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The grocery and retail markets are highly dynamic and exceptionally competitive. Facing historically tight margins due to the extensive resources it takes to keep product quality high, procurement teams in these sectors need to be on top of their game in order to compete and remain financially viable. A few specific procurement challenges companies in grocery and retail face today include:
- Getting the most value out of every part of the procurement process and ensuring alignment between sourcing results and overall business goals
- Navigating mega market trends: consumer demand for product transparency, empowered and well-researched consumers, health and safety issues and supply price hikes. These market forces are putting customer loyalty and brand reputation at stake and pushing grocers and retailers to rethink the way they source and bring products to market.
- Creating an enterprise-wide sourcing program in order to create a more efficient and unified spending process
- Small, resource-constrained sourcing and procurement departments, especially in grocery retail
Business today isn’t easy, but in the face of all these pressures, many grocers and retailers are thriving. What’s their secret? Incorporating a sophisticated, strategic approach to sourcing as part of their overall procurement strategy.
Beyond driving operational efficiency and cutting costs, a strategic approach to sourcing can help even the best-performing grocers enhance vendor relationships, increase product and ingredient quality, reduce spending and find new sources of supply, which ultimately equips them to generate more value for their organization and become more efficient and effective in their jobs.
Price Chopper Supermarkets, a regional, family-owned grocery chain with 135 stores, implemented a managed sourcing services model to help proactively find and analyze the best suppliers available based on quality, service and price. By leveraging a managed service partner, Price Chopper was able to implement a customized approach and get impactful financial results that fit its organization’s specific business needs.
The team focused on sourcing categories with the highest probable success rate and greatest ROI for their unique business objectives, and tapped an external team of procurement experts to quickly and effectively identify and communicate product specifications with suppliers, which helped decrease the turnaround time on price collection. Through this approach, Price Chopper achieved an efficient, repeatable and sustainable sourcing program that could be implemented across the entire organization — and ultimately led to $66 million in total savings over the life of the program, as well as an extended network of qualified, ready-to-engage suppliers.
With a never-ending list of procurement priorities, finding the time to tackle a massive project like this and secure similar results in such a timely fashion would have been incredibly difficult for the internal team alone.
Specific category savings of the project included:
- 63% on interior décor
- 55% on store operations and services, including the employee news magazine
- 40% on bagged potatoes and 65% on bagged onions
It’s non-traditional categories like these that often go untapped but offer the greatest value and savings potential. Oftentimes, when procurement teams aren’t familiar with a sourcing event or category, they’re tempted to leave it alone. But by partnering with a managed sourcing partner specializing in their industry or that specific category, these teams have a shorter learning curve and can take a product to market and obtain an award scenario much faster than if they started from scratch.
Another American grocery retailer and distributor is using managed services to drive value beyond just cost savings. They’ve created and conducted surveys to collect information on supplier performance both before and after an event. By asking questions through RFIs and scoring the answers based upon a predetermined scale, the team was able to establish clearly defined standards for categories to ensure product quality and open up the line of communication between their internal team and their suppliers. This saved them time in the supplier research process and improved the overall performance of their team, equipping them to make confident, informed procurement decisions based on data.
The traditional, one-size-fits-all technology-driven sourcing approach works only for simple categories and can limit potential savings, manageable spend and enterprise-wide adoption. This is why it’s important to complement your e-sourcing tools and procurement suite with managed services. By partnering with an external team of procurement experts and having access to their knowledge and experience throughout every step of the procurement process, new, complex sourcing categories are now perfect candidates for your business. By doing more with non-traditional, creative auctions, you can drive real value through sourcing, protect your brand reputation and retain customer loyalty by successfully navigating even the most pressing market challenges, and make each step of the procurement process more efficient and effective.