Professional Shopping as an alternative to classic Procurement in FMCG and Retail

Professional Shopping as an alternative to classic Procurement in FMCG and Retail

Emanuel Modrovic Blog, FMCG, Retail

In the fast moving FMCG and retail market, responsiveness and speedy time-to-market require very lean and quick processes. While this is not a ground-breaking observation, it is surprising how many FMCG and retail firms still grapple with running streamlined operations to allow them to do just that. Depending on the respective market positioning, a reactive stance to the latest trends is fairly common, but relies heavily on being able to quickly and efficiently cater to these trends before they have passed. At the same time, Procurement coverage, support, and capacity is often light and/or seen as a blocker and an annoying hoop to jump through. This is very unsatisfactory for all parties involved, and simmering conflicts and unclear responsibilities can lead to gaps in production and on shelves. Drawing on some of 4C’s recent work in the FMCG and retail space, we have developed a third way. Rather than abolishing Procurement involvement and capability completely, or enforcing a rigid and strict process, why not take the best from both approaches and help bridge the gap between commercial necessities and Procurement principles?

Professional Shopping

This third way focusses on professionalising the Procurement process while putting simple procedures and tools in place to aid commercial managers – you could call it Procurement Light or Professional Shopping. Successful execution of this approach hinges on effective frameworks and easy-to-use tools to enable quick but effective purchasing in fast moving environments with a focus on speed-to-shelf and simplicity. At the same time, it can help smaller and growing organisations without a Procurement function or focus on the Procurement element to reap some of the proven benefits of professional Procurement practices.

  1. The starting point should be simple policy documents and processes for product design, purchasing, quality auditing, and supply chain, including very clearly delineated roles and responsibilities.
  2. Value and speed can be driven right from the beginning, if commercial managers are supported through high level product specification templates to guarantee quality and CSR requirements depending on the relevant product group and type.
  3. Commercial decision-making about product and profit viability should be supported through interactive commodity dashboards and a simple Total Cost of Ownership (TCO) calculator. These can be integrated with the product specification templates to minimise manual intervention and typically focus on a select range of factors to enable comparison between sourcing countries and suppliers.
  4. Simple Negotiation templates which can be populated automatically to a large degree help to ensure solid preparation even for short-notice purchases.
  5. We have also found that usage of standard Terms & Conditions with flexibility and substance to expand into more strategic relationships helps to minimise involvement of the Legal team and speeds up overall conclusion of the purchasing process.
  6. Finally, having in place supply chain frameworks and agreements for a variety of locations and modes of transport then enable a smooth journey from factory to store.

Surprising outcomes

In one of our recent projects with a large retailer, focussing on a Professional Shopping approach yielded significant efficiencies and benefits of up to 12% in all product groups in scope. Working closely with the relevant functions, we were able to shorten the end-to-end process by up to 20%whilst delivering substantial savings – even in some of the most iconic product lines that constitute the client’s core offering. In an age of rapid change and disruption in consumer markets, relying on a hybrid approach can help to navigate uncertainties and preserve much needed flexibility.