Success in today’s market place for retailers and their product supplier partners is very much about embracing change. Consumer and economic pressures are leading to a significant evolution in the consumer products supply chain.
Today the Retail Industry Leaders Association (RILA) released a white paper with findings on retail sustainability and product supplier engagement. To promote the release, RILA hosted a tweet chat #RILAchat entitled “The Current State of Visibility in the Supply Chain” to take a closer look at the evolving relationship between retailers and their product suppliers as they strive to meet stakeholder demands and be more sustainable.
When we look back at traditional retailer and product supplier relationships, they have been pretty straight forward. Those relationships consisted of a transaction between the two primarily based on product requirements and price. And while there has always been a basic understanding of one another’s operations, such as labor practices, environmental impacts, manufacturing, and product safety, until recently both players have acted fairly independently.
Today, however, retail’s stakeholders have increasing expectations for supply chain visibility. This RILA report has shown that, to meet those evolving expectations, the retail industry is ushering in the age of transparent, communicative supply chains.
The emerging supply chain approach is rooted in company-wide efforts to be more strategic, proactive and efficient. Retailers are constantly looking for opportunities in their product supply chains to cut costs and be more innovative. Further, they want to address the needs of employees, regulators, investors, customers and other stakeholders. Increasing supply chain visibility is a crucial step toward meeting those business objectives and stakeholder expectations.
To achieve their supply chain sustainability goals, more retailers are assessing, reporting, verifying and addressing product supply chain social and environmental impacts. The tools they are using include codes of conduct, audits, capacity building, life cycle analysis, surveys and retrofit financing. What they have found is that each interaction improves product supply chain efficiency and risk performance.
Additionally, retailers and product suppliers recognize that to overcome today’s challenges and capitalize on opportunities they must work together. While retail involvement upstream in the supply chain was not common in years past, the relationship between the two parties is evolving into a more collaborative partnership.
With these significant supply chain advancements, both retailers and suppliers face considerable internal and external challenges. Internally, and particularly in this economy with the high cost of commodities and raw materials, achieving aggressive objectives with limited resources can present considerable challenges. Also, buy-in from management and cooperation across functional areas can prove difficult.
Externally, there has to be strong communication between retailers and product suppliers to link the purpose of deeper supplier engagement and outline the benefits for all involved. There also has to be strong sense of trust between buyers and suppliers to be successful. In addition to reaching beyond first tier suppliers, managing the vast numbers of suppliers and subcontracting factories is a considerable challenge. Finally, interacting across language and cultural barriers can prove difficult.
For retailers and their product supplier partners, the bottom line is that it’s never too early to start thinking about new opportunities for organizational improvement and opening dialogue between the parties. The evidence is mounting that the benefits of a transparent and communicative supply chain are worth time and resource investment. It will not only improve the bottom line, but create strong and lasting partnerships while bolstering brands and ultimately enriching the consumer experience.