Most retail industry professionals are familiar with the concept of customer relationship management (CRM). That's because most retailer organizations, like successful companies in other industries, have invested significant time and resources to implementing a CRM system that allows them to record and manage data from every customer interaction so they can build stronger customer relationships.
But CRM is more than software. It's a discipline that requires a strategy, goals, measurement and reporting to gather and apply the insights that drive improvements in operations, sales, marketing, customer service, and customer loyalty.
One could reasonably argue that supplier relationship management (SRM) is equally important to the success of a retailer organization. From the moment a merchant decides to add a supplier to their assortment, the retailer begins the complex process of partnering with the supplier for mutual success. All trading partner relationship strategies, tactics and business processes, such as onboarding, scorecarding, vendor compliance, EDI and returns, fall under the broader SRM umbrella.
SRM is the management of the retailer's interactions with merchandise suppliers in order to streamline processes and maximize the value of those relationships. SRM can also have an impact on the customer's loyalty to the retailer.
If retailers devote so much energy to better understanding, evaluating, quantifying and monetizing its customers, shouldn't retailers be doing the same with their hundreds or even thousands of merchandise suppliers?
For example, most retailers have a supplier onboarding program, but is it part of a larger supplier management strategy? For most retailers, onboarding is simply a business process that's the same for everyone. If you don't take a one-size-fits-all approach to CRM, why would you do the same with any part of your SRM plan?
All suppliers are not equal in their role and value to the retailer. Consider just a few examples of how differently suppliers are handled by retailers – depth and breadth of assortment support, margin expectations, product placement in store or online, product differentiation or exclusivity expectations, and even access and engagement with the retailer's senior management.
Instead of viewing the many things that fall under the SRM umbrella as independent processes, the retailer should approach them holistically to determine how they affect the retailer's ability to maximize sales and profits. If a supplier has to do all of these things to successfully partner with you, are you tracking their progress? Have you defined goals? How are you measuring performance? Are you offering the training required to enable suppliers to succeed? Is the effectiveness of that training being evaluated?
A thoughtful SRM plan supports this level of flexibility where it is needed while recognizing that there are numerous aspects of the trading partner relationship in which retailers strive for process and policy uniformity to maximize efficiency. For example, business process areas such as onboarding, EDI, purchase order management, packaging and marking, customs compliance, and accounts payable benefit from having all suppliers aligned and operating in the same manner.
Let's take a closer look at the first steps taken by retailers when beginning a new trading partner relationship – the supplier onboarding process. This is an essential part of SRM because, when properly managed, it sets the tone for a successful and profitable retailer-supplier relationship.
Effective onboarding requires the retailer to show a genuine interest in helping the supplier succeed and make the necessary preparations to facilitate that success. It also requires the supplier to do everything possible to satisfy retailer requirements. Best-in-class retailers follow three critical phases of effective supplier onboarding, as outlined in a recent RVCF white paper:
A thorough setup process within the retailer organization. Who will manage the onboarding process, gather information, maintain the database, and keep everyone on task and on time?
The education of the supplier and validation of the supplier's supply chain capabilities. How will the retailer's requirements be explained to the supplier? Is the supplier able to satisfy these requirements?
A detailed audit of the first shipment received by the retailer. Is the retailer carefully evaluating the first purchase order, shipment and receiving, and providing the supplier with detailed feedback?
To visit the RVCF Thought Leadership Store and download the white paper, 3 Phases of Effective Supplier Onboarding: How Best-in-Class Retailers Help New Suppliers Succeed, click here.
Supplier onboarding is one of many components that make up the critically important business discipline of SRM for retailer organizations. In future issues of the RVCF Link newsletter, we'll discuss other topics that fall under the supplier relationship management umbrella.
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