The Supplier Extranet is set to become a fundamental part of successful supply chain operations for large retailers.
With the likes of Wal-Mart, Tesco, Carrefour and Metro leading the way on the global landscape, Australian retailers are quickly becoming aware of the critical advantages to be gained through a Supplier Extranet in terms of productivity and profitability.
Supplier Extranets link retailers with distributors across a secure internet—based network.
Underpinned by Business Intelligence (BI) software, they enable retailers to deliver relevant, real time information to their suppliers, empowering them to make decisions (on deliveries for example) based on up-to-date factors.
This keeps the supply chain flowing at an optimum capacity at all times. Typically, the Supplier Extranet provides supply chain partners with access to a variety of reports including; Merchandising Information, Inventory Management, Promotions, Operational Performance and in some cases anonymised Customer Profile Information.
Communication between supply chain partners is vastly simplified through the sharing of accurate and timely information in this way.
In addition, retailers often have the option of activating an automated alert function for critical issues (based on thresholds) or for broadcasting relevant information updates with an immediate impact on the trade process between supplier and retailer.
Here are some of the key benefits of the Supplier Extranet:
Reduced capital commitment
For retailers, reducing their capital commitment is a continual battle, driving demand for real time information throughout the supply chain.
In terms of inventory, a ‘just in time’ replenishment scenario is the ideal for optimising capital commitment. This is because it reduces the resources required to invest in and manage a warehouse full of stock that won’t necessarily be needed immediately.
The Supplier Extranet helps to realise this ideal by keeping stock at an optimal level.
It allows granular information on inventory to be exchanged in a fast and reliable manner, which facilitates flexibility and agility within the ordering and delivery process.
Managing deliveries with greater efficiency reduces the burden on the back of the store — the less stock, the lower the capital commitment.
Ensured on-shelf stock availability
Over and under stock situations are common within stores.
International studies show mixed reactions from customers discovering an item they want is out-of-shelf, none of them positive. Approximately 33% of retail customers will attempt to find their product in another store.
This may be the first step in the desision making process that leads to a change in the customer’s prefered retail destination. If the problem occurs twice, the chance of this customer moving to another store rises to 50%. By the third time there is a 70% likelihood that the customer will move on.
Ensuring on-shelf stock availability is part of the process of Demand Side Supply Chain Management. The Supplier Extranet carries out a valuable function here in forecasting potential demand.
Shelf replenishment is scheduled based on purchasing behaviours revealed within the BI application. The process of refilling can also be driven by automated alerts - the primary advantage here being the ability to resolve issues as they occur, so enhancing both sales and customer loyalty.
Increased profitability
The Supplier Extranet encourages higher margins per square metre with minimised leakage and optimised assortment mix. This is because when retailers have accurate data at their disposal 24/7, they are able to optimise the assortment mix on the shelves for maximum profitability.
Introducing new brands becomes easier, as does making informed decisions about product facing in the store front, for example, before rolling out successful formulas to other outlets.
By analysing stock articles and how quickly they sell, it becomes easy to identify and periodically adjust assortment to cater for the most popular items.
L’Oreal recently demonstrated innovation in this respect through a Supplier Extranet connection with Germany’s second largest drugstore chain DM, which the vendor selected as the exclusive retailer for its first professional makeup line “Studio Secrets Professional.”
L’Oreal’s decision to roll out a new line through a drugstore rather than a major department store gives DM a significant competitive advantage in the marketplace.
Through DM, L’Oreal has been able to test alternative listing concepts, achieving a rapid optimisation of product assortment.
According to Kenneth Campbell, responsible for the L’Oreal brand in Paris, DM’s willingness to cooperate in testing innovative concepts at an early stage is a key component of the successful introduction of the new range.
Improved alignment between supply and demand
Automated alerts can play a vital role in providing retailers with a competitive edge, giving them the ability to instantly react to unforeseeable circumstances.
For instance, data mining might reveal a certain level of demand for a product; however the reality could end up being quite different because of the introduction of a new factor (a sudden change in the weather, for example). The knock on effect might be an unanticipated peak in demand leading to a faster than expected depletion in stock.
In this case the retailer can alert the supplier that an out-of-stock situation is imminent, so that the item can be fast tracked through the supply chain and onto the shelves.
This seamless collaboration between supply chain parties is a distinct advantage of the Supplier Extranet. The 24/7 availability of Supplier Extranets also supports global sourcing, in that they make it possible for retailers and suppliers to transact business across global time zones for faster response times.
Improved root cause analysis
Supply Chain process trouble shooting is assisted enormously through a 360° view of the end-to-end business within the Supplier Extranet.
The ability to drill down to the lowest level of detail makes all business processes highly visible. Furthermore, when dynamic dashboards are used to deliver aggregate information to managers’ desktops, problems (such as downwards trends) are quickly brought to light.
For example, a dashboard graph might indicate a slump in sales within a certain store. Simply clicking on that graph allows the user to dig down into the details behind it to discover which product is responsible for the problem, whether it’s an out-of-stock situation, or whether this situation has occurred in the past etcetera.
Increasing customer loyalty Needless to say, the end goal is to increase customer loyalty - customers equal sales.
To this end, the Supplier Extranet shifts the balance of responsibility over to the supplier, giving them a greater accountability for the availability of articles in the stores, which makes the supply chain more intuitive.
When the supply chain is optimised, customer repurchasing rates increase due to the fact that the products they want are highly available to them.
And, because they are now loyal to the store, there are greater opportunities for cross selling — a satisfied customer will stay in the store and purchase a larger range of items.
Essentially, the role of the Supplier Extranet establishes a simple means for supply chain partners to tap into relevant information 24 hours a day using a simple net browser to improve their business.
The Supplier Extranet enables retailers to stay on the ball in terms of delivering precisely what customers need, when they need it.
Bernhard Webler is Director of Retail, MicroStrategy