Automated Supplier Management for Seamless and Efficient Retail Supply Chains

Discover how automated supplier management in retail optimizes supply chains, accelerates processing, reduces staffing pressure, and ensures continuous operations.

Retail Supply Chains and the Pivotal Role of Supplier Management

A retailer’s supply chain is a complex network comprising various processes and partners, from sourcing and procurement to transportation, storage, and distribution of products to consumers. Within this network, effective management and collaboration with suppliers play a pivotal role, directly impacting product quality, input costs, delivery times, and the ability to meet market demand.

Key Supply Chain and Supplier Management Processes in Retail:

• Supplier Sourcing and Selection: Identifying goods requirements, market research, evaluating, and selecting potential suppliers based on criteria such as quality, price, delivery time, reputation, and collaboration capability.
• Negotiation and Contract Signing: Discussing sales terms, prices, quantities, delivery schedules, payment conditions, and other commitments, followed by formal contract signing.
• Purchase Order Management: Creating and submitting purchase orders, tracking order status, confirming delivery schedules, and handling changes or cancellations.
• Goods Receiving and Delivery Management: Monitoring transportation, inspecting goods quality and quantity upon receipt, and resolving issues during the receiving process.
• Invoice and Payment Management: Processing invoices from suppliers, reconciling them with purchase orders and receipts, and making payments according to deadlines and terms.
• Supplier Performance Evaluation: Monitoring and assessing supplier performance based on agreed-upon criteria (e.g., product quality, on-time delivery, responsiveness), then making decisions about maintaining or changing partnerships.
• Supplier Relationship Management: Maintaining effective communication channels, resolving emerging issues, and building long-term, sustainable collaborative relationships.
• Supply Chain Risk Management: Identifying and assessing potential risks related to suppliers (e.g., supply disruptions, quality issues) and developing contingency plans.

The Urgent Need for Retail Automation to Optimize the Supply Chain

Manually managing suppliers and related supply chain processes often encounters numerous challenges, leading to delays, increased costs, and heightened risk of operational disruptions. Therefore, automated supplier management in retail becomes an urgent necessity to:

• Accelerate Processing Speed: Automation eliminates time-consuming manual steps, expediting purchase order processing, receiving, and payment.
• Reduce Staffing Pressure: Automating repetitive tasks allows employees to focus on more strategic activities and better manage supplier relationships.
• Ensure Uninterrupted Supply Chain: Automation helps closely monitor processes, detect potential issues early, and issue alerts, thereby minimizing the risk of supply disruptions.
• Enable Continuous Operations: Automated processes operate 24/7, ensuring critical activities are not delayed.
• Timely Support for Operations: Information is updated quickly and accurately, enabling relevant departments to make timely decisions to support business operations.

Automation and Its Application in Retail

Automation refers to the use of technology to perform tasks and processes that previously required human intervention. The goal is to increase efficiency, reduce costs, enhance accuracy, and free up human resources.

Retail Automation specifically involves using technologies such as software, robotics, Artificial Intelligence (AI), and the Internet of Things (IoT) to automate various processes in retail operations, from inventory management, sales, and marketing to customer management and the supply chain, including supplier management.

Supplier Management Process with Automation Implementation

Applying automated supplier management in retail can be executed through the following steps:

Step 1: Automated Supplier Sourcing and Selection:

• Utilize online platforms and supplier management software integrated with AI to search and filter potential suppliers based on established criteria (e.g., certifications, production capacity, reviews from other businesses).
• The system automatically collects and compares information on pricing, quality, delivery times, and other terms from multiple suppliers.
• Employ data analytics tools to assess risks and collaboration potential with each supplier.

Step 2: Automated Negotiation and Contract Signing:

• Use B2B e-commerce platforms with integrated automated negotiation tools based on predefined rules and limits.
• Contract management software automates the creation, sending, tracking, and electronic signing of contracts, reducing time and costs associated with paperwork.
• The system automatically stores and manages all contracts, ensuring easy access and term tracking.

Step 3: Automated Purchase Order Management:

• Warehouse Management Systems (WMS) or Enterprise Resource Planning (ERP) systems automatically generate purchase orders based on current inventory levels, demand forecasts, and established ordering rules.
• Purchase orders are automatically sent to suppliers via EDI (Electronic Data Interchange) or online portals.
• The system automatically tracks order status, receives confirmation notifications from suppliers, and updates delivery schedules.
• Automated processing of changes or cancellations based on predefined rules.

Step 4: Automated Goods Receiving and Delivery Management:

• Use integrated tracking systems to monitor location and estimated delivery times.
• Upon goods receipt, the system uses scanning devices (barcode scanners, RFID readers) to automatically verify quantities and reconcile with purchase orders.
• In some cases, quality control robots can be used to quickly and accurately assess goods.
• The system automatically updates inventory levels and records receiving information.

Step 5: Automated Invoice and Payment Management:

• Suppliers submit e-invoices via EDI or online portals.
• The system automatically matches invoices with purchase orders and goods receipts.
• Utilize automated payment approval processes based on established rules.
• The system automatically executes electronic payments according to agreed-upon deadlines and terms.
• Automated recording and management of payment transactions.

Step 6: Automated Supplier Performance Evaluation:

• The system automatically collects data on supplier performance (e.g., on-time delivery rates, quality defect rates, response times).
• Uses data analytics tools to generate automated performance reports, comparing them against agreed-upon criteria.
• The system can automatically send notifications or alerts if supplier performance is unsatisfactory.

Step 7: Automated Supplier Relationship Management:

• Utilize Supplier Relationship Management (SRM) platforms to maintain effective communication channels, automating the sending of notifications and information requests.
• The system can automatically schedule periodic performance review meetings and track emerging issues.

Step 8: Automated Supply Chain Risk Management:

• Uses AI-based risk analysis tools to predict potential risks related to suppliers (e.g., financial stability, geopolitical events).
• The system can automatically propose preventive measures and build automated response plans when risks materialize.

The Value Proposition of Retail Automation – Supplier Management

Applying automated supplier management in retail brings significant value to retailers:

• Reduced Procurement Costs: Automated sourcing and price comparison can help reduce procurement costs by 5% to 15%.
• Accelerated Order Processing Speed: Automating purchase order management can reduce order processing time by 30% to 50%.
• Reduced Receiving Errors: Automated goods inspection can reduce receiving error rates by 15% to 25%.
• Increased Invoice Processing Efficiency: Automating invoice and payment management can reduce invoice processing time by 40% to 60%.
• Improved Supplier Performance: Automated performance monitoring and evaluation help increase supplier on-time delivery rates by 10% to 20%.
• Reduced Supply Chain Disruption Risk: Automated risk monitoring and management can reduce supply chain disruption risk by 5% to 10%.
• Employee Time Savings: Automating manual tasks can reduce employee time spent on supplier management by 20% to 30%, allowing them to focus on more strategic activities.
• Enhanced Supplier Relationships: More efficient communication and transparent processes through automation can increase supplier satisfaction by up to 15%.

Automating supplier management is not just a trend but a fundamental requirement for retailers to build a robust, agile, and efficient supply chain. By automating processes from sourcing to payment and evaluation, businesses can optimize costs, accelerate processing speed, mitigate risks, and build better relationships with their supplier partners, ensuring a stable and timely supply to support continuous business operations.