Supplier Strategy

🎓 Definition

The Supplier/Manufacturer strategy is the fact of assigning roles and corresponding objectives to each supplier in the category to implement its strategy and financial objectives.

💡 What roles can Retailers assign to their Suppliers?

• Drive traffic: Main focus is to bring more customers to the store, increase the frequency of purchasing of existing category customers, and bring existing store customers into the category they currently don't shop.
• Drive transaction: Main focus for the Supplier will be how to make the customer buy more quantity (Higher Units per basket) or purchase more expensive products (Higher average unit price)
• Generate cash flow: This strategy's primary focus is on the inventory. Suppliers will have to prioritize the out-of-stock and overstock issues seriously.
• Generate margin: Top priority is to focus on the most profitable SKUs and enhances category profitability as much as possible.
• Create image: Act as a shopping experience. The main focus is creating a strong brand image through marketing and customer satisfaction. For example, offer a unique product to the customer, such as seasonal or frequently purchased SKUs.

❓What is Supplier Strategy used for

1. Enhancing the category's profitability.
2. Build more incremental sales.
3. Optimize inventory management.
4. Enhance customer's shopping experience.
5. Creates excitement in the category.

How can retailers effectively communicate their desired roles to suppliers and ensure alignment with the supplier strategy?

Effective communication between retailers and suppliers is crucial for aligning strategies. Retailers can initiate regular meetings or workshops with suppliers to clearly articulate their expectations and desired roles. Utilizing collaborative platforms or software can also aid in sharing objectives, tracking progress, and fostering a transparent relationship. Open dialogue, feedback loops, and setting clear KPIs (Key Performance Indicators) can further help in ensuring that both parties are on the same page and working towards common goals.

Are there any recommended tools or frameworks that retailers can use to measure the effectiveness of their supplier strategies over time?

Yes, there are several tools and frameworks available to help retailers measure the effectiveness of their supplier strategies. One popular approach is using a Balanced Scorecard, which evaluates performance based on various perspectives such as financial, customer, internal processes, and learning & growth. Additionally, Retail Analytics software can provide valuable insights into inventory management, sales performance, and customer behavior. Implementing these tools, along with conducting regular performance reviews, can help retailers track progress, identify areas for improvement, and make data-driven decisions to optimize their supplier strategies over time.

What challenges might retailers face when implementing a supplier strategy, and how can they overcome these challenges to ensure successful execution?

Retailers may encounter various challenges when implementing a supplier strategy, such as resistance from suppliers, inconsistency in meeting performance expectations, or difficulties in aligning with changing market dynamics. To overcome these challenges, retailers should foster a culture of collaboration and partnership with suppliers, rather than adopting a purely transactional approach. Regular communication, mutual goal-setting, and shared accountability can help build trust and alignment between retailers and suppliers. Additionally, being adaptable and flexible in adjusting strategies based on market feedback and performance metrics can ensure successful execution and drive mutual growth.