Two-day delivery, next day delivery, same-day delivery. The retail industry is more dynamic than ever, forcing retailers to rein in supply chain errors and ensure their vendor community remains high performing. For the supplier, it is an uphill battle where they are pressured to meet increasingly complex demands from the retailer. Unfortunately, there is no easy way out. To stay relevant, suppliers will have to re-examine their strategy and make informed decisions for the upcoming changes. Here are the top 3 biggest trends that are shaping the relationship between retailer and vendor, and how can suppliers make the most out of them.
Tighter business rules and chargebacks
According toForrester, the Asia Pacific region will be an online retail powerhouse with total sales expected to reach $2.5 trillion by 2023. In addition, e-commerce will also add an additional3 billion potential buyersto the market by 2022. But here is the catch: Customers are harder to please as their demands and expectations have been influenced by the Amazon effect. Faster shipping and near flawless execution have become the new standard. While eliminating missteps in managing operating costs are still important, the retailer now needs to consider vendor performance. In the past decade, the collaboration between retailers and suppliers has masked a lot of inefficiencies, including late shipments, documentation errors and more. To protect their margin, retailers are tightening their business rules and implementing chargebacks for vendor violations.
From the supplier’s standpoint, getting vendor compliance right has become a must. Still, many suppliers are struggling to meet the retailer requirements with accurate, timely and complete information due to various reasons, including complex compliance rules, high volume transactions and a general lack of IT capabilities. Given all this, seemingly infinite issues can cause chargebacks. Savvy suppliers understand that the only true way to overcome the looming risk is through long term commitment with effective data exchange software in place to minimize chargeback risk before the penalty is even received. By integrating EDI with the ERP system, such as Microsoft Dynamics 365 Business Central, a supplier can eliminate manual re-keying of data while producing complete process accuracy through automation. EDI implementation will also provide the ability to track any non-compliant documents and fix them in real-time, thus enabling suppliers to meet the compliance demands of their retailers with ease.
The pressure of dropshipping
As purchases migrate to digital channels, the growth in demand for modern logistics warehousing around major urban centers of the Asia Pacific region also increases significantly. However, different from the US and European markets, there isminimal modern warehousing availablein Asia region, especially India and Southeast Asia. One way retailers have been able to overcome this problem is by taking advantage of the supplier’s warehouse network through dropshipping. In fact, the demand for this type of order fulfillment is increasingly being imposed upon the supplier by big retailers. The key takeaway here is that retailers are treating dropship as their distribution center and expecting suppliers to comply correctly from day one.
For suppliers, dropship enables them to expand their existing retailer relationships with new product offerings while finding new potential retailers to sell with. But to make the most out of it, suppliers will have to satisfy retailers’ requirements in fulfillment performance and compliance. This means implementing various processes, systems, and tools to carry out the dropship service, which can be costly from both a setup and maintenance standpoint. Moreover, the supplier also has to manage the inventory process for fulfilling orders, raising the need to synchronize inventory with all their channel partners to minimize risk and improve information exchange. This is where integrated EDI to ERP comes in. Through the integrated systems, suppliers are free from the burden of manually entering order data, thus minimizing the risk of data entry errors and accelerating their dropship performance capabilities.
Demand for Vendor Visibility
Long gone are the days of selling only to one major retailer. As the retail industry is becoming more dynamic than ever, suppliers are expanding their partnership toward many retailers. This is where the need for better collaboration and information sharing comes into play. While retailers are pressuring suppliers to follow strict compliance and dropshipping requirements, they also have to share sale forecasts with their suppliers to ensure adequate stocking. Correspondingly, the supplier should be able to offer inventory visibility for the retailer to determine current inventory levels and avoid stock-outs.
The goal is to find any potential issues at a detailed level and address them before the issue can impact supplier performance. Businesses need to be capable to track and exchange information about orders, shipments, delivery status, documentation and more. But, in the increasingly complex world of e-commerce, data is voluminous and convoluted. Manually tackling them is not a practical solution. Instead, the best approach is one that enables real-time automation. This can be done by integrating your ERP system with EDI.
Think of EDI First
To become the “best”, suppliers will have to address those challenges imposed by e-commerce retailers. In other words, they need to step up their game in technology to automate the information and data flow with the partner community. While there are different approaches, starting with EDI should be one of the highest priorities. Working as the bridge between retailer and supplier, it is a strategic investment to simplify order management across the whole “electronic retail ecosystem”. Moreover, big retailers have included EDI capabilities as part of their compliance requirements, making the technology a necessity to conduct business transactions with suppliers. But to make the most of it, for the sake of competition and meeting new demands from retailers such asdropshipping, integrating EDI to ERP is a must.
To find out more about EDI solutions for Microsoft Dynamic 365 for Business Central, please contact us at firstname.lastname@example.org. Our consulting team will equip you with all the information you might need to make the right decision for your organization.