AND

3 CHALLENGES PLAGUINGCHAIN STORES

5 S T R A T E G I E S

P R O C U R E M E N T C A N

E M P L O Y T O B A T T L E

T H E M

RETAIL AND RESTAURANT CHAINS FACE APERFECT STORM OF NEW AND EVOLVINGMARKET PRESSURES THAT MAKE IT

DIFFICULT FOR EVEN THE MOST POPULARTO GROW AND PROFIT.

Retailing & Chain Stores Market ResearchPlunkett Research, Ltd.

"Today, both retailers (including restaurants) and theircustomers are much more conservative than theywere during the long-term economic boom that

ended in late 2007.

Stores of all types have been seeking creative waysto cut operating expenses. Methods range from

reducing the size of stores to lowering the employeecount to reducing inventory exposure."

3 Top ChallengesFacing Chain Stores

Let's review some of the most pressingchallenges facing chains today and how theright sourcing and procurement strategiescan help guard against these market forceswhile accelerating growth and profits.

Rising CostsProcurement teams are dealing with a veryvolatile (and in many areas, expensive) supplymarket.

Operational expenses, specifically heating oiland employee wages, are expected to climbover the next few years.

For grocers and restaurants, prices for key fooditems - including beef, pork, eggs, chocolateand shrimp - hit record levels in 2014, and areexpected to rise even further.

01

Empowered Consumers

Today's consumers are forcing organizations tochange the way they do business.

Affordability remains key, but today's consumeralso want to know that products weresustainably sourced, how their food is prepared,and that the establishments they frequent aresocially responsible.

This creates a significant challenge for chains toprovide an exceptional customer experience inan age where consumers literally have limitlessinformation at their fingertips.

02

CompetitionCompetition for consumer dollars has alwaysbeen intense, but pressure on profit marginscontinues to grow as price-based competitionrises.

Specifically in the grocery sector - historicallyknown for low margins - merger and acquisitionactivity has led to increased uncertainty.

Whether it's digital storefronts, food trucks orthe new grocery giant taking over the locationdown the road, the competition has never beenmore fierce.

03

WHERE DO YOU GOFROM HERE?

Business isn't easy for chain stores in 2015 - butthe outlook isn't completely bleak.

If fact, in the face of all these pressures, manychain stores today are thriving.

What's their secret?

One key element - incorporating a sophisticated,strategic approach to sourcing as part of their

overall procurement strategy.

5 strategies

to hedge against marketchallenges and improve

procurement performance andbusiness outcomes

Expand sourcing goals beyondprice and contract terms

With more consumers demanding innovative and nicheofferings, and customized and seamless experiences, it’s

critical for chain stores to look beyond just cost and contractterms when evaluating suppliers.

The key is finding the right value – and a supplier that canoffer the perfect combination of quality, price, inventoryflexibility and terms – and developing relationships with

sourcing partners to drive innovation.

A common struggle for chain stores is finding new sources ofsupply. By partnering with a team of sourcing experts that

has a real, successful history in the retail and restaurantsupplier market, chain stores open themselves up to a

broader network of potential suppliers, which in turn createsmore opportunities to find higher-quality items, or more

innovative and marketable sources of supply.

01

Reevaluate your existingsupplier relationships

The ‘if it’s not broken, don’t fix it’ motto could be killingyour margins.

Too many chain stores rely on the same supplier year in andyear out, and never go out to market to ensure they are

receiving competitive rates. In most cases, that’s a costlyfinancial mistake.

When a category is taken out to auction through e-sourcing,stakeholders will find that in most cases, a better deal is

available. Sometimes that means changing suppliers – butoften, the incumbent ends up lowering its own price to keep

your business.

The savings tend to be substantial. On average, e-sourcingevents run by Intesource secure savings or cost avoidance of

roughly 18 percent.

02

Uncover new categories totake to auction

Another mistake many retailers and restaurants make is onlyrunning auctions on a handful of key categories. It’s important

that chain stores look across their business and beyond thetypical categories they e-source to find new pockets of

savings - both direct and indirect.

One of the most profitable places to look is on theoperational side. Sourcing indirect categories – like

construction, snow removal, shopping bags andmaintenance, to name a few – could create savings that

outweigh, rising costs in other areas.

The key is knowing where to look for savings, and developingdeep category expertise (and partnering with an industry

sourcing expert) in order to source effectively and efficiently,with the right suppliers.

03

Diversify supplier relationshipsto mitigate risk

Managing risk is a key responsibility for any finance, sourcing andsupply chain professional. And while it’s impossible to predict thetiming of a supply disruption, it’s safe to assume that a disruption

of some sort will eventually occur.

Risk should be one of the first factors sourcing professionalsconsider when evaluating a supplier. Too often, procurement

professionals are so focused on cost and obtaining the best dealfrom suppliers that they forget to weigh other factors, like supply

risk, that could ultimately have an even larger financial impactthan the initial terms.

To minimize the potential financial impact of a disruption, chainstores need to ensure that their supply base is diversified. It’s

critical to establish clear visibility into the locations of suppliers’manufacturing plants and understand where the materials the

retailer is buying are actually produced. This will help the supplychain team predict risky situations and understand the impact a

disruption could have on its supply base.

04

Collaborate with internalstakeholders

Boosting internal collaboration may seem like a no-brainer,but the potential business outcomes are too substantial to

risk overlooking.

When was the last time the procurement team synced upwith marketing to get a better understanding of what’s most

important to consumers today? Or teamed up with PR topromote sustainability and quality wins from recent sourcing

initiatives?

And most importantly, does the sourcing team activelycollaborate with finance and the C-suite around which

financial KPIs are most urgent to influence? Similarly, externalcollaboration – especially with strategic suppliers and

customers – also has the potential to drive significant results.

05

FOR MORE

Contact an e-Sourcing Expert(800) 475-2149

info@Intesource.comwww.Intesource.com

For more information on the ideas presented here...

Download the SlideShare Improve Your Company's Valuation