How top retailers use supply chain innovation
to cut costs and improve efficiency
How top retailers use supply chain innovation to
cut costs and improve efficiency
The retail industry is facing a sea of changes currently.
How the strongest of retailers adapt and innovate under
consumer pressure offers lessons for all industries. The
most compelling and instructive strategies target the
supply chain.
In a survey of retail procurement executives earlier this
year by C2FO, nearly 90 percent said they are focused
on improving profit margins. Nearly 75 percent feel part of
the solution lies in boosting supply chain technology, and
43 percent of retailers surveyed plan to invest in supplier
collaboration enhancements in the year ahead.
Leading retailers understand their supply chains hold the
key to cut costs, improve efficiencies, and deliver products
faster to customers. Many have already begun making
the right moves to improve supply chain efficiencies and
win over more satisfied brick and mortar and e-commerce
customers.
Two retailers that have spent considerable time and
money building stronger supply chains are REI, the
Seattle-based outdoor adventure, equipment, and clothing
company, and grocery store giant Albertsons Companies
based in Boise.
What’s their supply chain strategy? How are they
implementing it? How have they overcome rough spots?
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To hear their experiences, C2FO followed up its survey by
hosting a webinar with Lorraine Steed, REI’s Senior Manager, Treasury,
and Joe Vaiente, Senior Director, Accounting with Albertsons.
The panel also included Colin Sharp, the London-based Senior VP
for C2FO, who provided an international perspective to supply chain
trends.
The hour-long program, moderated by C2FO Managing Director and
retail expert Amanda Mathes, covered a range of topics, including
the rise of e-commerce, managing relationships with suppliers, and
pursuing winning strategies not only at U.S. markets but abroad.
View the archived webinar
Among the takeaways:
To succeed, start with a strong supply chain
These are challenging times for retailers is an understatement.
Companies are looking for ways to gain a competitive edge, and
one essential piece involves building a stronger supply chain.
Since its merger with Safeway, Albertsons has focused on
simplifying its vendor payment system, said Vaiente. That’s no
small matter for a company that operates 20 distribution centers
and 18 manufacturing plants — and is still trying to mesh two
corporate cultures.
Joe Vaiente
Senior Director, Accounting
Albertsons Companies
We want to take advantage of optimal
“
“
C-suite buy-in across departments is critical
buying practices to maximize our efficiency
and our (suppliers’) efficiencies,
Vaiente said.
REI also recognizes the interdependence between retailers
and suppliers and has made some key investments in its
supply chain. Among them, opening a large distribution
center in Goodyear, Ariz., to more efficiently serve its markets
in the Southwest. It has also embarked on a strategy that
other retailers have employed; treating each store as a
distribution center so products can be moved quickly to meet
demands.
European retailers face the same supply chain challenges in a
very competitive environment. “It’s a turf war,” said Sharp, and
that’s prompted retailers to look for ways to better manage
relationships with suppliers.
Realize operational efficiency and cost savings by
standardizing terms and payment platforms
From Vaiente’s perspective, switching vendor payment
platforms was Albertsons' biggest strategy change over the
past year. He expects it will take another 18 months before
the new single payment system is fully integrated.
There’s a second part to the grocer’s strategy. After rolling
out its terms standardization program, Albertsons about six
months later offered a relief valve to suppliers in the form of
on-demand access to cash at a price and at terms that make
sense to them using C2FO.
REI’s approach pushed vendor payments to a 60-day
schedule from 30 days to better manage its cash, but it
also introduced C2FO’s dynamic discounting option to help
suppliers who needed to be paid early to meet payroll or
other demands.
As C2FO highlighted in its survey, stakeholder buy-in is
essential in launching new supply chain initiatives.
At Albertsons, that meant working with a consultant to
determine standard vendor payment practices. Next came
pitching C2FO’s payment system to its C-suite.
“They saw it as a win-win” for the company and its vendors,
said Vaiente.
But Vaiente also said Albertsons faced a “big struggle” to
convince its procurement team that they were not losing
control of their supplier relationships.
Said Vaiente: “We’re trying to get procurement out of handholding suppliers who need immediate payment,” he said,
“and we now have a system to take care of it.”
Implementing C2FO allows each supplier to offer a discount
for early payment on demand at a rate they determine. The
solution provides flexibility for suppliers without requiring
effort on the part of procurement.
There were challenges within REI’s procurement and financial
teams as the company launched its terms extension and
C2FO payment platform at the same time.
In rolling out the dual initiatives, Steed said, the merchandise
buyers needed to be sold on the idea of “negotiating the
best product deals (while) taking their hands off the payment
terms.”
What helped drive home the changes? Having leaders at
REI with an open mindset to working around budget and
information technology constraints.
Lorraine Steed
Senior Manager, Treasury
REI
“To me, this underscores that best practices really should be
tailored through the lens of your unique business and what’s
right for you and your supply chain,” Mathes said.
Added Sharp: “No one wants to be punitive anymore with
suppliers and ask for discounts for no good reason.”
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“Our leaders understand the need to be nimble,” she said.
“They don’t sit around and analyze to death. They realize they
might make mistakes, but they don’t have time to be frozen …
there’s a sense of urgency.”
Trade finance innovation simplifies collaboration
with suppliers and strengthens your supply chain
Albertsons’ Vaiente said C2FO has simplified its supply chain
financing headaches and eliminated much of the hand-holding
with vendors.
How so?
“We set the parameters (for early payment processes), and C2FO
does all the work,” Vaiente said.
Steed said having C2FO’s payment system in place has made
a big difference. “Knowing we had the tool to help suppliers
went a long way when switching to terms extension of 60
days.
Plus, she said, C2FO knows REI’s supplier base. “We’re not
a giant retailer banging down our fists … C2FO fits with our
culture.”
A strong, efficient supply chain is the foundation for
innovating
For example, Vaiente’s team gets a daily email from C2FO about
cash management and supplier payments. “It takes us 10-15
minutes a day to review, whereas before it was a vendor-byvendor process,” he said.
There is no sign that consumer-driven pressure on retail will
subside. This continuous demand will be felt the strongest at
the supplier level.
“Now we tell our vendors to click on a link that shows them how
to get paid early,” Vaiente said. So far, he added, the payments
program has been well-received by suppliers, partly because
C2FO’s payment platform provides “more flexibility and better
options for vendors than traditional bank financing.”
As retailers ask more from their supply chains, they need to
take steps to ensure that even the weakest supplier link is
strong enough to withstand the current conditions. Resilient
suppliers can better collaborate and partner with you on the
challenges ahead.
| ©C2FO.
| 2017 | All rights reserved | 4
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