Wednesday, April 20, 2011

The Case Against Category Management – The Suppliers - 1


By March 3, 2000, we had converted our software to run on the Internet and started what must have been one of the first ‘Cloud Computing’ ventures in the retail industry. The following July, IBM published a press release announcing our plans to automate 180,000 convenience stores and gasoline stations by connecting their stores and back offices to the more than 4,000 grocery and  fuel suppliers in a common hub on the Internet. They called it “a classic example of how technology is giving small businesses the same operational efficiency normally enjoyed by just large companies.” Note: IBM had yet to coin the term “Cloud Computing.”

The press release prompted a phone call from Nabisco. After reading about our successes in linking retail stores to headquarters using the Internet, they expressed an interest in pursuing the possibility of installing the technology in the stores of their 100,000 convenience store clients, because as they put it, “knowing what the drivers should load on their trucks before leaving the warehouse could be worth untold millions of dollars in savings.” Unfortunately, two months later, in January of 2001, Philip Morris acquired Nabisco and that was the end of that.

In the summer of 2004, a convenience store client assembled a meeting of his suppliers to muster their support for the implementation for, and testing of, a new technology that would facilitate ‘Managed Supplier Partnerships’ between themselves and their suppliers. The participants consisted of a well-known soft drink company, a beer distributor, a direct-store-delivery firm, a regional grocery supplier and a vendor that furnished items such as trinkets, statues, caps and other miscellaneous items to most of the convenience stores within his geographical area. During the meeting, those present swore their complete cooperation and support.

Over the subsequent months, what actually occurred was somewhat comical. 1) The soft-drink company announced they were not yet capable of linking UPC codes to their invoices, but they were working on it, 2) the beer distributor politely asked me to vacate his premises when the discussion prompted the question: ‘If the retailer had plans to decide what he wants to sell in his own stores, what would be the need for pre-salesman?’ 3) the  rack jobber remained unreachable, 4) the trinket salesmen didn’t have the equipment to put UPC codes on his products, and 5) the grocery supplier had a strong desire to cooperate but his antiquated software system was not designed to track UPC codes accurately, and further, “insurance regulations” prevented us from assisting him in his efforts. All in all, it would seem a collective decision had been made to stonewall the project. 

I’m telling you these things because I want you to know, the idea of you controlling your own inventory strikes fear into the hearts of your suppliers and your IT providers. The very thought conjures up a total loss of control with regards to their ability to make these decisions for you. For decades now, things have been going their way. You suppliers have experienced first-hand, or at least have been made aware of what happens when retailers like Walmart start to take an interest in what products get put into their establishments and begin to ask questions about the margins on each and every little item that moves through their stores.

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