The Retail Value Chain Federation (RVCF) recently completed two whitepapers on the state of retailer-supplier collaboration. Last month, I participated in a town hall meeting about the same topic with the folks at Supply Chain Digest. We have our monthly conference calls and I speak with retailer and suppliers every single day.
During the past few months, a recurring theme has become painfully obvious. By and large, retailers want collaboration, but suppliers want forgiveness. Let me explain.
The retailer is looking to collaborate and find better ways to work together. They want to deal with the people on the supplier side who fill the orders so they can reduce shipping errors. They want suppliers to step up, become more engaged, and solve problems.
The supplier, however, will typically say that the people who fill the orders don't have time to collaborate. Instead, they send the finance people to request or demand money back for chargebacks assessed by the retailer.
The supplier knows they screwed up. But instead of collaborating, many suppliers play hardball. They'll say, "What's in it for us? We can just bury the price of compliance in the cost of goods. If you really want us to collaborate, and you really want us to comply, make it worth our while."
Retailers who are doing breakouts at the RVCF Fall Conference are sending letters to their suppliers, encouraging them to attend. The first thing they hear from the supplier is, "Why should we spend money to go there? What's in it for us?"
I think the answer to that question is pretty cut and dry. If a supplier ships to 10 retailers who will be at the same location at the same time, doesn't it make sense to spend a few bucks and take advantage of that opportunity to meet them face-to-face?
Based on what I've been hearing lately, the retailers get it. For the most part, the suppliers don't. And remember, I'm saying this as a guy who originally founded RVCF as a supplier organization. It's incredibly frustrating.
The whole mindset that collaboration isn't worth an organization's time and the behavior that trickles down from that mindset are misguided and shortsighted. If you want to increase sales, operate more efficiently and make more money, you need to accelerate the flow of merchandise through the supply chain with minimal errors. You need to get products into stores and into the hands of customers as quickly as possible.
The only way to figure out how to do this is by working with your trading partner to solve problems. But you can't solve problems when one of those sides won't come to the table.
Suppliers need to better understand the value of collaboration. Sure, you can play games. You can bury non-compliance costs in cost of goods. You can trade dollars back and forth in your trade spend. You can be sloppy. But you're not doing yourself, your trading partners, or the end consumer any good. On the other hand, you can improve your financial performance by becoming more aligned with your retail customer. If you reduce the number of chargebacks, you can reduce the prices of your merchandise, which will get where it needs to go more quickly and efficiently.
To be fair, retailers need to be a better job of communicating requirements to suppliers. Retailers need to show a little empathy and give suppliers enough time to implement changes and comply with new requirements. Retailers need to spend more time educating and training suppliers.
But this disturbing trend of asking for forgiveness or demanding money back on the part of suppliers has to stop. Retailers have shown a willingness to collaborate, and it's time for more suppliers to join them. When you make an investment in collaboration and developing a better trading partner relationship, it will pay you back in spades.
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