The best way to overcome this is two-fold. First, ensure that you enlist your suppliers’ help by requesting innovation and new services ideas from suppliers in the initial price discovery and procurement process. Second, leverage a solution or partner that automates and simplifies the e-Sourcing process. The key is to free up your procurement team to focus on more strategic initiatives such as new product evaluation.
Find innovative sources of supply
Finding new and reliable suppliers is a major challenge. After all, who better to purchase from than your incumbent? Not surprisingly, pricing and value often take a back seat to purchasing convenience. Why? Category managers and stakeholders aren’t always certain where to start when looking for new vendors. And considering the contraction which takes place in the supplier community, these challenges often don’t seem worth the effort. To leave the comfort zone of incumbent purchasing adds more work to an already burdened procurement team. What if the new suppliers don’t perform and you’ve burned the bridge with the incumbent? Even if new suppliers are identified, it’s time-consuming to take them through the certification process. With a traditional approach to sourcing, it’s easier to just stay with the incumbent.
One way for retailers to get around these burdens is to incorporate a supplier research element into the category review process. As a result, retailers become more aware of new potential suppliers and their capabilities and the supplier research and transition process is easier. Just knowing which retailers these new sources work with can bring comfort to the selection process. Are they supplying Whole Foods or Joe Shmoe’s convenience store? Whenever you look at new suppliers, make sure it’s a positive experience for all—even for those not selected—to ensure the long-term viability and integrity of any process that involves them.
The most mature organizations have the right blend of technology, process and staff—along with the category experience necessary to address the complex aspects of retail sourcing. Finding a “partial” solution—or handling negotiations manually—leaves the retailer to try to develop these processes on the fly, with the potential to result in disaster. And if a stand-alone technology investment is made, it can become a very expensive proposition to add support staff, especially when there’s little assurance of success.
Showcase community involvement
For mid-sized retailers, community involvement offers more than a huge PR opportunity. Supporting the community is just good business. But giving local suppliers an opportunity to work with local retailers presents some of the same challenges mentioned earlier: ‘How do you find the right local suppliers? And once you find them, how do you effectively engage them?’
Locating and engaging local suppliers, especially in the services area, can create a more competitive environment since local suppliers don’t have the same financial pressures of large, national organizations. Typically, they are more willing to go above and beyond to win business.
Existent sourcing opportunities
While the competitive landscape in grocery retail may look daunting, the sourcing team has a major opportunity to drive top- and bottom-line growth for their organizations. There’s money to be saved—especially in categories that the retailer may have overlooked—and new efficiencies to be found. Those new efficiencies are key and sometimes just as important as the actual savings because they free up retail staffs to focus on the issues that matter most to their customers—product innovation, local connections and the shopping experience.
But before you set out to transform your sourcing operations, make sure the new processes leverage in-house expertise where possible to avoid the ‘sweeping changes’ feel that may make it difficult to integrate and absorb. When addressed systematically, these new business processes and approaches can be highly successful and generate immediate positive results.