As solution manager for retail in SAP’s retail organization I am happy to provide an update about what will be there for retailers in the area of sourcing with significant private label business.
When we think of the trends that a retailer face today we get to 5 mayor topics only in the procurement area that are crucial for their business.
Insight into the supplier performance: The retailer who has transparency into the performance of his vendors leads in the market.
Cost pressures: the cost sensitivity increases more and more. Retailers need to control their cost and they must look in all areas for cost saving opportunities. A small percentage of increased cost savings increases already the profit tremendously.
Complexity and Inefficiency: The jungle of different systems in the area of procurement leads to more double work and inefficient work. Harmonized processes are an important success factor. Automation drives speed and accuracy.
Globalization: It is not enough to work with the vendors that you know or only look in your ecosystem for new vendors, but best-in-class Retailers must think globally. A global sourcing process has to bet set up so that the Retailers can find the best vendors for their needs.
Compliance: Streamlining the buying processes and aligning all involved departments lead to higher compliance. This is another area where potential for cost saving can be identified.
Knowing about these trends requires to look at solutions that address these challenges. And here is where SAP Ariba Strategic Sourcing comes into the game.
What Ariba Strategic Sourcing offers can be used by every company that has a procurement process in place and I cannot think of a company that does not procure products (or services) – even if it is only for their own consumption like copy paper or material for the offices of the employees.
But this blog is not about these sourcing processes but about how retailers with their business processes can benefit from SAP Ariba Strategic Sourcing in particular.
So, what about sourcing products for the purpose of selling it to consumers? This is what Retailers do and that should be supported as well.
And here comes the good news: Yes SAP listened to the Retailers and yes SAP Ariba now offers capabilities that are addressing exactly this: The sourcing of products for Resale.
When do Retailers source Merchandise?
We can think of two reasons:
- A retailer wants to find a new vendor for existing products because there is a chance for a better price and/or quality from another vendor.
- A retailer is planning to introduce a new product into the existing assortment.
In both cases this will be mainly relevant for private label assortment. So strategic sourcing is mainly needed for private label products.
For the branded merchandise, Retailers have their brand vendors. If a Retailer wants to have product A in the assortment that is only produced by vendor A, the Retailer cannot expect to get it also from vendor B. So there won’t be many reasons to run a sourcing (project). I am not saying that negotiation would not be beneficial, but a sophisticated sourcing process as you can do it with Ariba Sourcing is not as necessary as it is for private label products. Still you should leverage the capabilities of the Ariba Business Network.
In order to make the sourcing process for private label merchandise work for retailers it is key to integrate the Retail Master data model into the souring process.
Retailers work very often with a generic product and its variants. In fashion we call the generic product “style” and “colors and sizes” are the related variants. In some assortments retailers like to order “Mixed Cases” that consist of combinations and ratios of variants (let’s think for example of different Pizzas or shoes in different sizes).
These characteristics of the Retail Master data model must be considered when enabling the private label process for retailers when they run sourcing. In other words: In order to support this process, the specifics of the Retail products as described above must be covered, i.e. the variants (for the Pizza it would be the different Pizzas like Pizza Salami, Pizza Margarita, Pizza Extra Cheese and so on including the individual ingredients), the generic product and mixed cases.
This is what is currently addressed by SAP Ariba Strategic Sourcing.
Not to forget about all the beautiful generic capabilities that are there anyway with the Ariba Business network and the further Ariba Applications.
For a complete picture about vision of SAP Ariba Strategic Sourcing for retailers please refer to the picture below:
To summarize what is now addressed in the retail sourcing processes we can say that Ariba Strategic Sourcing understands the Retail product with its different product types. That means, that as a Retailer you can run your sourcing process also for the retail merchandise and leverage the capabilities of Ariba Sourcing and the Ariba Business Network at the same time.
I hope you enjoyed reading this blog about Sourcing for Retail Businesses.