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Issue Date: January 2008

Eliminating the weakest link in the supply chain

1 January 2008

Ashley Ellington, MD: Softline Enterprise, explains that because consumers now have less money to spend, they are becoming that much more fussy about where they spend it, and what they spend it on. This makes supply relationship management (SRM) more important than ever before.
Ashley Ellington
Ashley Ellington
For players in the highly competitive retail industry, things have just got tougher. The effects of the new National Credit Act and interest rate hikes have arguably combined to serve them with a double whammy. Not only are they dealing with the direct effects of these on business, but they are being forced to address a potentially far more concerning issue: the emergence of an increasingly selective consumer.
Ashley Ellington, MD: Softline Enterprise explains that supply relationship management is one of the latest terms to emerge in the applications and solutions space - and that it is one anyone with a supply chain needs to sit up and take note of.
"The latest belt-tightening mechanisms government has implemented have the potential to alter consumer behaviour significantly. Consumers are now more determined than ever before to get the most possible value out of each rand they spend. This means they are not going to be complacent when it comes to quality and availability. Service is also going to play a big role in keeping consumers coming back to your store. This means supply chain management (SCM) is crucial."
When it comes to SCM, however, using the standard approach and applications is no longer enough. "Integration - all the way through from customers to suppliers - is critical. The automated flow of goods across your supply chain has to be seamless, and this seamless delivery must start at your suppliers' doors - where SRM fits in."
Just like customer Relationship management (CRM), supply relationship management essentially involves managing all aspects of your company's relationship with its suppliers. While one would assume this to be inherent in a supply chain, Ellington says it is not necessarily, "What we are seeing specifically in the retail space is that apathy in terms of your suppliers translates into very real weaknesses in your supply chain. A certain supplier can often prove to be the weakest link in your supply chain. As a result, quality of both services and products suffers, and delivery can become problematic. This is often simply because these relationships are not managed correctly."
Before entering into an agreement with a supplier then, it is critical that they understand what signing on the dotted line entails, "Your suppliers must be as committed to your business and to the flow of goods as you are. They need to understand the full impact of their defaulting in the slightest possible way. Good SRM ensures this happens. It guarantees that any glitches will be ironed out well before they impact on your ability to deliver to your customers. By maintaining this relationship on a continuous basis, you will add significant value to your supply chain, with extremely positive knock-on effects."
Ellington explains that an important element of SCM is shopping for the 'right' supplier, "It pays to be picky when it comes to suppliers. What we are seeing especially in the fresh food retail space at the moment is that certain stores have clearly selected the right suppliers, and others have not. By using stricter criteria in terms of delivery and quality, these stores are harnessing the power of their supply chains and giving their customers far superior products. In this way, they are proving to their customers that paying slightly more for a packet of lettuce for example is worth it. The lettuce is fresher, of better quality and will thus last longer in the fridge. Based on choice and management of a supplier then, a retailer has the power to differentiate a generic product like lettuce. This is the real power of SRM."
Fostering your supplier relationship then could very well be the secret to enticing consumers through your doors. By seeing the potential of each and every product and involving the suppliers of these in getting this potential to market, you probably will not have to worry about what Tito decides to do with the interest rate in a month's time.

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