Five actions for procurement in the 'new age' of grocery retailing

Nicki Perrott
posted by Nicki Perrott
10 March 2015

In today’s world, retailers need to be everything to everyone – be local, be an experience, be at my front door when I want you, be quick if I’m busy but take time if I’m lonely. Don’t push up prices, don’t build near other retailers and don’t waste any food.

Sell kids clothes, sell Advocaat, sell insurance and flat-screen televisions but source all of them responsibly. Make me healthy, make me green, clear my conscience and then; reward me for my business.

The big four UK supermarkets are clearly being challenged to meet the demands of a new post- recession consumer. New entrants to the market are having a seismic impact. Gone are the days when once or twice a month we all went to an out-of-town shopping centre and filled our trollies to the brim full of promotions. Now, we shop little and often and four out of 10 of us always stick to a shopping list. Our mothers tended to go to the same store year upon year but today we are much less loyal to a brand, we regularly visit a diverse range of grocery stores, trading down to save money and trading up to treat ourselves.

The pace of retail makes it a fast, dynamic and exciting sector to work in, but this pace must not lead to short-termism, poor decision-making and shortcuts or there will be more horse meat scandals and accounting irregularities, which damage the brands and sector.

So what does this mean for procurement? Pre-recession indirect sourcing (goods not for resale) was an area often unloved by retailers. As austerity hit and customers tightened their belts, the bottom line became as important as the top line in the boardrooms, and it was suddenly an area of opportunity. Those that did it well were able to offer real competitive edge to the business. 

The difference between those indirect procurement teams that did it well and those that didn’t was about staying close to the customer. Good buyers are on the shop floor seeing if the toilets are cleaned as specified, they go out with refrigeration engineers and observe if the new planned preventative maintenance schedule is working, they talk to store managers about the LED lighting and its impact on sales and then they take the findings and work with stakeholders and suppliers to continuously improve the offering. The focus to save money is balanced with the customers’ needs and how buyers effectively execute change.

And what of direct procurement teams; the food, drink and general merchandise? In my experience, it is rare for goods for resale (GFR) and goods not for resale (GNFR) buyers to move between departments. On paper you would expect the same skills – negotiation, supplier management, commercial acumen but GFR is much more about the here and now. What is the competition doing on beer this week and can we match or beat it? As the demands of the customer have become much more complex and the sourcing more global, this may not be enough anymore. A more strategic, long-term approach to each and every category is required.

What should procurement do in this new age of grocery retailing? First, it’s always about the people, either as an outsourced or insourced model, supermarkets must invest and employ a high-calibre team. Second, GFR and GNFR must have clear sponsorship at board level. Thirdly, the GSCOP (Groceries Supply Code of Practice, see page 24) should be extended to cover general merchandise and indirect supply. Fourthly, buyers should move to a more strategic and mid/long-term approach to enable suppliers to plan their business accordingly.

One final requirement is to stay close to the customer. Supermarkets, suppliers and the entire supply chain must put the consumer at the heart of everything they do, all of the time.

Nicki Perrott is client director at Procure4 and was head of Sainsbury’s procurement 2010-2014
 

 

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