Guest Column | November 1, 2022

How To Enhance Vendor Transparency To Improve Vital Relationships In 2023

By Stefan Hilger, gicom


It’s no secret that the holiday season puts a lot of strain on the retail industry. With an influx of orders before the holidays and an abundance of returns afterwards, a fully functioning supply chain is critical to securing loyalty from holiday shoppers. In fact, this year Black Friday sales are expected to hit a record $11.2 billion.

Managing this volume of orders and returns takes an extensive partner network. Securing this dream team takes effort as does managing it. As the holiday season kicks off and we head into the new year, retailers should be constantly evaluating and improving their partnerships.

The partnerships trajectory is jumpstarted with the agreement negotiations. Therefore, agreements must be designed to maximize transparency and flexibility, especially as retailers head into the new year.

Why Are Transparency And Flexibility Important Today?

If a retailer can foresee a problem or is alerted to a supply chain threat right away, they can determine the best course of action without impacting the customer experience. Supply chain uncertainty will continue into 2023, thanks to severe weather, political strains, and ongoing pandemic challenges. As a result, transparency between retailers, their supply chain partners, and their customers has never been more important.

When retailers are crafting partnership agreements, they should prepare for any scenario that may arise. Here are a few tips for securing the dream team for 2023.

Preparing By Testing and Re-Testing Scenarios

Retailers must prepare for the unexpected. Yet with adequate back-up plans and crisis mitigation strategies, retailers can withstand a wide variety of disruptions. But as they say, practice makes perfect. Retailers can practice solving challenges alongside their partners with the help of agreement simulations.

Digital simulations can be run to see how a change in one factor would impact another. For instance, if a particular television at Walmart became incredibly popular, Walmart’s supplier might become overwhelmed by the demand. Walmart would then need to evaluate the supplier’s production capabilities and determine whether or not they need a back-up partner on call if demand raises quickly.

Similarly, when signing an agreement with a new partner, simulations can be used to coordinate the negotiation. For example, if a cost of a material the vendor needs increases, the vendor may increase the price they charge the retailer accordingly. The retailer will then need to determine the impact this will have on their margins. Strategic scenario testing both before and during partner agreements can help prepare for these difficult situations.

Real-Time Communication Increases Transparency

Customer loyalty begins to erode when the estimated delivery day passes without their order arriving, or when the item they ordered doesn’t live up to quality expectations. These issues can stem from a variety of places throughout the supply chain, but with transparent partnerships they can be avoided, or at least better navigated.

When an issue arises, retailers and their partners must quickly work together to find a solution. These conversations are best handled when both parties have up-to-date information via one source of truth like a database. With digitized agreement management solutions, both parties have access to historical agreement data, partnership KPIs and profitability margins. They can discuss the issue from the first interaction, mitigating internal communication issues and diverting problems away from the customer experience.

However, if the issue does reach the customer, the high-level of transparency shared between the retail partners should be passed down to the customer. For example, imagine that a supply chain disruption interferes with an expected delivery timeline. With a digitized approach to agreement management, the partners can work together to identify the quickest way to reroute the order. If the order is now going to be a day or two late, this should be communicated to the customer as soon as possible to set expectations and protect customer loyalty.

Continuously Reviewing Partner Performance

After two years of disruption during the pandemic, shoppers are hyper-aware of shipping mishaps like the one outlined above. As a result, retailers must find reliable partners who fulfil their side of the agreement consistently and according to schedule. When this isn’t the case, retailers should not hesitate to look for a new partnership.

It takes time to build a strong partner relationship. However, if one party isn’t holding up their side of the agreement, the partnership is not mutually beneficial. This mishap can be tracked with digital agreement software. These solutions are designed to track the KPIs in agreements and ensure both sides of the negotiation are delivering on their promises.

When considering new partners, retailers should provide a complete overview of historical and current key figures, allowing negotiators to run simulations to ensure they’re prepared for any unexpected events.

Once a strong partnership is formed, it’s equally important to keep the relationship going. This involves early renegotiations when contracts end based on past metrics. Evaluation of partner performance is critical to ensure successful partnerships.

Building Relationships Amid Holiday Craziness

With weather crises, pandemic concerns, inflation, and supply chain disruptions threatening “business as usual,” this holiday season will be unlike any other. To reach the level of success possible during this peak sales season, retailers must rely on partnerships that can adjust as quickly as these factors fluctuate.

At the end of the day, holiday success will come from how well a retailer treats their customer. By increasing transparency within partnerships, retailers have a better sense of the quality and quantity of their inventory, as well as the range of fulfillment opportunities available. This information can then be passed onto the customer, giving them the tools they need to make the best purchase for their needs. Meeting and exceeding customer expectations in this way will lead to increased sales, profitability, and loyalty for the holiday seasons and into 2023.

About The Author

Stefan Hilger is a member of the executive board of gicom.