Retailers and Suppliers Get Linked

Recently, I overheard an interesting conversation between a retailer and one of its suppliers. Not that I’m an eavesdropper per se, but I was the only customer in the store, a small retail boutique, and the conversation was unavoidably audible.

The supplier was trying to convince the retailer to stock more of its product for the holiday season; the retailer’s reply: “We have no money to put into inventory—in fact, the only reason we are still in business is because we aren’t carrying any debt. My partner and I have not taken a salary this entire year.”

Unfortunately, that was not the only time I’ve heard a retailer say these tough times have usurped owner earnings. Among mom-and-pop entrepreneurs and small regional chains, work without pay has been a common theme this year.

For mid-size and larger retail companies, the pay has diminished but not disappeared entirely. However, “no money for inventory” is a problem throughout the industry.

As I browsed the boutique, the retailer suggested to the supplier that they should consider placing product in the store on consignment—a potential win for both since it required no investment on the part of the retailer but gave the supplier a chance to market its goods.

Old-fashion consignment deals are the precursor to sophisticated scan-based trading and vendor-managed inventories that accomplish the same synergies for large retail chains and their suppliers. It was refreshing to hear a retailer, with just a single bricks-and-mortar store, plus an e-commerce site, negotiate a solution with a supplier that will hopefully help both companies weather this difficult retail season.

However, the critical take-away message is that trading partners have to elevate their levels of communication and cooperation.

One of the more interesting and unique opportunities is how retailers and their suppliers can leverage the concept of “social networking” to achieve more effective connections. A new supply chain exceptions-management platform from Atlanta-based Inovis is built on a social-networking business model similar to the popular LinkedIn or Facebook interactive platforms.

“Retailers have less time to cope with exceptions in the supply chain, but the problems and costs keep growing,” stated Erik Huddleston, chief technology officer at Inovis.

Although retailers have invested in visibility and exceptions-management tools, a fundamental problem has gone unsolved: Once you see a problem, who fixes it?

“Information identifying specifically who should address exceptions has been missing from the overall enterprise,” noted Huddleston. “There was no systematic way to maintain current contact information on the appropriate people at every supplier so we’ve developed a solution, modeled after social-networking sites, that pushes management of information back to the suppliers. When an exception occurs, the system identifies the right person to handle the problem based on the profiles existing in the social network.”

Huddleston said the concept has been piloted with select retailers and already the company has enrolled a few thousand users.

On June 2-4, Chain Store Age will host an Executive Summit—a joint supply chain, risk management and technology conference in Atlanta. Retailers are invited to join the Chain Store Age Executive Summit LinkedIn Group athttp://www.linkedin.com/e/gis/1029017 .