All businesses are constantly striving to reduce costs in order to remain competitive in the challenging economy. Due to the strong presence of varied factors like increased awareness for environmental concerns, nonstop upward movement of cost-to-serve, technology-boosted consumer empowerment, or the spread of the omnichannel way-of-life,
supplier collaboration is more of an obligation than a choice. The key is to eliminate the barriers to collaboration between suppliers and retailers. Only a seamless alliance is capable of achieving organizational goals of both partners in a cohesive fashion.
A collaborative partnership can wipe off up to 5% of the end-to-end costs for suppliers as well as retailers
360° visibility into inventory: If two entities collaborate, a panoramic visibility of the combined inventory is possible. This helps in cost reduction through multiple ways: forecasting product demand and purchase plans accurately, using consolidation centers on a shared basis, tracking down duplicate stock items, eliminating wastes, fulfilling orders in high-speed mode, minimizing the probability of returns, and so on.
Tying replenishment with fulfillment: When the core systems work in-sync and the manufacturers act in absolute harmony with the retailers – right and timely decisions can be taken about the production and inventory management. Effective collaboration provides much better results when there are multiple locations and channels involved.
Optimized promotions: It often happens that when companies take the onus for promoting products individually; they fall short of the intended effect even as the advertising costs soar. To make promotional activities far more meaningful and appealing to shoppers, retailers and suppliers should join hands and draw up targeted campaigns. For instance, a producer of branded meals can combine its offering with a private label edible item.
Analytical efficiency: With the advancement of technologies like cloud computing and digital analytics, retailers can constantly gather a mammoth amount of data in real time. But, it costs retailers to maintain this type of high-end infrastructures. Collaboration allows retailers to sell or share data and retail insights to partners, and in the process remuneratively convert a cost center into a profit center.
Analysis by the Aberdeen Group shows that in a two-year period, the occurrence of retail and consumer marketing enterprises entering into collaborative relationships with core suppliers has seen a jump of about 29%, whereas this figure for non-core suppliers is 15%. By coordinating effectively, suppliers and retailers can together save costs, and at the same time provide better services and products to their shoppers.
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