Chain reaction: Why the supply chain must change

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THE CONSUMER TRENDS SHAPING THE SUPPLY CHAIN OF THE FUTURE

HOW RETAILERS CAN CREATE A TRUSTED PARTNER NETWORK

The evolution of the supply chain: It’s what you know, not who you know

Most retailers, however large or small, rely upon the effective management of a supply chain. From large supermarkets selling thousands of lines of products, sourced from around the world, to small independent fashion stores selling items produced by local designers, most retailers manage a supply chain. Effective management of that supply chain can be worth several percentage points in terms of profitability and can even be the difference between success and failure.

Typically the focus in terms of creating supply chain efficiency has been on driving down cost while guaranteeing consistency and availability. Retailers want to ensure they are always able to offer customers the products they want at a price they are willing to pay, while maintaining a healthy margin. As the retail world has become more competitive, so retailers have turned to their supply chains looking for greater efficiency.

Retailers of all sizes must walk a fine political line; ensuring suppliers are kept keen and co-operative, while ensuring they are as competitive on price as possible.

Typically negotiation skills and a strong network of contacts and potential suppliers have been crucial for retailers looking to get the best deals and mitigate over-reliance upon

single suppliers. But we are now in an age where ‘who you know’ is becoming less important compared to ‘what you know’ about those companies in a supply chain.

Increasingly an efficient supply chain thrives on information. Retailers must respond to increased regulation of safety and standards by ensuring they obtain more information about their supply chain. They must also be able to quickly and confidently provide information to customers on issues ranging from nutrition to sourcing and sustainability.

With this in mind, it is clear the supply chain of old is no longer fit for purpose. A supply chain based on “one up, one down” relationships - where each link only has clear sight of the previous and the next link in the chain - does not provide the information, assurances or

transparency retailers now need. Instead the model needs to be based on a trusted network where every node within the network is accountable and offers full transparency to the rest of the network.

Retailers need to drive this change to satisfy multiple factors, all of which rely upon absolute transparency into what they are selling.

In this report we will examine the reasons why and discuss how retailers, particularly in the grocery sector, can go about doing this.

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There are many reasons why retailers need to obtain more information about the entirety of their supplier network.

The importance of information

On one level it is about providing customers with the information they need, whether to satisfy an interest in provenance or to offer assurances about nutrition or allergy advice. Consumers are increasingly seeking greater assurances about the quality and safety of their food. Allergies are increasing around the world and food intolerances are a growing concern for consumers. Food scares around specific ingredients and a greater media focus on the potential health benefits or risks of specific products have also made consumers more wary about what goes into the products they buy. This comes at a time when many consumers are also willing to pay a premium for goods which are provably organic or locally sourced, or sourced from independent, artisan producers.

Global research, commissioned by Oracle in 2016, revealed the extent to which consumers are demanding more information.

But it is also increasingly important for a business’s own governance – and even survival – that it gathers and can quickly access as much information about suppliers and products as possible.

Knowing how and where goods are produced, under what conditions, and how they are transported and by whom, not only enables retailers to pass that information onto consumers, with confidence, but also enables them to ensure they are doing all they can to limit risk.

In instances where a potential crisis arises, from potentially fatal mislabelling of allergy advice to contamination during the production process, greater transparency will mean they are able to far more quickly isolate the cause and identify all products affected. This will enable them to quickly and comprehensively take steps such as removing items from stores and the supply network.

Gathering such information carries a cost for retailers but the cost of not doing this should weigh more heavily on the minds of responsible retailers. Without such rigour in place, product recalls can be hugely complex and incomplete, incurring high costs while not alleviating all possible risk. Added to this, financial penalties in the form of litigation and fines can damage a business considerably. But it is the associated, less immediately quantifiable, damages such as a loss of customer confidence and a tarnished reputation that can quickly put a retailer out of business.

If that isn’t motivation enough, personal liability for senior executives, which can even result in criminal convictions in extreme cases, is another risk to be aware of.

of consumers want assurance the food they buy has been responsibly sourced

would shop more with retailers they think are ethical

of shoppers have abandoned a purchase due to a lack of information

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The research found:

41%35% 23%

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Making the change happen

It is not to say they are the only ones who stand to gain, or lose out if this change doesn’t happen. Because it will happen, and those suppliers and partners who aren’t able to comply with this need for greater information will find they miss out on business.

It is an investment, of time and money, worth making for every member of the network.

However, it is retailers who must get the ball rolling. The first priority is to ensure there is a means to capture and share the information they need, that gives them the scale and responsiveness they need.

They must enlist all other parts of the supply network and get them onside, from farmers and producers to manufacturers and logistics partners.

The best way to do this is to ensure there is something in it for everybody. To that end they need to ensure they communicate the mutual benefits and explain clearly why this is now an essential process within any new or ongoing relationship.

Retailers must find ways of incentivising their suppliers and partners to provide the information required, along with assurances that it is accurate and will be kept up to date. This is crucial.

The information going into this system needs to be verified at every stage of the process, because a retailer’s ability to give consumers confidence and mitigate risk based on that information is only as good as the information itself.

While a network of connected, sharing, transparent partners needs to be a collaborative effort, ultimately it is retailers who must lead on implementing this change. It is retailers who have the most to gain and the most to lose. It is retailers whose customers will expect them to answer increasingly specific questions and it will be their customers who need to trust in the information provided to them.

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Oracle Retail Brand Compliance Management Cloud Service enables retailers to create a truly global, collaborative database of products, suppliers and partners and provides all the above functionality, in terms of reliability, responsiveness, scalability, mobility and ease-of-use to retailers and their network.

The platform used to collate and share all this information needs to be:

RELIABLE

The data entered needs to be up to date and trustworthy and available at all times, as it will form the basis of all crisis planning and preparedness for supply-related issues. This means partners such as auditors must be able to access the platform in order to assess the information it contains and provide assurances about suppliers.

Once armed with this information retailers must be able to share it equally and readily both inside and outside their organisation, with employees and consumers.

RESPONSIVE

Retailers must be able to quickly access all the information they need, when they need it. If a bad ingredient is identified in a range of products, for example, retailers need to be able to immediately identify which products it is in and where those products are. It is also important retailers are able to quickly and confidently rule something out – such as contamination or the presence of allergens – if complaints are received. Similarly, businesses need to be able to immediately answer questions from regulators and investigators.

GLOBAL

Consistent, multiple language support is essential to reflect the global nature of most supplier and partner networks.

EASY TO USE

The system will be used by a wide range of people, from farmers to logistics workers to shop staff, auditors and compliance and legal professionals.

MOBILE

People must be able to enter data whether in the field, in the warehouse, at a port or in the store. Therefore the system must be optimised for use on mobiles.

SCALABLE

It must be easy to add new partners and provide access to multiple users within an organisation. It must work locally and globally and be capable of growing with the network it supports.

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So far we have focused on the reasons retailers and their suppliers and partners must have access to all this information from a predominantly defensive perspective. Those are undoubtedly the most pressing reasons to make this change, however, there are a great many positive benefits, such as increased productivity and a smarter use of resource.

Not just a defensive strategy

Currently, the paperwork and manual processes which perform elements of this task are time consuming and a poor use of some very skilled people’s time, such as food scientists. Freeing those people from the admin will allow retailers to focus on further improving their customer experience.

Additionally, speed to market with new products will be improved, as will sourcing new products given retailers will know so much more about their supplier and partner network.

Similarly, gaining such a detailed, transparent view of the supply network means retailers can more easily spot inefficiencies they may have been perpetuating for years, where the price of products, manufacturing or shipping may have become less favourable as volumes or market conditions changed over time or as more cost-effective suppliers came onto the market. The system would make it easier to spot where large, international operations had duplication of suppliers or are missing out on better volume deals, due to country operations sourcing items separately.

Ultimately, it all comes back to the bottom line. Retailers increase their likelihood of making sales, and protecting their margins and profits if they are able to satisfy the fads, fixations and growing concerns of consumers and regulators.

26 COUNTRIES, 23 LANGUAGES, 750 STORES, 21 MILLION CUSTOMERS TO SERVE… HOW METRO MAKES SENSE OF ITS SUPPLY NETWORK With more than 750 stores in 26 countries across Europe and Asia, serving more than 21 million customers in 23 different languages, Metro Cash & Carry faced a considerable challenge in capturing, understanding and validating the supplier and product data it needed to manage compliance and risk.

The company needed to consolidate supplier management and product specification data and enable more effective collaboration and communication across geographies.

Metro selected Oracle Retail Brand Compliance Management Cloud Service to consolidate all necessary product detail, increase transparency at every stage from sourcing to manufacturing, transport and retail, and reduce complexity while underpinning the due diligence needed to ensure product safety and compliance. The solution also provides the language support needed for such a global operation.

For it to be a success, Metro needed to get all country operations and suppliers on side to ensure it accurately captured all the data it needed on products and their manufacturing process.

The level of detail at which Metro is now able to review its suppliers and ingredients is enabling the business to make informed decisions at greater speed. Just one example came from the company’s review of its use and sourcing of palm oil. Palm oil is used in a great many products but before a review could even be undertaken Metro needed to know exactly which ones.

A process which would previously have taken days of meticulous research was completed in a matter of minutes. Metro is now able to apply the same speed and detail to decision-making about all ingredients within its supplier network and, should the need ever arise, has the confidence it would be able to swiftly deal with any related issues or crises.

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BEYOND RETAIL

It is essential that businesses gather as much information about suppliers and products as possible. Knowing how and where goods are produced, under what conditions, and how they are transported, not only enables retailers to pass that information onto consumers, but also enables them to ensure they are doing all they can to limit risk.