Strategic measures for optimising efficiency of procurement in retail industry operations
Summary
Procurement efficiency has a direct and significant impact on the performance of the overall business. However, in today’s tumultuous business climate retailers need to be aware of the main challenges faced by retailers arising from the realm of procurement which impact their organisation most profoundly.
In this blog post covering procurement in retail industry operations, we look at the main challenges and explore the strategic measures that can be implemented to address and overcome the procurement challenges faced by retailers to enhance results and success.
Getting the procurement function right is vital for any retail operation as it directly determines the quality, quantity, and cost of products and services sold to customers.
The efficiency of tasks related to procurement, such as sourcing and supply chain management, can exert a considerable influence on the availability of goods and services and will be a key factor that dictates sales volumes and values.
Therefore, procurement has the potential to throw any demand or sales forecasts when it is not aligned with the overall organisational strategy. Moreover, activities falling under procurement in retail industry ventures also heavily influences the profitability, competitiveness, and sustainability of the retail industry.
However, retailers face various issues and risks in their procurement activities—especially in the complex and volatile markets of the present day. Read on as we look at how retail businesses can enhance procurement performance by implementing tried-and-tested strategic measures.
What are the main challenges faced by retailers arising from the realm of procurement?
There are a multitude of challenges retailers face based on the nature of their operations and the complexity of their supply chains. Here are some of the key challenges that retail operations are faced with overcoming:
- Supply chain disruptions: Caused by natural disasters, such as pandemics and extreme weather, or man-made phenomena, such as cyberattacks or armed conflicts, and geopolitical tensions, resulting in trade restrictions
- Unforeseen fluctuations in demand: The currently volatile economic conditions have led to widely fluctuating demand from customers. This can be a result of inflationary measures or the current cost of living crisis that is sweeping across much of the world
- Rising costs of procurement: Prices for raw materials along with costs of transportation and logistics have risen significantly in the post-pandemic era, which has led to an adverse effect on the profit margins and bottom lines of retail operations
- Increasing rates of competition: Since the start of the COVID-19 pandemic, retailers faced increasing pressure to expand into online operations as a means of ensuring business continuity. This also led existing online platforms that positioned themselves as niche players or discounters to expand into retail businesses and leverage their established infrastructure to offer faster delivery, better customer services, and lower prices—heightening competition. Moreover, there’s an additional strain on procurement, as availability is key in online business
What strategic measures can be implemented to address and overcome the procurement challenges faced by retailers?
To overcome the challenges that complicate procurement in retail industry operations and to achieve optimal efficiency in procurement functions, retailers can adopt some proven strategic measures that can help them improve their performance and create value for their stakeholders.
Aligning procurement strategy to achieve business objectives and meet stakeholder needs
Retail businesses can create synergy and better alignment between procurement strategy and overarching organisational goals by ensuring that procurement decisions are based on a clear understanding of what the organisation wants to achieve and what the customers and other stakeholders expect and value.
For instance, if the corporate objective in focus revolves around boosting sustainability and reducing the environmental impact and social costs of the business, the procurement strategy should focus on sourcing products that are eco-friendly, ethically sourced, and socially responsible.
By aligning procurement strategy with business objectives and stakeholder needs, retailers can ensure that they are procuring the right products at the right time, price, and quantity. This can help them avoid wastage, overstocking, or understocking as well as avoid mismatching of products. It can also help them increase customer satisfaction, retention, and loyalty.
Leveraging digital technologies and data analytics for elevated procurement management
Leveraging digital technologies and data analytics enable retailers to enhance their procurement efficiency by reducing errors, delays, costs, and risks. The data-backed insights provided can also increase the organisation’s agility, responsiveness, and competitiveness in the market.
One possibility of integrating technology into the procurement function involves embracing e-procurement solutions that can allow retailers to use cloud-based platforms to connect with their suppliers, automate re-ordering, and monitor vendor performance in real time. As the speed and efficiency of procurement are significantly increased through automation, retailers can easily leverage this advantage to gain an edge in their increasingly competitive markets.
Implementing best practices and standards to optimise efficiency in the procurement process
Best practices in procurement are trusted methods or techniques that have proved their potential to produce effective results in similar situations or contexts, while standards refer to agreed rules or guidelines that define the requirements or expectations for a certain procurement process or outcome.
Implementing best practices and standards within the procurement function can help retailers improve their procurement efficiency by ensuring consistency, quality, and compliance in their procurement activities—resulting in greater returns from procurement activities that benefit the organisation.
Partner with a specialist in procurement consultancy to optimise efficiency and boost returns from procurement in retail industry operations
Taking the necessary strategic measures to elevate procurement functions can enable retail businesses to effectively gain a sustainable edge and optimise their efficiency, returns, and results to overcome challenges.
Working with a specialist provider that has a proven track record in procurement consulting allows retailers to leverage their expert insights and specialised knowledge to recommend the most appropriate strategic measures based on the specifics of each retail operation.
