What’s The Ideal Purchasing Strategy For Your Retail Supply Chain?
Centralized purchasing offers a lot of efficiencies for retailers, but it’s not always the right answer to optimize your retail supply chain.
Think about it: Central buyers play a huge role in determining the ideal product mix for a retail store. Usually from the retail head office, the central purchaser places inventory orders meant for all of the retailers’ local stores.
These buyers work closely with vendors and suppliers to get the best price. Central buyers make the retail supply chain more cost-efficient by getting a volume discount on bulk inventory orders.
Central buyers strive to stay in touch with customer demand by keeping their pulse on product trends. That’s a huge asset in selecting the ideal product mix for inventory management. Also, using a central buyer to supply your stores ensures that the same type of product style and brands are consistently available at all of your retail locations.
That sounds pretty good, right? But what if your retail chain’s multiple stores are located in various regions that cater to contrasting customer demographics and buying patterns? A central buyer’s product selection may not fit the needs of consumers that shop at some of your stores.
Here’s a situation to consider: A sports apparel chain has numerous stores located in the South and Midwest. The chain sells sports apparel from national brands and apparel representing local or regional sports teams.
Should the central buyer determine the team sports apparel that’s stocked at each store location? Let’s say the central buyer places an order of University of Kentucky basketball T-shirts. Should the retailer’s North Carolina stores carry the T-shirts? How about stocking the Ohio retail locations with a central buyer’s order of University of Michigan football jerseys?
Sometimes, the retail supply chain deviates from centralized purchasing and stores do their own purchasing. The store manager, instead of a central buyer, selects the store’s ideal product mix and places orders with the vendors. Store managers provide insight into the products that sell best on the local level. They see first-hand which items fly off the shelves and which items don’t sell well.
Using the above example, the store manager for the sports apparel chain could order from local vendors that make league-licensed products, and increase vendor orders for sports team apparel leading up to tournament games or rivalry games.
Depending on the volume of local sports apparel, the chain might also have a central buyer that focuses on team sports apparel. Such a specialized central buyer would likely have greater visibility of regional sports trends.
Here’s another situation where store managers should do their own purchasing — if the store location specializes in selling products from local vendors. For example, let’s say that a regional grocery store chain sells local food from the farmers’ market. The store manager, rather than the central buyer, is in a better position to work with all of those local vendors.
Sometimes the best purchasing process is a combination of a centralized purchasing and having the store manager as the buyer. Think of it as a “divide and conquer” approach. The central buyer and store manager are each assigned to order and replenish specific product groups or items.
In the end, stores must carefully analyze the ideal purchasing method that fits their retail supply chain. However, if inventory is managed properly through head office control, it keeps both the central buyer and store manager informed in real-time of inventory availability and stock-outs throughout the chain.
Learn more about optimizing your purchasing by scheduling a free operational assessment with ArcherPoint.
Author: Wm. Matthew Street, Solutions Consultant/Retail Product Lead at ArcherPoint