustrate a typical modus operandi (MO), during the design brief process, the retailer's designer or buyer performs a variety of tasks. These tasks include creating an initial design brief, which might entail selecting the item type, and then entering shipment dates, volume estimates, and target prices in a certain currency, while also selecting style, color, etc. Following this, the quality manager completes a technical review that may consist of entering testing requirements, specifying packaging requirements, and adding or reviewing various style and quality data, such as for grading, size, curve, etc.
At the end of the day, the buyer signs off the design brief and notifies the remote sourcing office, which then initiates the sourcing brief process. Accordingly, the merchandiser or agent reviews the sourcing brief and selects suitable suppliers to provide quotes. If necessary, he or she may add further comments or requirements. Once this process is complete, the merchandiser or agent accepts one particular sourcing brief and notifies the “lucky” supplier that an order is likely to be placed with it. However, a rapid on-boarding of selected new suppliers requires that retailers have transparency into the suppliers' factory operations so they can minimize the risks associated with product safety, regulatory compliance, and potential late deliveries. Retailers also remain responsible for maintaining audits and ensuring that ad hoc testing is performed throughout the product life cycle.
This then starts the supplier brief process phase, where the supplier reviews the supply brief and, if necessary, adds comments, inquiries, or requirements. After some back-and-forth, the supplier will eventually accept the supplier brief, which then initiates the quoting process phase.
The quoting process phase begins with the supplier creating a preliminary quote with a starting price (most likely based on its internal costs) and submitting it to the sourcing office. The merchandiser then reviews the quote and either approves it, returns it with modifications, or rejects it. Once an agreement is reached between the merchandiser and the supplier, the supplier then submits a much more detailed quote with complete technical details (specifications), ordering information and instructions, and dimensions, as well as complete pricing information. The merchandiser again reviews the quote, and if acceptable without further negotiation or modifications, sends it to the buying office. Once the buyer completes a comparison of the quotes and approves one, the ordering process phase begins.
During the ordering process phase, the buyer confirms the preliminary order, sometimes updating certain information (such as style, size, and color buying allotments and channels), and then signs off the order and creates stock-keeping unit (SKU) numbers. The planner must then update quantities and delivery destinations by creating purchase order (PO) lines, while the quality manager reviews and signs off the required technical details.
Once the purchase orders are placed, buying departments need to maintain control over any purchase order revisions made—regardless of whether chosen suppliers are large or small, or whether they are information technology (IT) savvy or have minimal access to technology. The buying departments also need assurances that the correct information is transmitted throughout the company and its trading partners, and that advanced shipping notices (ASNs) trigger the relevant sequence of events.
When the supplier confirms and signs off (commits to) the order details, the order delivery process commences. The quality assurance department tracks and updates testing and sampling requirements (that is, it manages the sampling process and updates testing completion status). The supplier then begins actual production once it receives permission.
After this, the supplier will select the freight forwarder and the destination distribution center (DC) once it receives permission to ship from the retailer. Finally, the (hopefully correct) order will arrive at the DC at the expected time. Successful retailers have been those that continually focus on driving the very best performance from each supplier, and that work collaboratively to improve performance in areas such as on-time delivery, product quality, and regulatory compliance.
How These Realities Affect Retailers
To see how these realities affect retailers, consider a hypothetical garment retailer that has outlets in major cities across several continents—one that targets young shoppers by offering a full line of moderately priced clothing and accessories. Its stores are thus designed to reflect the tastes and “culture” of these young shoppers, and the retailer's buyers order products at quarterly shows from a variety of vendors. The problem here is that the retailer is always chasing changing fashion trends. The retailer's stock must reflect the very latest fashions, since its target market is likely to be aware of and seek out these fashion trends. For example, if the shopper sees a particular T-shirt in a new music video spot, he or she will want to buy that T-shirt right away, not next season.
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