With consumers facing rising bills for fuel, mortgages and food there can be little wonder that high street retailers are feeling a little gloomy. Even the weather is against them.
When times are hard corporate attention turns to improving working capital through changing payment terms with suppliers or lowering levels of inventory. Alliance Boots recently put the cat among the pigeons by making suppliers wait up to 75 days for payment of invoices and several leading retail groups are even turning to their landlords to secure rental payments on a monthly, rather than three monthly, basis. With pressures like these, cash is becoming more important than profit and when that happens, margins suffer.
Those that are winning sales on the high street are at the discount end, where middle-class shoppers trim costs by shifting from the likes of Marks & Spencer to Primark. Here the battle is fought over delivering value to the customer while ensuring that the cash-to-cash cycle is highly tuned.
If a retailer is going to stand its ground then it is going to have to ensure that its processes are well defined and IT appropriately aligned to those processes. Visibility across the chain needs to be crystal clear. But the richest pickings will be in thinking outside the box regarding opportunities for collaboration. Invariably, that means starting open discussions with key suppliers over areas of mutual advantage – that may be sharing epos data, forecasts, transport and logistics arrangements, or talking of ways of taking entire links out of the chain. And it’s this sort of radical thinking that is required.
Wal-Mart is working on such an initiative with P&G in the States, whereby sales data is not used to forecast demand but to schedule replenishment deliveries on a store-by-store basis. Significantly, shipments are tailored for each store at the factory and cross-docked at the Wal-Mart distribution centre for delivery to store.
In this way P&G’s distribution centre can be bypassed, removing a whole link from the chain and radically cutting time from factory to shelf – some ten days in this instance.
Collaboration is going to be the key to taking cost out of the supply chain and speeding the cash-to-cash cycle.