Collaboration For bringing in localization

Collaboration For bringing in localization

Cost pressures due to the current economic turmoil; necessitate collaboration between retailers and CPG Vendors more than ever. Retailers and CPG companies need to share customer data to collaboratively work on understanding customers to create a tailored offering for the customers (localization) and reap benefits such as increased sales, reduced inventory costs and reduced stock outs.

INTRODUCTION

The current economic situation has put pressure on retailers to squeeze margins and offer products at competitive prices. These consumer pressures are typically passed down to CPG companies for discounts and lower costs. Due to the raising food and raw materials prices, CPG vendors find it difficult to meet these demands at competitive prices. Retailers and CPG companies need to work together for a win-win situation for all.

Inventory is one of the major pain points for Retailers. Cost pressures necessitate reduction in inventory costs, but a constant push from CPG companies, and discounts on bulk, make it difficult for retailers to balance between, inventory costs, supplier discounts and availability for customers. Not to forget the additional complexities due to plethora of items, large number of domestic and international vendors, various lead times and regulations. For a retailer it is finally to get the right product, in right place, in the right time and now, more than ever, focus is on the right quantity too.

Given the plethora of products typically which retailers carry, it is difficult for retailers to understand a product that well as a CPG company who manufacturers/markets it can understand. CPG companies understand their markets well, at the same time, retailers have a very good understanding of the big picture of what would sell and what would not in their stores. Hence if CPG companies and retailers collaborate to provide insights to each other on products, it could help the value chain to manage their inventory better and pass the benefits to the customer.

Most prudent retailers and CPG companies have adopted Collaborative Planning, Forecasting and Replenishment (CPFR) wherein they share their sales, forecast, lead times, replenishment parameters and others. But what seems to be amiss here is the customer data. Sales data, does not speak about customer – their behavior, their needs, their choices, capacity to buy and others such details. This data is essential to tune strategies and bring in customer centricity.

Most inventory related issues, could be traced back to inefficient assortment. If retailers and CPG companies collaborate to create an appealing assortment tailored to the customer needs, they could reap the benefits of sales surge, reduction in inventory costs, reduced stock outs and higher customer satisfaction, more so customer delight.

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