Sourcing and Supply Chain Management Lecture 9 PDF

Sourcing and Supply Chain Management Lecture 9  SELECTING VENDORS BUILDING PARTNERSHIPS What we will cover How to locate new vendors Describe different types of vendors The criteria that buyers use to select vendors Methods buyers use to evaluate the vendor par...

Sourcing and Supply Chain Management Lecture 9  SELECTING VENDORS BUILDING PARTNERSHIPS What we will cover How to locate new vendors Describe different types of vendors The criteria that buyers use to select vendors Methods buyers use to evaluate the vendor partnership How to develop buyer vendor partnership Recognise that strong buyer vendor partnerships are needed for retailers to be successful SUPPLIERS AND VENDORS After you have developed your merchandise plan you will need to locate sources of supply, or vendors that will satisfy the needs and wants of your customers It is an important part of buyers job to select the right ones  Buyer needs to decide whether to purchase directly from producer or use a middleman between the buyer and seller TYPES OF Vendors are typically VENDORS Manufactures Wholesalers Manufacturer reps  TYTYPESTYPES OF VENDORSTTY TYPSTYTYPES OF VENDORSTYPES OF V Buyers needs to decide whether to purchase directly from producer or use a middleman between the buyer and seller Vendors are typically Manufactures Wholesalers Manufacturer reps NDORS  Some manufacturers have minimum orders and your store may not be able to make a purchase directly If so you would need to use an intermediary Most buyers of fashion make purchases MANUFACTURES directly from manufacturers or their reps in the market Because of the rapid changes in fashion the styles could change if had to go through a middleman Almost all fashion goods are produced just before the selling season which means they reach market with minimum delay  Retailers wishing to establish own label private brands usually place orders directly with manufacturers who are willing to make changes to their products if large enough orders are placed Private label Buying directly from manufacturer allows retailer to secure merchandise that’s not available in other brands retail stores The main benefit purchasing directly is that costs are lower as there is no intermediaries in the process i.e. no middleman  WHOLESALERS Buyers may choose a wholesaler if they cant purchase directly from the manufacturer The wholesaler purchases merchandise from a manufacturer in large quantities and resells the goods in smaller amounts to retailers Wholesalers will accept small orders unlike the manufacturer who only produced large quantities  MANUFACTURERS They can sometimes use The merchandise bought Most large retailers make wholesaler to purchase from a wholesaler will purchases directly from smaller orders for quick cost more than direct the manufacturer shipment emergency from a manufacturer stock fill-ins  MANUFACTURES REPRESENTATIVES They do not take Manufacturers pay a fee to They act as an agent for the possession of the the rep for bringing the manufacturer merchandise before selling product and the buyer it to the retailer together They typically represent several non competing lines The fee is usually a You can visit these vendors from different percentage of net sales at showrooms manufacturers this saves you time and travel expenses  Often the vendor will make contact with the buyer Buyers can initiate contact with vendors MAKING by attending trade shows and making appointments to go visit showrooms CONTACT WITH If you use a buying office they can SUPPLIERS initiate contacts with vendors for you AND Magazines and trade journals are a good VENDORS way to learn about new suppliers Other buyers may give ideas about the suppliers they use  SUPPLIER AND VENDOR INITIATED CONTACTS Some vendors send sales reps to you frequently to check sales and stock levels Smaller independent stores prefer vendors that visit and monitor stock levels this reduces their travel time and expenses relying on the rep visiting you does not keep you up to date with other vendors merchandise prices and offerings Changes are occurring so quickly its good to have a broad overview of what's available this allows you to compare your merchandise price quality with what ever else is available in the market  The following criteria should be considered when selecting new vendors Merchandise and prices offered CRITERIA Vendors distribution policies FOR SELECTING Vendors reputation and reliability VENDORS Terms offered Services offered  Main consideration should be if the merchandise carried by the vendor is compatible with the needs and wants of your customers Also that the quality standards meet your expectations MERCHANDISE You need to ensure that what is AND PRICES delivered to the store is the same OFFERED quality as the sample you saw when order was placed You could be looking for unique or distinctive merchandise if your shop is known for providing fashion leadership You need to decide will you focus on national brand or your own label  Merchandise and price offered Main consideration should be if the merchandise carried by the vendor is compatible with the needs and wants of your customers Also that the quality standards meet your expectations You need to ensure that what is delivered to the store is the same quality as the sample you saw when order was placed You could be looking for unique or distinctive merchandise if your shop is known for providing fashion leadership You need to decide will you focus on national brand or your own label  National brand own label National brands have automatic recognition and usually ensure that a large number of customers already know the brand and want to purchase it Private brands will offer your customer merchandise they cant obtain at other stores and your costs will be lower allowing you higher mark ups  VENDOR DISTRIBUTION POLICIES Exclusive distribution is where the sell the product to only one retailer in a certain area With exclusive distribution the vendor usually retains some control over how the product is merchandised in the store Designer lines are frequently marketed through exclusive distribution Exclusive distribution enables you to offer your customers unique merchandise that cant be found in competing stores  VENDORS The price is a main contributor in deciding which vendor to choose The image and target customer of your store will dictate the price range of merchandise you will be able to consider Vendors reputation is very important talking with other buyers can help you establish the vendors reputation for quality control and speed in handling complaints  Vendor terms offered Whereas some Discounts offered by Some retailers may retailers with limited vendors should be at want substantial cash financial resources least equal to those discounts from the may want more time prevailing in the suppliers to pay industry  SERVICES PROVIDED Services provided by vendors can be the deciding factor when considering from whom you will make your purchases services offered include Sharing advertising costs Return and exchange privileges Participation in store promotions ,prizes clothing items etc Sales training provided by vendor Assistance in stock control Pre ticketing of merchandise this allows stock come straight into store and saves time and money  Services provided Services provided by vendors can be the deciding factor when considering from whom you will make your purchases services offered include Sharing advertising costs Return and exchange privileges Participation in store promotions ,prizes clothing items etc Sales training provided by vendor Assistance in stock control Pre ticketing of merchandise this allows stock come straight into store and saves time and money “Suppliers and retailers are essential to each other if either is to achieve their business objectives”  Buying cycle for fashion products COLLECT IDEAS FOR REVIEW SALES NEW SEASON Address feedback Fashion shows issues Fabric /yarn shows Repeat fast sellers Directional shops PERFORMANCE Increase variety Style consultants REVIEW OF LAST In fast selling categories Key suppliers SEASON’S Mark down slow MERCHANDISE TAKE DELIVERY. sellers Avoid mistakes REVIEW INITIAL SALES build on successes Adjust order quantity if necessary Address any quality issues FORMULATE PLANS Colours Styling Materials PLACE FIRM ORDERS WITH SUPPLIERS. CHECK PRODUCTION QUALITY DISCUSS PLANS WITH SUPPLIERS DETAILED PRODUCT Review ideas from RANGE PLANNING BUILD COLLECTION suppliers for new Number of styles OF PROTOTYPE season (variety and depth) SAMPLES FROM Price SUPPLIERS Store distribution Colour and size offer  The fashion garment supply chain 1. Fibre maker 2. Yarn manufacturer (dyeing) 3. Knitter/weaver (dyeing 2) knitted or woven ABROAD 4. Garment manufacturer 5. Shipping agent 6. Shipped by air/sea/road/rail 7. Arrives at retailers or a combination distribution centre 8. Distributed by road to Internet Sales fashion outlet HOME 9. Arrives at retail store 10. Consumer Managing Using different performance the Supply criteria to measure suppliers such as… Base  Managing the supply base Using different performance criteria to measure suppliers such as… How buyers and suppliers work together  Key qualities to look for in a supplier Ability to take and act upon all instructions in an efficient and effective manner Good, consistent and accurate written, verbal and electronic communication skills Creativity in interpretation relating to sample development in terms of line, range and product category  Key qualities to look for in a supplier A consistent and level temperament that remains cool under pressure Confidentiality - ability to keep commercially sensitive secrets from competitors and the trade in general Good level of technical expertise and the ability to solve construction or quality issues Honesty in all dealings – delivery dates, prices, issues, problems – everything to do with the business relationship  KEY QUALITIES TO LOOK FOR IN A SUPPLIER A consistent and level temperament that remains cool under pressure Confidentiality - ability to keep commercially sensitive secrets from competitors and the trade in general Good level of technical expertise and the ability to solve construction or quality issues Honesty in all dealings – delivery dates, prices, issues, problems – everything to do with the business relationship Working successfully with suppliers requires developing strong and effective business relationships…where honesty is maintained in all dealings  Suppliers come to a buyer’s attention via: Word of mouth Direct approach Trade magazine Management suggestion Trade embassy/consulate of a foreign embassy Internet Attendance at foreign trade fair/show or exhibition  SUPPLIERS COME TO BUYERS ATTENTION VIA: Word of mouth Direct approach Trade magazine Management suggestion Trade embassy/consulate of a foreign embassy Internet Attendance at foreign trade fair/show or exhibition Buyers need to constantly review each suppliers trading performance including qualitative and quantitative criteria:  High levels of fashion innovation and design investment General efficiency of entire trading operation Qualitative Adherence to responsible ethical trading standards set by Performance buyer’s Criteria organisation/international law The organisation’s manufacturing meets accepted and approved quality standards set by the buying organisation  QuaQQUlitative Pe Qualitative performance criteria rfo rmance High levels of Criteria fashion innovation and design investment General efficiency of entire trading operation Adherence to responsible ethical trading standards set by buyer’s organisation/international law The organisation’s manufacturing meets accepted and approved quality standards set by the buying organisation  High levels of fashion innovation and design investment General efficiency of entire trading operation Quantitative Adherence to responsible Performance ethical trading standards set by buyer’s Criteria organisation/international law The organisation’s manufacturing meets accepted and approved quality standards set by the buying organisation  QUANTATIVE PERFORMANCE CRITERIA High levels of fashion innovation and design investment General efficiency of entire trading operation Adherence to responsible ethical trading standards set by buyer’s organisation/international law The organisation’s manufacturing meets accepted and approved quality standards set by the buying organisation Buyers are constantly under pressure to reduce the number of suppliers that they deal with in an effort to achieve economies of scale and simplify processes  Achieve economies of scale by buying more from fewer By suppliers rationalising Make business administration simpler the numbers Improve the buyers’ own time of suppliers, management Make buying decision making buyers can: less complicated  BY RATIONALISING THE NUMBER OF SUPPLIERS BUYERS CAN Achieve economies of scale by buying more from fewer suppliers Make business administration simpler Improve the buyers’ own time management Make buying decision making less complicated One way to evaluate suppliers is to set up a matrix…  How to manage your suppliers Weighting Supplier Ref No 1001 1002 1003 – Delivery Performance (1.2) 7 4 9 7 x 1.2=8.4 4 x 1.2=4.8 9 x 1.2=10.8 Quality Performance (1) 8 5 9 8 x 1= 8 5 x 1=5 9 x 1=9 Adherence to ethical trading standards (1) Fashion Innovation (0.7) Design Capability(1.2) TOTAL  Buyers are forever considering Developing future seasonal buys and will be product thinking and assembling ideas for colour, style and/or brand categories offer well ahead of the actual and selecting time of purchase lines  Developing product categories and selecting lines Buyers are forever considering future seasonal buys and will be thinking and assembling ideas for colour, style and/or brand offer well ahead of the actual time of purchase  Basis for strong partnership Being prompt in keeping appointments Visiting with manufacturers reps who call on your shop there is always something new to learn about the market Giving your full attention to their presentations You should promptly confirm or cancel any orders you have tentatively placed to avoid any misunderstandings Keep the promises you make orders must not be cancelled before their cancellation date Provide feedback to vendor of how merchandise has sold in your store Not making snap decisions when changing vendor base your decisions on careful analysis  What do buyers expect from vendors Many buyers want help in managing inventory this can be best done by keeping the items in stock that are performing well and eliminate the non performers Help with sales training Fixtures and visuals Packaging often items are packaged by the dozen individual packaging would help retailers Timely deliveries prompt shipment of orders and good timely deliveries with quality merchandise  WHAT DO BUYERS EXPECT FROM VENDORS Many buyers want help in managing inventory this can be best done by keeping the items in stock that are performing well and eliminate the non performers Help with sales training Fixtures and visuals Packaging often items are packaged by the dozen individual packaging would help retailers Timely deliveries prompt shipment of orders and good timely deliveries with quality merchandise  The vendor and Closer relationships retailer must know occur with good Closer communication each others issues and problems buyer- vendor The vendor must discuss with the Bar coding and computerised relationship buyer the mark up systems now allow needed and the mark vendors to give downs which they retailers accurate up can live with and the to date information speed of inventory on the status of their returns orders  Apparel. Clothing lines for women, men and children.... ? Footwear. Anything worn on the feet such as boots, shoes and sandals....? Sportswear.... ? Choosing Formal Wear.... ? product categories Accessories.... ? Watches & Jewelry.... ? Luggage?  Next stage is selecting lines that make up the product category Buyer will inevitably have too many samples Selecting The buyer will be continually lines editing out lines until arriving at the final selection Final decision is taken by entire team and after reflection between buyer and merchandi RELATIONS HIP The relationship between BETWEEN supplier and retailer is BUYER fundamental but has suffered in previous years... AND SUPPLIER  RELATIONSHIP BETWEEN BUYER AND SUPPLIER The relationship between supplier and retailer is fundamental but has suffered in previous years...  Buyer/supplier Suppliers – Generally Buyers – Young and perceptions of older more inexperienced each other experienced – Use threats – Always full of and buying excuses power – Promise the – Make world unrealistic – Doing the demands same job for – Change years departments – Too relaxed regularly with plenty of – Too busy all time the time  Building Partnering Relationship Awareness  Exploration  Expansion  Commitment  lack of trust The key imbalance in the relationship barriers to lack of effective communication successful supply chain ineffective systems and processes partnerships are: high investment and a long lead-time before benefits accrue (findings from a study by retail consultants Management Horizons Europe) Selecting the right supplier to develop product lines is partly to do with cost price but there are other factors…  Product quality Product delivery Other Product fashion level Communication efficiency factors Compatible personality Ethically managed production  OTHER FACTORS Product quality Product delivery Product fashion level Communication efficiency Compatible personality Ethically managed production  Will the supplier deliver a product that meets the business’s pre-defined quality standards – will it wear and last? No buyer wants customer returns! Product quality  Can the supplier make the product in time for it to be delivered for the planned selling period? Product delivery  Can the supplier efficiently interpret the fashion required? Does the brand offer the right level of fashionability? Supplier creativity is very important. Product fashion level  Does the supplier maintain regular communication at all times with the buyer and their key support team? Communication efficiency Compatible personality Does the supplier representative work well and get on with the buyer? Ethically managed production Does the supplier manage its own sourcing and manufacturing ethically?  Building Blocks for Strategic Partnerships Mutual Trust Open Communication Common Goals Credible Commitments Strategic (Partnering) Relationships Retailer and supplier committed to maintaining relationships over the long-term and investing in mutually beneficial opportunities  Dangers of partnership approach Partners can become Buyers may overlook interdependent product opportunities breeding offered by other complacency supply sources  A portfolio of supplier relationships Core Suppliers Supply Partners Use on regular basis for Ongoing supply specific skills Shared strategic objectives Increasing business according Operational adaptations to competence New/Intermittent suppliers Inactive suppliers Emerging product markets Dormant Occasional purchase De-listed requirement (seasonal) Emergency supply Fads  A continuum of retailer-supplier relationship development Long-term Vertical Partnership Alliances relationship Integration One-off Repeated transactions transactions Ongoing Collaborative Franchises Owning transactions systems Licenses suppliers MQUESTIONSManaging thMe Supply Base QUESTIONSMMManaging the Supply Base