Finger-pointing: the hurdle in Retailer-Supplier collaboration

Pieter Kinds

Pieter Kinds

January 25, 2016 - 11:20

It is no secret that a solid retailer-supplier relation can be very beneficial for manufacturers, retailers, suppliers, and even the end customer. But how can companies expand their current functional relationship and establish a more intimate relationship? How to achieve collaborative improvement strategies and joint goal setting?

In order to retrieve the right answers to the right strategies for building and maintaining a strong collaboration, we take a close look at several surveys and reports examining supplier relationships.

Let's kick-off with the recent 2016 State of the Retailer-Vendor Supply Chain Relationships, conducted by SCDigest. This survey that takes a closer look at retailers and consumer goods manufacturers. According to the results, 98% of retailers rate their relationship with their vendors as average or above, with 96% of vendors sharing the same opinion. At first sight, this looks like a very decent outcome. But when taking a closer look, there are some issues, let's say disconnections on how both sides view themselves.

Retailers feel their own knowledge and skill-level in terms of how to collaborate successfully with their supplier is a not the problem. This is stated as retailers ranked this as one of the minor potential issues to good collaboration. On the other side, the vendors don't agree with this statement. They rank a lack of knowledge and skill in collaboration among their retail partners as the biggest single hurdle they need to overcome for supply chain collaboration. Remarkably, vendors also rank their own knowledge and skill in how to collaborate successfully as a small problem. This time, the retailers don't agree. They rank the lack of knowledge and skill in collaboration of their vendor partners as their second greatest barrier to achieving successful collaboration. According to this report, a strong finger-pointing mentality is coming from both sides of the ballpark, obstructing the way forward of collaboration.

Common supplier activity

Secondly, after looking at some of the hurdles of retailer-supplier collaboration, it is interesting to view the State of the Retail Supply Chain 2015, Research findings on Supply Chain Planning & Execution report. It highlights in a dedicated chapter five aspects of supplier collaboration. The most common activity is supplier performance management. This is carried out by 59% of retailers with a further 28% practicing partial supplier performance management. Generally, this means a more informal supplier management process with only a few KPIs being checked and often a poor enforcement of standards. However, an astonishing 13% carry out no supplier performance management and monitoring at all and so are probably being taken advantage of by suppliers who focus their attention on more demanding retailers.

In terms of sharing of information, sales forecasts are most commonly shared with suppliers - 53% of retailers do this, with a further 22% sharing forecasts in a partial way, usually with key suppliers. Next comes the sharing of sales information, shared by 41% of retailers. Stock information is the least shared piece of information; only 25% of retailers do this with a further 47% doing it in a partial way. In conclusion:"The low level of planned future collaboration is surprising. We seem to be in a situation where retailers share as much of their company information as they want to now and little additional collaboration is in the pipeline."

Lessons learned: How to achieve valuable collaboration

To examine retailer-supplier collaboration barriers and the impact on supply chain performance, a great and recent report to consult is the Retailer-Supplier Collaboration: Identifying and Eliminating Barriers to Improve Supply Chain Performance, conducted by the Peerless Research Group on behalf of Logistics Management and Kane is Able, Inc. This survey also examined the collaborative nature of retailer companies and consumer goods manufacturers. The main conclusion of this report left little to the imagination, retailers and suppliers both see the value of greater collaboration, however neither of the two groups believe they're doing a great job at it. The largest alignment gap between the two groups is the accuracy and timeliness of demand forecasts. On a scale of one to 10, retailers rated their performance at 7.35. Supplier rated those same retailers in the 5.50 range.

The survey also highlighted a few key lessons coming out of the results:

- Collaboration takes time and commitment

- Communication is number one

- Mutual benefits of collaboration must be clear up front

- Issues with lack of trust still need to be overcome

Procurement's role in Supplier collaboration

Moving on to survey number 4. We take a small part from The Future of Procurement report (2015), Making Collaboration Pay Off, by Oxford Economics. 65% percent of procurement professionals say procurement is becoming more and more about collaborative with suppliers. Because the pace of business has increased exponentially, and businesses must be able to respond to new market demands with agility and innovation. In this climate, buyers are relying on suppliers more than ever before. And buyers aren't collaborating with suppliers merely as providers of materials and goods, but as strategic partners that can help create products that are competitive differentiators.

After reviewing the 4 surveys, it is reasonably safe to say that both parties agree that a solid retailer-supplier relation can be very beneficial. However, according to the respondents, both parties seem to think that difficulties or issues with supply chain collaboration are not theirs to tackle. Access the full 2016 State of the Retailer-Vendor Supply Chain Relationships survey:

 2016 State of the Retailer-Vendor Supply Chain Relationships

ControlPay - Global Freight Audit: Supplier payments management and its relation to supplier collaboration

Late or non-payment of freight invoices of transportation providers can potentially cause serious supply chain disruptions for retail or manufacturing companies with their suppliers. Transportation providers hold a key-position in the supply chain networks, and it is important to manage these relationships in a pro-active and structured way. Due the fact that many (large) companies often have hundreds of suppliers, the need of a collaborative effort arises when looking at freight invoice billing, (late) payments, transportation issues, exception handling or the management and approval of extra transportation costs.

Supplier payments visibility, why is it important?

Outsourcing freight invoice audit & payment activities can contribute to minimize and even eliminate these potential issues. In our opinion, only pro-active freight audit & payment can properly contribute to supplier collaboration. By offering a web-based tool, that provides visibility and transparency, issue resolution, reporting dashboards and extra transportation cost solutions, future billing & payment issues will be resolved before the payment term, After all, a relationship between company and supplier can only be optimal if overdue payment is completely ruled out.

We register and monitor all the issues created on our system either by our staff, the carrier or the customer. These issues are connected to shipments and eventually to invoices. There are extensive KPI’s and reporting around issue resolution. This workflow centrally manages all the issues in data, overbilling and questions and clarifications that may exist. It will replace e-mailing. Without these functionalities, companies are often troubled to mitigate potential payment issues to key partners.

Learn more about the specific features and tools of our fully web-based freight audit platform

As a Global & EMEA Freight Audit & Payment provider, we achieve savings for our customers via the elimination of overbilling. But next to that, we enhance communication and billing processes with logistics service providers and visibility and transparency of transportation set-ups, which gives our clients the power to further optimize processes, reduce the number of carriers and standardize rates and business rules.