The Potential of Retail Scorecards
The concept of measuring retail/supplier performance is fundamental to improving a relationship. But, after a decade of implementation and use, progress on retail scorecards is happening very slowly. Their primary value is the improvement of on-time shipping performance. But, this benefit is only the beginning of what is possible through the use of retail scorecards.
Retailers and suppliers come to the table from different backgrounds with dissimilar needs and political dynamics. The retailer is typically a smaller company with a regional focus. Within the retailer, there is tension between the buyer/ merchandiser and the retailer’s supply chain organization and store operations. The role of the store is changing with the greater acceptance of e-commerce and mobile commerce by the consumer.
The retailer’s supply chain systems are not as advanced as those of their suppliers. For example, 56 percent of retailers have a perpetual inventory (PI) signal in their warehouses with 47 percent of respondents having a PI signal for their stores. Managing inventory on a perpetual basis is a sign of supply chain maturity and an important foundation for retail/supplier collaboration.
The supplier interaction with retail usually starts with a call from a salesperson. The larger the supplier’s company, the larger and more complex the sales team and the greater the political dynamic between the supplier’s sales group and other functions within the supplier’s organization — marketing, demand insights, category management and customer service. A struggle for the retailer is the difference in scale and capability of the suppliers’ organization.
Managing demand and translating retailer needs within the supplier is a challenge. The average supplier is greater than $5 billion in revenue operating more than 50 manufacturing locations and 28 distribution centers. While a regional team may have 30 to 50 account teams, each with scorecards, the global consumer packaged goods companies have hundreds of account teams with scorecards. As a result, the supplier’s organization struggles to harmonize and standardize information across retailers that have very different scorecards with different definitions and formats. While it is the intent of the supplier to use customer scorecards, no supplier feels they do it well.
Most scorecard interactions today are more focused on penalties than the joint benefits for a collaborative relationship. The primary emphasis is on deductions. Positive performance only translates to more business 26 percent of the time. The retailer normally budgets deductions and manages them as a cost of doing business.
Retail scorecards help to bridge the gap between partners and forge unique value. Suppliers need to use data and try to drive value in the relationship while helping retailer systems mature. Patience is the operative word. Retail scorecards are not as mature as most people think.
Retailers and suppliers come to the table from different backgrounds with dissimilar needs and political dynamics. The retailer is typically a smaller company with a regional focus. Within the retailer, there is tension between the buyer/ merchandiser and the retailer’s supply chain organization and store operations. The role of the store is changing with the greater acceptance of e-commerce and mobile commerce by the consumer.
The retailer’s supply chain systems are not as advanced as those of their suppliers. For example, 56 percent of retailers have a perpetual inventory (PI) signal in their warehouses with 47 percent of respondents having a PI signal for their stores. Managing inventory on a perpetual basis is a sign of supply chain maturity and an important foundation for retail/supplier collaboration.
The supplier interaction with retail usually starts with a call from a salesperson. The larger the supplier’s company, the larger and more complex the sales team and the greater the political dynamic between the supplier’s sales group and other functions within the supplier’s organization — marketing, demand insights, category management and customer service. A struggle for the retailer is the difference in scale and capability of the suppliers’ organization.
Managing demand and translating retailer needs within the supplier is a challenge. The average supplier is greater than $5 billion in revenue operating more than 50 manufacturing locations and 28 distribution centers. While a regional team may have 30 to 50 account teams, each with scorecards, the global consumer packaged goods companies have hundreds of account teams with scorecards. As a result, the supplier’s organization struggles to harmonize and standardize information across retailers that have very different scorecards with different definitions and formats. While it is the intent of the supplier to use customer scorecards, no supplier feels they do it well.
Most scorecard interactions today are more focused on penalties than the joint benefits for a collaborative relationship. The primary emphasis is on deductions. Positive performance only translates to more business 26 percent of the time. The retailer normally budgets deductions and manages them as a cost of doing business.
Retail scorecards help to bridge the gap between partners and forge unique value. Suppliers need to use data and try to drive value in the relationship while helping retailer systems mature. Patience is the operative word. Retail scorecards are not as mature as most people think.