Procurement’s Ever-Growing Role in Retail

It’s been 10 years since AT Kearney categorized retailers into three different categories:

  • Food and drug retailers, who sell just what you would expect (food and drugs)
  • Soft line retailers, who sell apparel
  • Hard line retailers, who sell appliances, electronics, and furniture

Although these classifications still exist, the definitions have blurred considerably in recent times.

Take Wal-Mart, for example. Wal-Mart is a hypermarket giant that combines all three of the above categories under one roof. And as we all know, Wal-Mart has been extremely successful. However, this convenient “one stop shop” is shutting down other retailers in the process. And as this hypermarket trend continues, survival alone will be a challenge for traditional retailers across the globe.

According to a 2011 Ernst & Young survey, future retail concerns include:

  • Low consumer market growth
  • The inability to benefit from e-commerce
  • Compliance
  • Supply chain disruptions
  • The rising shift to sourcing

So, how will traditional retailers survive?

With the help of Procurement, of course!

As you can see from the above list, supplier-related activities are now a much greater concern. Today, retailers must focus not only on their customers, but on suppliers as well. This drastic change to retailers’ operational approach means procurement teams need to be more heavily involved. But are they?

According to a 2012 KPMG survey, less than 45% of retail procurement teams lead their organization’s supplier performance management activities, SRM, or contract management activities. This needs to change!

To stay afloat in such a competitive industry, retailers and procurement teams alike must adapt advanced modern sourcing and procurement approaches that focus not only on cost savings, but on two other key concepts – flexibility and visibility.

To learn more about the evolving role of procurement in today’s retail industry, download our newest whitepaper: Improving Retail Procurement Insights: Thinking Beyond Cost for Delivering Innovation.

In the meantime, what do you do to make sure your procurement team is a part of the decision-making process? Comment below or tweet us @iasta.

One Response to Procurement’s Ever-Growing Role in Retail

  1. Procurement function in manufacturing organizations is considerably more advanced in its strategic role of demand planning, supplier evaluation & selection, negotiations and execution of supply contracts. And, it doesn’t stop there. Procurement professionals in most medium and large size manufacturing companies manage supplier relationship with high level of dedication & professionalism to ensure quality, delivery and profitability of their companies through this strategic approach. Retail sector will greatly benefit from adopting similar approach to procurement function. Walmart’s involvement with suppliers in recent years seems to be on track to recognize the strategic importance of Procurement function.

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