Putting in the work now for a more profitable future

by | Oct 25, 2018 | Omnichannel, Retailers, Suppliers

Technology, like time, marches on. Progress is inevitable, and things are going to change.

It’s even true for the retail supply chain, and like most changes we experience in this industry, it’s going to be the industry giants that lead the charge. Everyone else will follow suit over the next few years. People who already have market leadership aren’t going to tread water – they’re going to continue pushing their own strategies and technology adoption forward, and they’re going to require all their trading partners to follow suit.

But rather than wait for the ideas and technology to trickle down, this is a chance for smaller companies to start making their transition earlier to get ahead of their similarly-sized competitors and even pick up some new customers.

Not only do you have an opportunity to challenge your larger competitors and make them nervous, but you can become a market leader in your own right. By winning market share from the “challengers” who are a little slower on the uptake, you can outmaneuver and outperform them. Through this early adoption, you can take advantage of adding new partners that want to work with you because of your performance, whether you have a retail brand or a supplier operation.

Automation is a good example. As we’ve discussed in previous posts, some small companies will trade with larger partners and upload their product spreadsheets into web portals. As they grow and add a few more retailers, they’ll add more and more staff to help handle the new portals. This is fine if you’re small, but many suppliers and retailers make a big mistake by trying to do everything the same way as they grow, even when it doesn’t scale well.

And so they grow in fits and starts, scrambling to hire new personnel to handle manual data entry as they add new partners, which eats into profits and efficiency. Soon enough you have whole rooms full of people pushing paper and yet you still never seem to have enough to get it done efficiently. Additionally, with every point of manual data entry across the process is a chance for a mistake that could compound as it’s repeated across the company.

Not implementing a proper ERP system is another common problem we’ve seen. A company’s inventory system will grow out of control, to the point it can no longer be handled in a spreadsheet. All the information is still entered by hand, and there are several near-duplicate records because someone transposed an item number or description. They turn into a big mess once a company gains enough business connections and responsibilities.

You might be able to grow this way, hiring new people for manual data entry and creating bigger and bigger spreadsheets, but this isn’t sustainable and you won’t be able to manage an out-of-date and cumbersome system for very long. Something will get missed, a bad habit will develop, and then you lose your biggest partners because you’re not able to deliver.

You can’t stop the future

By then, it will be too late to invest in what you need to save the situation. You’ll have already lost a major partner and you may have put the rest of your business at risk. Think of the ripple effect that can have. We all remember when Sports Authority ceased operations just two years ago. Their closing put a lot of pressure on their suppliers who had been waiting to get paid, had outstanding inventory, or had extended credit to the sporting goods giant.

If you want to grow strategically and secure a more profitable future for your business, pay close attention to the technological advancement successes and failures of retailers and suppliers in different industries. One of Sports Authority’s key problems was that they didn’t have a positive in-store experience for their customers, and didn’t prioritize (or achieve) an omnichannel experience for its customers.

Borders booksellers didn’t try to keep up with a growing demand for online sales until it was too late. Their in-store experience was wonderful, but they lacked a comprehensive online experience. They tried closing stores to save the company, but they never recovered.

If you want to grow your business, keep up with the industry, and future-proof it against possible failures like Sports Authority’s or Borders’, stick to these three basic strategies:

  • Add systems where appropriate. If you see your competition or your trading partners are adopting a new piece of technology, start exploring it right away. Don’t wait to see what happens before you even start thinking about a change. If a new piece of technology gets picked up by, say, the big box stores, now is the time to look into it. Don’t wait until companies of your size have begun implementing it before you see what all the fuss is about.
  • Add sales channels where they are strategic. We’re still surprised that Borders never saw Amazon coming in the early 2000s and that they ignored the continued growth of online sales. An online channel would have been relatively inexpensive to launch, compared to opening a fleet of new stores. Figure out which new sales channels might be right for you. Do the market research, try some pilot programs, and see if a new channel is something your customers would be interested in before you decide it’s not right for you.
  • Add automation to keep your resource and staffing costs down. Can you imagine (or have you had) a department of 30 to 40 people all handling the processing of purchase orders (PO), PO acknowledgments (POA), advanced shipping notifications (ASN), packing lists and invoices? This is where the industry was 15 – 20 years ago, but now everything can be handled by one or two people and an automated electronic data interchange (EDI) system. It’s error-free, sends and reconciles documents in seconds, and can eliminate many of the problems that have plagued retailers and suppliers for decades.

Finally, if you want to grow, focus on what’s best for you and your company. Don’t try the things that will only be attractive to Silicon Valley or financial analysts. Focus on keeping your customers happy, providing top-quality service, and meeting the expectations of your trading partners. If you can do that, you’re more likely to get that profitable future you’ve worked so hard for.

To learn more about the kinds of automation and technology to help you get there, please visit the SPS Commerce website for more information. You can also speak to one of our EDI experts, who will be able to answer all of your questions and even provide a free demonstration.

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Richard Schultz


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