Most will agree that when there is cooperation between retailers and their suppliers, a more profitable and leaner supply chain is the result.
Take these stats, for example:
-Revenue has increased 3.7 percent for collaborative companies (Advantage Research, 2013).
-An incremental profit of $7 billion to $21 billion has been experienced in the CPG industry as a whole through greater retailer-supplier collaboration.
Those number sound amazing, especially due to the fact that revenue growth is one of the top five challenges for small businesses, according to the 2016 State of Small Business Report. So you’d think that working on retailer-supplier relationships should be a no-brainer and a #1 priority. However, that hasn’t been the case.
So why has collaboration initiatives been slow to come to fruition? Mostly because communication within the supply chain just plain stinks.
It’s true; recent studies show that both suppliers and retailers agree they simply need better communication. In fact, logistics company Kane Is Able conducted a survey and found that communication gaps infiltrate everything, from simply being more honest with each other and making sure nobody is cheated, to the technical aspect of the retailer-supplier relationship, such as running more effective portals or B2B websites.
Related Article: SHOPPING HABITS: AVOID THE SUPPLY CHAIN BREAKDOWN
When it comes down to it, there are four overarching points that suppliers say retailers could do to improve interactions and maximize the supply chain.
1. Forecast Often
The biggest gap in communication surrounds the timeliness and accuracy of demand forecasts, according to the study. Both retailers and suppliers were surveyed on a scale of one to 10, (one being poor and 10 excellent). Retailers had a pretty high opinion of themselves, averaging a score of 7.35 for themselves. Suppliers told a different story, rating retailers around 5.50.
Why the lower score? When it comes to forecasting, suppliers in general want more data sharing and joint planning.
Forecasting has been a supply chain hot button for years, and it seems nobody has been able to “crack the code.” As a retailer, reliable projections are critical in order to respect your vendors’ time and resources.
“Delays on your end or last minute alterations can affect their profit margins and strain the relationship,” Nicole Marie Richardson wrote in a recent Inc.com article. “Similarly, pay on time and if you can’t, explain to the vendor why, reschedule the payment, and don’t flake out again. Further, reliable projections are a necessity. Richardson explained that fixing forecasting issues is a “big win for your suppliers” because they don’t want to pay inventory overages or experience costly liquidations and other negative fallout from bad forecasting habits.
How to fix it:
You can simply forecast at the right level. You might think that it’s easier said than done, but you can start by reviewing your current level of forecast on a regular basis. Then you can decide whether your level is correct based on your current accuracy goals and review processes currently in place.
One important question to ask is whether or not your SKU level forecast is appropriate because in most companies it’s not. That means you’ll have to be more attentive to the details by segmenting history and forecast by channel, sales region, or even customer. Measure. Report. Repeat.
Run as many reports as you possibly can. Reports aren’t worth anything unless you and trusted company leaders review them… a lot.
Generating data reports is a fundamental way to report accurate analytics to stakeholders and to let your employees know how good or bad they’re doing in their given departments or how much progress they’ve made in a certain time frame. You can’t do that accurately and reliably if you are currently using manual methods (pencil and paper or even Excel) to track inventory. The rate of human error tends to be too high, skewing your results.
Implementing an automated inventory management system will give you the accurate data you need. Barcode technology solves a number of problems throughout your warehouse and the supply chain as a whole, from producing more accurate paperwork to tracking your employee activity. Lee Letawsky, parts technician and purchaser for Precision Drilling, was forced to manually update item counts and physically search for inventory within the company’s warehouse, with no records of any of the parts on hand. After implementing an automated inventory management system, Letawsky says the system has provided 100 percent insight into logistics data like shipping time and lead time per customer.
2. Be More Open
Suppliers want to be seen as a partner, someone to talk to on a regular basis and work through issues together. A communication breakdown between a supplier and retailer is never good. If it’s secretive or tentative, trust will be broken, possibly for good.
How to fix it:
Make expectations clear: Your suppliers can’t read your mind. So when you start a new supplier relationship, be open about your company’s expectations, goals, and vision. For example, if a vendor knows that excellent customer service is important to you, they’ll be more likely to do what they can to help you reach that goal.
Put everything in writing: That means everything from best practices to expected sales volume to payment receipts. If you have a verbal discussion with a vendor, always follow up with an email to avoid miscommunication.
3. Show More Empathy
In any relationship, from friendships to business partnerships, it’s important to display a certain amount of empathy; put yourself in their shoes once in a while. If a request is last minute or perhaps out of the ordinary, how would you want them to treat you if roles were reversed?
How to fix it:
Simply show your vendors some goodwill. Try not to ask for outrageous requests or favors. If you have no choice, return the favor by throwing some extra business their way, give them referrals and simply offer understanding if they can’t always accommodate immediate or unexpected requests.
Don’t play the blame game. Mistakes are bound to happen, and you might even lose some business over it. Yes, it’s unfortunate, but don’t get all bent out of shape. This comes back to communication. Clearly let the problem be known to your supplier, without assigning blame. Trust that the issue will be resolved.
4. Align Internally
Another communications gap is the degree of alignment between the retailers’ purchasing and supply chain teams. Again, the research showed very different perceptions. Vendors felt that that there is little communication between “buyers and their logistics colleagues down the hall.” As a result, it makes a vendor’s job harder when nobody seems to know what the other is doing.
How to fix it:
While I could go on all day and link you to resources about improving communication skills, it really all comes back to applying the aforementioned points with your own employees. Communicate clearly, let people know what the company goals are. Let workers know how they’re doing through frequent reporting, and be empathetic. Each of these contributes to better relationships, whether along the supply chain at large, or with the guy in a neighboring office!
How has your company improved communication in the supply chain?