Thursday, April 23, 2009

Benefits of manufacturers working with retailers

Earlier this month, we posted about what the benefits were if manufacturers and retailers worked together. I wanted to know more about this topic, so I turned to LinkedIn to ask the question. Vivek V. Krishnan responded with a great answer I'd like to share with you:

It is easy to see the benefits for the retailer and the manufacturers have in coming together, sharing information, possibly resources and streamlining the entire supply chain to get the product right up to the shopper. ( By the term shopper I think you mean the buyer of the product. Typically, a shopper is not necessarily one who buys the product but one who simply spends some time interacting with a product or the retail environment). One would think that the most common benefit to the streamlining of the supply chain to the buyer of the product is reduced prices. A good lean supply chain would reduce various costs for the retailer and the manufacturer the benefits of which one would hope would pass on to the end buyer. Simple enough!!

I strongly believe however that there are other benefits to the union of the two parties for the end buyer.

Before exploring the benefits, one would have to outline certain assumptions on the coming together of the two said parts of the value chain. The union has been carefully put together in accordance to the best practices prevalent in the industry today and that the information and resource sharing is whole. The retailer is willing to share the benefits gained from the partnership with the manufacturer with the end buyer.

The benefits to the end buyer then are as follows:

1) The price of the products would come down as a result of lowered inventory holdings, shorter supply chains, increased margins, better forecasting capabilities etc. This as I had said earlier would be the most obvious outcome of such a partnership.

2) The diffusion of new products would be quicker. Today, the buyers find out about the launch of a product much before the actual arrival of the product on retail shelves, which results in many days of frustrated waiting and decreased interest levels. Such a collaboration will greatly shorten the time to market for new products and the buyers will benefit. Please note that while this may be novel during the first few times, there is a risk that this short time to market will soon become a hygiene factor and buyers will begin to expect it.

3) As Reno before me said, information and training about the new products can be given to the end users and buyers more effectively through the retail channel partners.

4) The retail store can act as a single point of contact for the buyers for all things relating to the product manufacturers, such as after sales services, replacement of faulty products, sourcing of product related accessories, promotions, upgradation, servicing of warranties and guarantees etc.

These are few of the benefits that I think would affect the buyers greatly with a very effective collaboration between the retailers and manufacturers.

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