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Procurement in the retail industry

Procurement in the retail industry is not quite the same as procurement in other industries. Retailers have to negotiate with suppliers on many fronts, including price, delivery schedule, operating budget and credit terms. The complexity can lead to dilemmas — bad deals that cost more than what you are willing to pay and good deals that you don’t have a chance to get because of your purchasing strategies. There are many issues in the procurement process that hinder its development. The existing law and regulations of most countries are designed to support the large-scale manufacturing industry, which is nothing like the modern retail activities. It is vital to identify the different procurement opportunities present in retailing and the framework for developing a procurement strategy for your organization.

Developing a marketing strategy can sometimes prove to be a challenge for firms that have a relatively small market share. The best way to counter this is by developing a procurement strategy, which clearly sets out the firm’s expectations from suppliers. For example, if the target market is the ‘urban’ consumer, firms should aim to procure goods that are easily accessible and affordable for this particular consumer group. Alternatively, the strategy can be developed to focus on a particular niche market. It is important for a firm to understand the importance of a procurement strategy from the very start, as this is one of the most important factors in determining whether a contract is signed and whether any fees or charges will be incurred by the firm.

A good example of a company which is suffering due to poor procurement management is Wal-mart. As per their own policy, Wal-mart requires its vendors to provide the minimum number of units required for every product. The vendors fulfill this condition by submitting the production and shipping details to Wal-mart according to the terms and conditions provided by them. This leads to a lot of problems as most of the vendors do not submit the required numbers and at the same time, they do not submit the products on time. When the products are received by the retail stores, they find that there is a delay in receiving them and hence, they have to incur additional cost for the delivery.

It is important to establish a procurement strategy. This includes setting a reasonable acquisition fee for the goods to be procured, developing a list of suppliers who meet all of the requirements necessary for a successful purchase order, and determining how much money can be spent on a regular basis to conduct Internet marketing. By setting out the procurement strategy in detail, a firm will be more likely to obtain a successful purchase order. Furthermore, this detailed plan will help to ensure that a firm obtains the lowest possible costs, so that the largest amount of profits can be made.

Procurement training is important for individuals and organizations. As the field of procurement has changed dramatically in recent years, requiring new skills for procuring items from vendors, and managing vendor relationships are necessary.

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