Vendor

Management

Dr. Shikha Gupta

Assistant Professor
Department of Fashion Management Studies
Supply Sources
• Most retail businesses do not manufacture the goods that are sold
through their outlets.
• Access to a wide supply base that delivers products at
• an acceptable level of quality,
• on time and
• in the right quantities
Helps achieving a retailer’s product management objectives.
• Exceptional supply sources: in terms of brand recognition or product
expertise, can be a source of competitive advantage.
TYPES OF SUPPLIER
• There are a number of different alternatives that retailers might
consider to be suitable sources of supply.
• The choice will depend on factors that are principally associated with
the size of the purchasing retail company.
• Power
• Manufacturers
• Agents
• Wholesalers & Distributors
• ‘Grey Market’ sourcing
Power
• Relationships between retailer and suppliers have been based around
the concept of distribution channel power and control.
• The greater the market share of an intermediary or producer, the
greater the power of that channel member and therefore the more
control they have over the exchanges that take place within that
distribution channel.
• Strong brands are also able to exert considerable influence over
retailers’ supply selection strategies irrespective of their market
ranking.
Manufacturers
• Large retailers frequently deal directly with a product manufacturer.
• Close physical proximity with retailers can help a supplier to achieve a
higher sales service level, which can be a source of competitive
advantage.
• Most direct buying is restricted to large retailers with multiple outlets.
• A small retailer is likely to use indirect sources of supply, such as an
agent or wholesaler, when ordering goods from large producers.
Agents
• An agent acts as a selling intermediary for a product manufacturer.
• Collecting orders from smaller retail organisations through a network of
agents, a manufacturer is able to supply efficiently a large number of
smaller customers/retailers.
• Together, their orders make up quantities that are economical to produce.
• Agents work from a sales office/showroom that is located as conveniently
as possible to the retail customers.
• Work on a commission basis and may represent more than one producer.
• Agents are useful for retailers in the early stages of global sourcing.
Wholesalers and Distributors
• Wholesalers and distributors work in a similar way to agents: they
accept small orders from retail customers.
• Wholesalers actually take ownership of the goods between the
producer and the retailer.
• Supply the retailer from their stock as opposed to the producer’s
stock, as in the case of the agent.
• Apply a profit margin to the products they sell to the retailer, usually
determined by themselves rather than the producer.
Advantages
• Retailer can buy goods in small quantities thereby reducing the financial
investment in stock.
• By purchasing small quantities frequently, the retailer uses less space for
storage, allowing the conversion of as much of their premises as possible to
selling space.
• Intermediaries allow small retailers access to leading brands and an
increased selection of suppliers. Small retailers would not have the
resources to search out these suppliers, nor would their individual orders
be worthwhile for the larger manufacturer to supply.

Disadvantages
• Retailer has to pay the wholesaler’s profit margin on top of the cost price
of the product.
• Intermediaries are not normally able to guarantee exclusivity, apart from a
very small geographic scale.
‘Grey market’ Sourcing
• Practice undertaken by retailers to obtain branded merchandise from
traders who do not have a ‘licence’ awarded by a manufacturer to sell
their goods.
• The legal issues associated with this type of sourcing are complex.
• ‘grey’ goods have been sold in reputable retailers such as Tesco and
Asda, who effectively have challenged the legality of requiring a
‘licence’ to sell consumer goods such as clothing and toiletries.
• One of the problems with dealing in grey goods, however, is
guaranteeing the authenticity of the product.
THE SUPPLIER SEARCH
• The search for good suppliers is an important and on-going task for retail
product managers.
• Fall within the remit of the buyers, who have the best product and market
knowledge.
• In reality, retail buyers find that it is the suppliers that seek them out most
of the time.
• Dealing through agents or buying groups is a way of accessing a wider
supply market.
• Sources of Supplier search include:
• Global Sourcing
• Trade Shows
• Literature
Global Sourcing
• Direct sourcing around the world requires considerable expertise and
resource expenditure.
• Worthwhile if large volumes of product can be bought at much lower
prices.
• Reasons other than costing:
• Some products are indigenous to certain countries.
• Unique products may only be available in some countries, such as hand-crafted
items.
• Certain branded items may only be available from an overseas source.
• Global sourcing usually requires retail buyers to make a trade-off between
more variety in the supply base and longer lead times.
Trade Shows
• A trade show is an organized gathering of suppliers, who present
samples of the products they are able to supply to retailers and take
orders against those samples for supply at some stage in the future.
• Organized on a product specific basis.
• Usually held in a purpose built exhibition hall.
Literature
• Retail product management personnel make time to read relevant
trade journals and peruse any product catalogues that may be sent to
the buying office.
• These secondary sources may therefore provide more supplier
information for the buyer.
THE CHOICE OF SUPPLIER
• Having made the initial contact , the retail buyer then has to assess a
supplier’s suitability to his or her company’s needs.
• A retailer will put a supplier through a number of assessment stages in
order to appraise its suitability and will evaluate and monitor its
performance:
• taking references from other retail customers
• conducting an analysis of the supplier’s current customer list
• visiting the production units where the goods will be made
• inspecting and testing samples of products from the production line.

• Conducting a low risk trial in the form of a small order or an order of a

basic item that the retailer may already be sourcing from a number of
existing suppliers.
Initial Selection Factors
• A supplier’s initial assessment will be made according to its ability to
satisfy a retailer in four main areas:
• Product range & quality
• Price
• Delivery
• Service
Supplier Development
• Most retailers will have within their portfolio a supply base that
includes suppliers at different stages of development.
• Some will be relatively new, undergoing trial orders.
• Others will have completed their trial orders successfully and the
volume of their orders will be increasing, or they might be asked to
supply a greater variety of product for the retailer.
• Other suppliers will be very well established, perhaps having grown
with the retail business, and may be supplying a wide variety of
products to many different buying departments.
SUPPLIER EVALUATION AND MONITORING
• If a supplier has been dealing with a retailer for a long time, it can be assumed it
is reaching a high level of satisfaction with the retailer.
• However, suppliers to major retailers are subjected to regular evaluation or
continual monitoring to ensure that their standards do not fall.
• Evaluation may be done by the buying department/ third party/ separate
department.
• The most common method of supplier evaluation is the weighted multi-attribute
evaluation system.
• A supplier is also evaluated according to the sell-through rate of the product.
• Direct relationship to the ability of a product to generate profit, and the greater
the profits generated for the retailer from a particular supplier’s product range
the more favorable the product manager will be towards that supplier in the
future.
Supplier Monitoring
• Rather than performing a one-off evaluation, many retailers monitor
their suppliers on a continuous basis.
• The supplier’s performance is rated as a percentage on a set of
performance indicators.
• If the rating starts to fall a significant way below 100 per cent,
remedial steps need to be taken by the supplier, otherwise penalties
will be incurred.
• Performance indicators may encompass all the main evaluation
criteria.
RETAILER-SUPPLIER RELATIONSHIP
DEVELOPMENT
• Most transactions that a retail buyer makes are not carried out with a
new supplier.
• The majority of the transactions will be carried out within the
framework of an ongoing business relationship between a retail
organisation and a supply organisation.
• Very often it will be a supplier who makes a new product suggestion
or who comes up with a product improvement; suppliers who wait
passively to be found by a searching buyer will probably wait forever!
RETAILER-SUPPLIER RELATIONSHIP
DEVELOPMENT