Enhance your retail technique with clever sourcing
The process of delivering goods to a store or a person sounds easy enough—an order is placed, then the items are shipped to where they are needed. Seems simple enough, but the reality of order management in the digital retail era is an entirely different story. For example, shortages and surpluses can happen at varying levels of the process, such as a vendor being out of a specific SKU or a retailer that is inundated with an item that isn’t selling well. Sometimes, suppliers are located too far away resulting in greater shipping charges and longer delivery times.
It is well known that having multiple channels, including mobile, brick and mortar stores and e-commerce, creates more sales opportunities. Not every channel performs well for you, but you’ve taken advantage of the ones that do in order to find the best strategies to satisfy your customers. It only makes sense that you would follow similar strategies of disconnecting from suppliers that do not fit your needs and finding the best suppliers for sourcing the products you sell. Intelligent sourcing could be the solution you need.
What is intelligent sourcing?
Intelligent sourcing is a process by which trading partnerships and sales performance are continuously re-evaluated and improved for the greatest efficiency and the best price points for the retailer, supplier and the customer. Intelligent sourcing requires dedication to using metrics to help understand how products are performing, both across your channels and the market in general. Using this information enables you to identify suppliers whose product commitments and capabilities align with customer preferences.
As competitive pressure, market volatility and supply chain risk intensifies, sourcing professionals must work smarter than before. It’s not just a matter of knowing what’s selling well, it’s knowing what isn’t selling well, and the where, when and especially the whys of how demand influences supply, and vice versa. It might not always be obvious what you should be sourcing and how to optimize relationships with your suppliers.
Can you consolidate suppliers? Can you find suppliers closer to specific locations to reduce delivery times and shipping costs? Can you get a lower price buying in higher volumes? Are there suppliers out there who could meet your needs better, faster and more accurately? Can logistics and scheduling be improved to cut costs? Unless you’ve done a thorough audit of your spending, sales, sourcing and supply chain, as well as analyzed the market to see what opportunities and options are available to you, you’ll never know if the answers to these questions could very well be “yes.”
Getting started with intelligent sourcing
The first step for intelligent sourcing is taking a deep dive into big data. Diving deep into the data involves more than analyzing spend, sales and sourcing data at the surface level. By taking the time to dig into the data, you can figure out ways to shatter anecdotal evidence and long-standing biases about supply and shopping trends.
Then there’s also outside data to evaluate. What is the general market like for the products you’re selling? Are there other products you should be stocking? Should you try finding other vendors who can serve your needs better? How does geography and proximity factor into your retail strategy? Evaluating outside data is key when trying to figure out different ways to improve your business.
As you can see, there’s more to it than simply analyzing and reacting to the data. You can have the best software provide you with all of the answers and identify the best vendors, but intelligent sourcing doesn’t happen overnight. For true intelligent sourcing to bring about the best results, all parties, including retailers, suppliers and logistics providers, must be on the same page, succinctly working together to optimize the supply chain and satisfy customer demand. Intelligent sourcing plans result in symbiotic partnerships that help all of the parties involved, so relationship building is key.
Intelligent sourcing in action
After the trading negotiations end and contract agreements are signed, it’s time to implement the new order fulfillment process. It could take some time to get all parties on the same page, especially if different invoice and payment systems are in play. EDI and other B2B integration solutions can accelerate the time to value by streamlining and improving workflow.
Your work isn’t done when the new supply chain structure is in place. Intelligent sourcing is an ongoing process of tracking results over time, modifying your plan as needed and spotting and reacting to changes in the market before profit margins are impacted. New product opportunities and strategic suppliers may also emerge. Intelligent sourcing must be consistently evaluated and practiced to achieve optimum results.
Considerations for intelligent sourcing
Having all of this data readily accessible for sourcing professionals can be challenging. Relevant data can be scattered throughout the retail organization, with no clear, holistic view of the business. Additionally, it can be difficult to track down supplier availability in the market.
Depending on how you approach intelligent sourcing, it will take time and resources to get results. Collecting data requires storage space, processing power and IT staffing. Additionally, hardware and software advances at an accelerated pace, regularly requiring upgrades and associated costs for those upgrades. As the company becomes more successful, IT spending budgets could balloon.
There’s no need to recreate the wheel since a variety of options are available that already address these issues. Sourcing, Assortment, Fulfillment (EDI) and Analytics services already exist and by utilizing them, you can greatly reduce costs and resource needs. Putting the right processes and solutions in place can consolidate a retailer’s internal data. Retail networks can make it incredibly easy to find exactly the suppliers that fit your needs.
Consumers have an expectation that products are available and will be delivered on time, so it is critical that retailers and supply chain partners work closely to ensure customer expectations are fulfilled. Additionally, the internet is the great equalizer, allowing competitors to seemingly come out of nowhere to eat into your customer base.
Thankfully, technology for retailers also evolves to keep up with the speed of business. Decisions about sourcing and suppliers need to accelerate quickly to get your products where consumers need them to be. An intelligent sourcing strategy can keep you ahead of the competition.