In the volatile and fast-moving circumstances the retail sector finds itself in – a vital part of the national response to COVID-19 – maintaining regular communication between retailers and suppliers is critical to ensure supply can keep up with significantly increased demand. David Taylor, Director at Solutions for Retail Brands (S4RB), explains how a new approach to supplier engagement can help retailers to uphold their responsibilities to customers, employees, shareholders and suppliers.
Research by market analysts Nielsen shows that UK supermarket takings surged by more than 20% during the four-week period between 24 February and 21 March, as Brits made nearly 80m extra grocery shopping trips in March – spending almost £2bn more on food and drink than in 2019.
Signs of the impact this massively increased demand has had on the food supply chain has shown in recent weeks, with images of empty shelves and shortages of products gaining significant visibility on social media.
On the whole, the grocery supply chain is standing up well to this increased demand, but it is vital that retailers continue to work closely with suppliers to ensure that customers can continue to get the products they need.
What is supplier engagement?
Supplier engagement is all about loyalty. It’s the level of commitment a supplier has to a retailer’s products, brand, values and goals. It affects every interaction with suppliers and, the higher their level of engagement, the more efficient and cost-effective the retailer can be.
Successful supplier engagement results in the retailer and supplier working as ‘one team’ to make sure that everyone who is involved in producing a product thinks in the same way using shared ways of working, systems and values. Just as employee engagement aspires to do for those within our own organisation.
We do not just want suppliers to know about a brand’s beliefs, values and goals, they need to understand it deeply to bring fresh and relevant ideas, successfully implement the brand strategy and adopt the ways of working.
During a fast-paced and ever-evolving situation such as the COVID-19 outbreak, retailers need to be focused on the tactical, rather than cultural, element of supplier engagement. When planning supplier engagement around the pandemic, it is important to cover all three pillars of supplier engagement; communications, transparency and support.
The importance of relevance
Ensuring you are delivering relevant and useful information is critical in any form of communication, but none more so than supplier engagement. A failure to maximise relevance could quickly result in the loss of an audience’s attention and mean that messages and desired actions are not completed.
This can have a significant impact on a retailer during ‘normal’ times, but during the unprecedented times we are witnessing, retailers must ensure they maintain engagement through high levels of relevance through segmentation in their supplier engagement activity.
Developing a model of communication
In the context of COVID-19, retailers must traverse a narrow line between their responsibilities to customers, employees, shareholders and suppliers, and it is important that a model is developed to ensure these areas are communicated clearly.
By considering the power, the significance and size of the supplier relationship; legitimacy, how much attention is required in the current circumstances; and urgency, the importance of supply or business continuity, retailers can assess where supplier relationships require daily engagement during the crisis, or can continue to be monitored infrequently.
Maintaining supplier relationships
For example, if a retailer has a strategic supplier supplying a line where panic buying is impacting availability, such as hand sanitiser or toilet roll, it is critical that regular engagement occurs to restore the product in question to shelves.
In this case, a weekly video call between senior leadership figures from both the retailer and supplier should be considered, as well as sharing KPI reports (detailing availability, sales, forecasts, and quality), and assigning further support to expedite information sharing and identification to troubleshoot any issues in the supply chain.
Other relationships may be less critical, but it is important not to neglect these relationships. Many retailers will have small suppliers whose cashflow is dependent on them for the business’ survival, so good supplier engagement can signpost them to relevant government support and establish a clear path to escalate if their situation becomes critical and the business requires intervention immediately.
Morrisons has set the standard for smaller suppliers, with its pledge to pay small suppliers immediately; becoming the first major UK supermarket to change its payment terms.
For the smallest suppliers, with an annual turnover of £100,000 or less, the normal Morrisons payment period is 14 days. For firms with a turnover between £100,000 and £1m, that period is from 30 to 60 days. Over the course of the COVID-19 disruption, all firms with a turnover of up to £1m will be paid immediately. For larger firms, the payment period will remain at 60 days.
There will also be a number of relationships between strategic suppliers seeing less demand, and as a result, uninterrupted supply. By communicating clearly, this key relationship can be continued while prioritising the bigger current challenges.
Most retailer-supplier relationships will be less affected by COVID-19, so an aspiration for a business-as-usual approach is required as much as possible. Sending fortnightly emails providing an update on your approach to the outbreak and offering performance dashboards to monitor the usual sales, complaints, service levels data, as well as creating online FAQs covering anticipated enquiries, can help to alleviate any potential challenges to these relationships.
In these challenging and unprecedented times, retailers have a duty to support suppliers and engaging effectively can reap benefits with continued availability of products and strengthened relationships for the future.
At S4RB we are working closely with retailers to help them with the planning and execution of supplier engagement during COVID-19. By delivering relevant, actionable communications with suppliers, as well as developing effective models of engagement, retailers and suppliers alike can ensure continued supply to meet the huge demand in stores.
To learn more about how to prioritise communications to your supply base, visit: www.s4rb.com
