I remember the days when Retailer and Supplier engaged in power struggles; and one or the other party used this power in intense negotiations. It was all about price. The word collaboration existed as a word and not as a practice.
Retailers and Suppliers have definitely had a shift in mindset, almost like morphing from adolescence to adulthood; believing reliability, quality and win-win attitudes are more valuable assets than the lowest price. Granted price is still an important factor and always will be; however, it is now not the only defining factor. Imagine that, Retailer and Supplier are now in the room at the same time, and no boxing ring is to be found!
This shift in mindset could bring me down so many paths as it really is all about collaboration on so many levels. So if I were a Supplier and wanted to focus on what I believe is the biggest win-win for myself and Retailer, it would be on POS data sharing and the power it brings to the relationship for both parties.
If you think about the role of a Retailer, they provide consumer product.
Simple enough, we all know this already. But when you think about the consumer products, they come in different sizes, shapes, colors, etc; and most of all, they come from different Suppliers. This is where a Supplier can collaborate and differentiate themselves most effectively with a Retailer. So what does POS data have to do with it?
Think about what POS data really contains:
- item sales information
- inventory figures
- item performance
- forecasting tools
This data is powerful on so many levels. So what can Suppliers do to start to use POS data as leverage with their Retailer? Or think of it as “What can I do to make my Retailers’ lives easier?”
As a Supplier, using a vendor managed inventory approach will go along way. One will accomplish this by lowering inventory quantities the Retailer has on hand, and sustaining just in time replenishment. A Supplier will net a similar win as they will have a proactive approach in their production planning. How nice is it to actually understand the purchase order information you will be receiving. You will now have the data in your hands to make the necessary decisions on not only when to have more on hand, but to trace the successes or lack there of for each of your products.
The above goes even a step further to enhancing your relationship with your Retailer. As a Supplier, you can now position yourself as a collaborative partner and valued advisor to your Retailer. Besides handling their inventory and forecasting needs, you can also proactively share the trends you are seeing, providing feedback for potential new product.
My guidance to Suppliers – do not begin to practice detailed inventory management and forecasting when your Retailer indicates they are willing to share POS data, and don’t rely on a crystal ball to provide those answers either. Solid practices in inventory trends and forecasting should begin prior to POS data being introduced. Purchase order history that includes time of year, item order frequency, length of time between orders, and other differentiators relating to your product allows for the establishment of a solid foundation. POS data should further allow the Supplier to validate their current understanding of Retailer inventory needs and product trends. It will also lead to a deepened strength of the Supplier’s ability to forecast and plan inventory for themselves and for their Retailer.
Solid practices of inventory forecasting and trends along with the power of POS data will net the future, not the perceived extraordinary power of a crystal ball. My take – fortune teller….you’re fired! Forecaster….your hired!