Retail Consolidation
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Retail Consolidation for Power, Performance and Profitability
A Strategic Solution for Effective Vendor Compliance Management
Written by: Seraj Farooqui Peter Galicz Edited by: Denise Stepp
June 2012
Contents
Introduction Problem Statement TheSolution How Retail Consolidation Works Implementation Summary About Us References 2 3 3 3 5 7 8 9
Introduction The past five years have been particularly challenging for firms across the retail and consumer products industry. Whether impacted by the global economic crisis, oil price volatility, or the rising cost in labor overseas, the industry environment continues to be driven by the external forces that have changed the economic landscape. For wholesalers and manufacturers alike, remaining “competitive” requires a strategic effort to improve operational efficiencies by streamlining both sourcing and procurement processes. This also remains true for power retailers, like Wal-Mart and Target, who maintain strict inbound policies to optimize product flow and ultimately ensure an “Everyday Low Price.” When partnering with a multi-million dollar retailer, the notion of power is a direct result of dependence. Cyclically, the extent of dependence is induced by the perceptions of power. For many manufacturers, these relationships may represent 70-80% of sales revenue. Hence, when a power retailer increases their supply chain and logistics demands, manufacturers are left scrambling to ensure compliance. In the case of Wal-Mart, failing to comply with demands for scheduled deliveries, special packaging, and advanced shipment notices, etc. is not only a mean of lost revenue, but lost business. The need for effective vendor compliance management is further amplified by WalMart’s own Supply Chain Reliability Program. Coined as a Must Arrive by Date (MABD) policy, this initiative attempts to
Retail Consolidation for Power, Performance and Profitability
A Strategic Solution for Effective Vendor Compliance Management
Written by: Seraj Farooqui Peter Galicz Edited by: Denise Stepp
June 2012
Contents
Introduction Problem Statement TheSolution How Retail Consolidation Works Implementation Summary About Us References 2 3 3 3 5 7 8 9
Introduction The past five years have been particularly challenging for firms across the retail and consumer products industry. Whether impacted by the global economic crisis, oil price volatility, or the rising cost in labor overseas, the industry environment continues to be driven by the external forces that have changed the economic landscape. For wholesalers and manufacturers alike, remaining “competitive” requires a strategic effort to improve operational efficiencies by streamlining both sourcing and procurement processes. This also remains true for power retailers, like Wal-Mart and Target, who maintain strict inbound policies to optimize product flow and ultimately ensure an “Everyday Low Price.” When partnering with a multi-million dollar retailer, the notion of power is a direct result of dependence. Cyclically, the extent of dependence is induced by the perceptions of power. For many manufacturers, these relationships may represent 70-80% of sales revenue. Hence, when a power retailer increases their supply chain and logistics demands, manufacturers are left scrambling to ensure compliance. In the case of Wal-Mart, failing to comply with demands for scheduled deliveries, special packaging, and advanced shipment notices, etc. is not only a mean of lost revenue, but lost business. The need for effective vendor compliance management is further amplified by WalMart’s own Supply Chain Reliability Program. Coined as a Must Arrive by Date (MABD) policy, this initiative attempts to
References: Heaney, B. (2011). Outsourced Logistics vs. In-house: Comparisons and Strategies. Boston: Aberdeen Group.