Giving retailers a competitive edge with five procurement best practices
4 mins read
The number of people shopping on the high street has fallen dramatically since 2018. And the events of 2020 have shown us just how vital customer experience (CX) is.
The need for physical distancing has emphasised the importance of not only delivering digitally, but also delivering swiftly and seamlessly.
These two factors demonstrate that, to have a competitive advantage, today’s retailers have simply got to be easy to buy from. They can’t afford to compromise on CX – the essential ingredient that drives loyalty in an increasingly competitive market.
So how can the procurement function help?
Generating cost savings with better procurement policies and practices allows your business to invest more in activity that generates revenue and improves your customers’ experience. A mature procurement function can also help to foster relationships that inspire CX innovations.
The retailers that grew during the past year tend to be focused on selling their end products or merchandising. This increases revenue, but our experts at Capita Procurement Solutions find that it’s easy for retailers to lose focus on goods not for resale (GNFR) – money that could be better spent on ultimately creating a better CX. Efficient, expert procurement also ensures that the business gets the best value from every pound spent.
Here are five ways that you can gain competitive advantage by managing your procurement processes more effectively.
1. Focus on your core business
If you’re running operations outside your immediate area of expertise, such as logistics, IT, warehousing and call centre activity, challenge the market – compare the benefits of your internal solution to what a third party could deliver. Third-party suppliers can provide specialist knowledge and expertise – and in most cases deliver the solution at a lower cost and more efficiently than you could yourself.
External providers with more sophisticated processes, systems and employees can better manage the flexible workforce that you need to meet fluctuating demand in challenging markets. They also free up the time and energy that you need to improve your CX and build better relationships with your key strategic suppliers.
2. Get innovation insight from your relationships with outside experts
It’s easy to lose focus on managing your third-party supplier relationships outside of your core direct suppliers. Investing in your procurement capability gives you the bandwidth to develop these relationships to ensure that you don’t miss out on supplier innovation in the GNFR areas.
Building relationships with suppliers can drive innovation and sustainable business improvements. A good rapport with an IT supplier, for example, can put you among the first to know about advances in automation that could revolutionise your warehousing and inventory functions, speeding up delivery to customers and improving their experience. They may recommend using augmented reality combined with conversational AI to bring the high street experience into the safety of shoppers’ homes.
Your suppliers’ expertise gives them knowledge and insights you’d never have access to yourself. To make the most of this opportunity to collaborate, you need to keep your channels of communication with them open.
3. Know your supply chain
Covid-19 has changed consumer behaviour for the short to medium term and maybe even for the long term. When the pandemic hit in early 2020, the companies with a clear view of their end-to-end supply chain were able to identify potential weaknesses and bottlenecks that it might exacerbate, to mitigate them quickly and minimise disruptions to customer deliveries.
As well as this, Brexit’s effect on import logistics, customs and tariffs means that some parts of the supply chain are working more slowly and expensively than before. Visibility of the whole chain lets you anticipate these issues and work proactively to prevent them becoming major interruptions.
Mapping your supply chain, identifying and mitigating its potential risks, helps you to understand the areas that could affect business continuity and avoid surprises.
4. Benefit from conversations with procurement subject matter experts
Retailers often lack procurement expertise in specialist areas like marketing, logistics and IT due to the focus on goods for re-sale. This means that they don’t get the full value from their supply chain activity. A quality procurement function enables a retailer to achieve its strategic goals through innovation, supply chain management and savings delivery. Having access to specialist procurement advice from Capita Procurement Solutions on contract issues, terms and conditions can help you to select the best supplier for the job and avoid signing unsatisfactory contracts that favour sophisticated suppliers.
There are parts of any business that resist procurement’s intrusion into their budgetary decisions. Internal stakeholders’ work drives revenue, so they may feel that they should be allowed to spend their budgets as they see fit. The secret is to develop a procurement function that can build strong internal relationships with budget owners, demonstrating that its improvements are not a blocker or a box-ticking exercise but great advice from a team of valued advisors who are working not to interfere but to help departments to spend their budgets more effectively.
5. Create visibility
Retailers focus heavily on analytics, studying their customers’ behaviours to find out what attracts them and what keeps them loyal. These excellent analytics capabilities provide valuable customer insights that underpin sales strategies and drive growth. Using this capability to analyse third-party spend can unlock significant savings opportunities that might otherwise go unnoticed.
By analysing where you spend your money and on what, procurement experts are constantly testing the market to see where you can realise better value.
This increased visibility helps you to make more informed decisions about where your non-merchandise spend goes.
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Kieran is a business leader with more than 25 years’ market leading expertise in commercial transformation and procurement delivery across multiple sectors and industries, with a focus on business strategy, commercial transformation and savings delivery. As Client Services Director for Capita Procurement Solutions, he specialises in mapping client maturity to targeted outcomes and embedding strategic and tactical solutions to enable both short and long-term sustainable benefits.