After cost, volume is the next most important number

Alignment with your customers is key to your success. To be aligned, you need to have a common definition of success, or one of you will never be happy. This does not mean you have to agree on everything but you do need to discuss outcomes and find some common ground.

 

There is more to alignment than cost of goods

Many suppliers get focused on cost, which they should be. However, alignment is not limited to cost of goods. Yes cost is important and always a negotiation, but it is not the only number you need to be thinking about. You should know your item better than they do and there are other factors where you need to be aligned to ensure you both have a common definition of success. Once you agree on the cost, make sure you cover these other topics.

Volume is a key number

You should know how much your item will sell. They do have access to the POS data but you have your own history and you should be knowledgeable about the category. After cost, this is the second most important number and one you should not be afraid to discuss.

Make sure you have a starting point or an opinion about the sales your item will deliver. This demonstrates confidence and an understanding of the situation. They might not agree with your estimate but it is something you need to include in the conversation. Explain the rationale for your estimate and let them explain why they see it differently. Work to get to a point where you both see the estimate in the same light, because when you are back for the next meeting this will be the most important number to determine your success. Often this can be the first item on the agenda at the next meeting. Write it down and make sure they know you have recorded it.

Specs and standards can change

In every perishable department there are well-defined specs and standards for products. This can include size, grade, shelf life, case pack and quality expectations. To deliver the sales estimate, your product will need to meet or exceed your customer’s expectations. These can change so do not assume you know what they have in their program. Many retailers have a portal where suppliers can access these product specs and standards. Print them out and bring them to the meeting to confirm they have not or will not be changing. If possible bring some product samples to review and compare to the specs and standards.

Service level

Many retailers are very focused on service level. Their opinion would be that they are paying for a 95 per cent service level as part of the cost of goods. If orders are shorted, retailers disappoint consumers and miss sales.

Clarify the service level targets expected in your category and make sure it is achievable in your business. You will have an unhappy customer if they are expecting a 97 per cent service level and you know with weather, labour or other issues you will be 95 per cent in a good year. This is one metric you can monitor in your business and report to your customers. If you are going to have an issue be proactive. They will not be excited but in the end you do yourself and them a favour by giving them enough time to react and perhaps keep the shelf full.

Merchandising expectations impact volume

This is one part of the relationship suppliers can be reluctant to discuss. Yes it is the retailer’s job to figure out how and where to display the product but for you to estimate your sales you need to know what they will do with the product.

You cannot change what they will do, but you can check to see if they are doing what they said they would do. If your category manager tells you the product will be on an end two out of four weeks and that is part of the reason they expect 5,000 cases, then you need to check. If the product never gets merchandised on the end and the sales are 4,000 cases then you should raise this issue. They will defend their actions but they know you are checking and that they did not execute. Another bonus to asking about merchandising is they might share some changes coming up that will impact your product.

Ad plans can be the most important

With consumers’ thirst for items on sale, a big part of your volume can be items on temporary price reduction (TPR). You need to know when the ads will be running and at least an idea of the level of discount they are planning. You both need to be on the same page for ads to ensure they are executed properly. This can impact your ordering of ingredients and packaging, plus your production needs to handle any increased volume.

Ad volumes are also numbers you both need to agree on. You need to be able to produce it and they will be looking to get it merchandised and sold. Success happens when you both work towards the same number of cases.

Start dates, end dates and plan o gram updates

Perishable items are sourced from multiple growing areas, which requires a lot of coordination between suppliers and retailers. Both parties need to agree on when the item will be available and shipping to the stores. Communication is key as you move through the season and just as important on the end date as the starting date. A graceful exit is a win for both supplier and retailer. If your item is merchandised in a regular spot in the five-deck case, chances are it is part of a plan o gram. They will only review these during certain times of the year so you need to ask and make sure you propose any changes within the windows they have defined. All of these dates will impact your relationship with your customers. You need to both have the same understanding, regardless of who determines it.

Ask the questions

Relationships between suppliers and retailers move to a new place when you are both on the same page. You are in a much better position to determine if your item is successful when you ask the questions and get on the same page as your customer. You might not always like where they are but you can only get them to change their mind if you ask the questions and know what they expect. When you both have the same expectations it is very clear whether an item is performing or not.

If you have any questions about getting on the same page with your customers please give me a call at (902) 489-2900 or send me an email at peter@skufood.com.   Next month we will discuss how to build the relationship with your customers.

 

WHAT’S IN STORE?

Have you had your item delivered?

Many stores are now offering delivery in the large urban markets and where that is not available, shoppers can take advantage of click and collect. Online shopping is gaining in popularity and suppliers need to be familiar with how it works and what their items look like after being delivered or selected in the store.

Sign up for online shopping and try it out.

Next time you are meeting your customer show a photo of your online order with your products in there. Hopefully it will be a great experience, if not figure out what needs to be fixed. Chances are if you experienced it, others will too!

Publish date: 
Wednesday, November 27, 2019

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