Eat, sleep, order online, repeat – right? The retail industry is undergoing a significant transformation in a rapid pace. E-commerce is growing exponentially, and niche players can reach consumers regardless of physical location. Physical expansion paces are being ramped down and new ways to create customer experience and generate sales are explored. So, is every retailer out there already onboard with this, you might ask? Nope, certainly not. But in order to face the competition, retailers need to reassess how to create value, reshape their asset mix and re-focus their efforts.
When strategy isn’t keeping up
As a consequence of the reduced expansion of physical stores, one of Sweden’s larger retailers was experiencing issues with the purchasing of store interior. Old ways of working, inadequate and inefficient processes became expensive problems as volumes were declining. Leftover products were piling up, forecast accuracy was off, suppliers were overcharging, and the purchasing process was simply too time consuming and rigid to keep up with. Problems most retailers have or are about to face.
Strategy and objectives of the purchasing department was not in line with the new company strategy of the company – a misalignment which resulted in increased cost, inadequate flexibility and insufficient speed to market. The cooperation between product development and purchasing was lacking, resulting in a much too wide assortment of interior products with a high degree of low-runners. Simply put, our client was not set up to deliver the modern store experience needed to face the challenges of the rapidly changing retail landscape.
Making it all work
With a strong feeling of “improvement needed” and “we can do better” our client reached out to Cupole to initiate their improvement journey. As with any transformation you need to start from a solid and fact-based common ground. This is why the project was kicked off with an opportunity assessment covering spend, operating model and collaboration. Through extensive interviews and data analysis the spend assessment identified a substantial savings potential, whereas the operating model and collaboration assessments identified the capabilities that needed strengthening to fulfill the identified potential. Based on the outcome of the assessment a recommendation was provided and a transformation program was formed to get the company onboard with the new ways of purchasing store interior.
“The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” – Bill Gates, founder of Microsoft
The main objective of the transformation program was to build a solid foundation for the organization to grow and develop from, and to give our client the capabilities needed to realize the identified savings potential and increase flexibility. It’s all about breaking it down and taking strategically smart steps, one at a time.
The program started with defining the units wanted position and a strategy of how to get there. The second step was centered around defining and remodeling the core processes to fit the given situation and enable a strategic sourcing approach to future purchases. The organization was trained in the new process at the same time as we, together with the buyers, developed purchasing strategies for each individual sourcing group. The program also developed a new management model with clear yearly activities, smart KPIs and regular follow-up, as well as a complete overhaul of the call off process. A new organization structure was also developed with defined and described core roles and clear career paths to build and retain competence within the unit.
New flexible retail reality
Together with our client we started the transformation journey towards a flexible, cost efficient purchasing organization based on clear and fact-based sourcing strategies. By building a solid foundation centered around a clear wanted position, strategy and a solid core process the organization is now equipped to start realizing the identified potential and build a stronger store offering to cope with the new reality of retail. A stronger store offering that isn’t only efficiently procured, but through flexibility enables continued profitable growth for our client.
Together with our customer we’ve put the ball in motion and most importantly, that ball is now heading in the right direction, and we can already see that their business now is more like: eat, sleep, cha-ching, repeat.