The appeal and challenges of deliveries retail chains.
Table of Contents
On one hand, many manufactures (sometimes, but less often due to lower margins also wholesalers) dream of starting the co-operation with large retail chains. Such customers offer large scale, regular orders and sometimes stable co-operation.
The reality of partnering with retail chains.
The typical models of such cooperation could be a long-term contract, offering may be not that high margin, but still, stability. Alternatively it could be a one-of delivery, where the sale and relatively higher margin off-set the stability. Of course, such customers typically squeeze the supplier on financial terms, same in margin and well as in not that favorable payment terms, but on the other hand they are very stable and reliable payers.
Sounds good, but on the other hand, the retail chains are very difficult and demanding customers. And it is so in the areas least anticipated by the supplier. Let us focus on such unexpected areas of possible co-operation. The area almost nobody is discussing, once the long expected contract is negotiated, is the delivery term. Typically it is just one clause in the contract, like the goods are to be delivered at a certain place at a certain time. Dot. It is too late to re-negotiate the deal, it is just time to deliver. And as usual, the devil seats in the details.
The first and usually unexpected obstacles start when the deliveries are to start. It is the moment, when it turns out the retail chain has its’ very specific and demanding terms”, which, what a surprise, are at all not negotiable. It is better to be aware of it before starting. Having time, the organization can accommodate and then the process goes smoothly and the company does not have to compensate. It is a very expensive way.
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Key komponents for successful deliveries.
Efficiently delivering products to big retail chains involves several key elements in the supply chain. Here are some critical components:
- Sourcing and Procurement:
- Retailers typically work closely with manufacturers and suppliers to ensure timely production and availability of goods.
- Either it is a long term agreement, typically on yearly base
- Or it is a one-off, typically promotional, order
- In any case negotiating favorable terms, managing contracts, and maintaining strong relationships are essential.
- Part of the negotiated agreement are delivery terms with special focus on logistics conditions and transportation terms
- Logistics and Transportation:
- Coordinating transportation from suppliers to distribution centers and/or retail stores is crucial.
- Efficient routing, tracking, and managing carriers play a significant role in successful deliveries.
- Typically there is a retail chain manual describing all the details.
- But manual is by definition general
- And it needs to be filled in with best practices, experience and build-up of successful co-operation
- Especially to cover all the discrepancies and exceptions
- Warehousing and Inventory Management:
- Retailers need effective warehousing solutions to store and manage inventory.
- Optimizing stock levels, handling storage efficiently, and minimizing stockouts are priorities.
- The warehouse needs to dedicate sufficient space, both on the ramp, as in the shelves
- The number of dedicated staff needs to have certain flexibility in capacity
- Last but not least important is labelling and delivery notifications
- Distribution Network:
- Retailers should strategically plan their distribution network to minimize transit times and costs.
- Leveraging physical assets (such as warehouses and distribution centers) effectively is essential.
Common challenges in co-operating with retail chains.
But what could be the difficulties, one may encounter starting deliveries?
No excuse approach.
Retail chains have their own, very demanding judge. It is the end customer. And he does not excuse for anything. Goods should be available as promised and when promised. For the supplier it does not matter, how good the reason (in fact excuse) is. The deal is the deal and any discrepancy will be severely punished. Once it could be just a penalty (however steep), but if repetitive, it means the end of the supply.
Zero flexibility.
Retail chains have their own rules, also when it comes to supplies. It means how the goods to be delivered, when to be delivered and in what condition.
Time is an asset.
If you keep them occupied too much, asking too many questions or making them contact you because you do not follow written instructions, it could jeopardize the co-operation. It is the very reason they write down instructions and put a lot of effort to make them as clear as possible, to avoid your questions as much as possible.
Personal relationship.
Once the contact is established, the customer buyers try to keep contact with the people they know. Try not to introduce new players to the game all the time, spreading the responsibility throughout your organization. Appreciate the personal relationship more than your company internal work division.
Why you should consider a logistics partner.
Keeping all the a/m in mind the strong recommendation is to use an experienced logistics partner for the deliveries, instead of trying to build it from scratch.