September 18, 2012
CSD: The Benefits of Vendor Management Conferences
Through a special arrangement, presented here for discussion is a summary of an article from Convenience Store Decisions magazine.
Aligning your vendors to a common business vision is a daunting task. In many cases, vendors for retail outlets number in the hundreds, if not thousands. How is the retailer expected to manage all of them?
In years past, I used to organize an autumn annual vendor conference that allowed our company to explain where we were headed in the upcoming year. Hundreds of vendors would be in attendance, hearing firsthand from the senior team what our financial and key initiative projections were for the upcoming year.
Align to a Common Vision: The annual vendor conference provides the ultimate platform to efficiently inform, educate and align your vendors for the upcoming year. The vendors that attend are "in the know" and potentially have a leg up on vendors that are not in attendance.
Force Your Team to Plan: From an internal standpoint, the annual vendor conference creates a budget and planning deadline that your team must meet in order to be effective at the event.
Apply Peer Pressure: There is nothing better than having competing vendors in the same audience hearing a common business vision and determining how they will outflank one another.
Negotiate While in the Zone: When the vendors are all "hyped up" after the senior management presentations, it’s time to close the deal. The expectation should be set in advance that the annual conference is the place where "deals get made" and vendors should be ready to sign on the dotted line. Clearly, this is an opportune negotiating tactic for the retailer, but more importantly, it creates a sense of urgency to finalize the plans with vendor commitments allowing for a focus on executing those plans.
Senior Management Attracts Senior Management: Use the draw of access to your senior team to attract the senior teams of your vendors. The more aligned you are "up the chain of command" at your vendors, the more attention — and resources — will come your way.
Invest Dollars for Returns: An annual vendor conference is a critical strategy to not only align your vendors, but provides a sense of urgency for your team to plan for the upcoming year. While there are dollars to be invested to court and entertain vendors, the resulting impact of an efficient platform is substantial in the return of investment by your vendors. The squeaky wheel gets the oil, and if you can pull off a well-orchestrated annual vendor conference, the investment will return handsomely.
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Discussion Questions
Are you a big proponent of annual vendor conferences run by retailers? What do you see as some common missed opportunities around annual vendor conferences run by retailers? What are some steps for retailers around optimizing vendor conferences?
Poll
Annual vendor conferences are a great way to transmit information and high level strategies. They also level the playing field to ensure vendors of all sizes have a chance to learn from retailer senior management. Winners think of them as the beginning of a conversation, not an event. Too often the event mentality sets in with major retailers telling vendors what to do. Even worse, they become group negotiating squeezes.
I remember sitting in one a few years back where in the morning general session, the customer’s senior management announced a mandatory cost-cutting effort, and then we spent the afternoon being paraded through 15 minute breakouts with their procurement team forcing us to identify cost reduction opportunities on the spot. No warning. No time for leveraging the smartest thinking. Just a squeeze — and a buzz kill for the partnership mindset that we all need to win today.
I see nothing but good coming out of these types of events. In order to manage it, a retailer could have multiple sessions for different vendors. The IT leadership could have a session with their vendors and the same for merchandising, finance, and operations. As long as the same goals and objectives are related and then specific for the functional team it would be of great benefit to the vendors as well. It puts everyone both retailer and vendor on the same page. Vendors who do not participate nor assist in anyway should be in jeopardy as a continuing vendor for that retailer. Just saying….
The greatest problem with an annual vendor conference is the difference between senior management vision and the super buyer (category manager) decisions process. Too often the vendor prepares a presentation/offer supporting the management vision only to have it knocked down by the buyer. The annual vendor review rarely achieves much as it becomes the annual vendor beating on price.
There is a better way. There should be an annual vendor review, but on the complete transaction process, not just price. Each side needs to prepare detailed numbers and get input from everyone who touches the transaction. Each side should define what their plans are for the coming year. Then identify opportunities to increase sales and reduce cost. Examples could include change case pack, change pallet quantity, increase fill rate, reduce cycle time and/or increase communication lead time. Consider what each party many be doing with others to determine if it would be beneficial, etc. There are many common ground issues that can be improved on. Only by continually improving will the process get better.
To chime in with Frank Dell, a number (many? most?) retailers would benefit just as much from a session focused on aligning their internal reward systems and operating procedures with the stated senior management strategy. They simply don’t match far too much of the time.
We are sometimes asked to participate in or lead client strategic planning exercises. Occasionally some wise guy in the room (OK, me) will pose this question: “What are we working on today, our stated strategy or our realized strategy?” Of course, someone asks what that means — usually with phrasing that includes derogatory adjectives.
The difference is this. Your stated strategy is what you write down and share with others in those vendor alignment meetings. Your realized strategy is the sum total of every action your organization takes every day — and they seldom match.
BTW, this is NOT the exclusive province of retailers — vendors are equally susceptible.
Whether negotiation should be included at such an event depends on the retailer and their strategy. With some retailers, their strategy and supplier negotiation are almost the same thing(!); with others this combination does not make good sense.
This latter group should put more focus on joint value creation opportunities and that clearly align with the strategy that has been communicated and will create a win for all parties: the shopper, the retailer and the manufacturer.
I am struck by the first three responses that almost seem like the story of “Goldilocks and the Three Bears” — we have one strong proponent, one middling proponent, and one unsatisfactory proponent. Makes me think it is not the process per se, but the execution. Each person’s experience with the vendor conference came up very different from the others.
It is a drum that has been pounded before in our industry — if there is not trust, if there is not a genuine desire to deal fairly, if there is not a desire to work toward a common good, then we can try any initiative and it will fail.
The process is agnostic. It can be used for positive engagement and productive uses, or it can be used for the purpose of gaining an upper-hand, control,concessions, or other non-collaborative outcomes.
Ben Ball hits the nail on the head. None of this time in annual vendor conferences matters if the reality of day-to-day operations is inconsistent with the stated strategy.
For six months, I literally lived full-time within a major grocery retailer’s offices, working on evaluating promotional initiatives via shopper marketing analyses, with the stated objective of improving these initiatives’ short and long-term profitability. Yet, when reviewing results with a specific Category Manager, his response was, “But I don’t give a damn about profitability…I get gold stars for volume results!” (verbatim)
So I agree wholeheartedly with Ben…unless the infrastructure is truly aligned with the strategy, the real value of such conferences is minimal at best and, at worst, a costly set of exercises.
It is great to get the vendor community together with the retailers. I would add two caveats: The conferences HAVE to be hard-hitting with tangible and tactical direction for the vendors to follow, rather than the meeting turning into a boondoggle. The other piece is that collaboration opportunities should be acknowledged among the vendor ecosystem in front of the retailer, so profitability can be maximized by all constituents.
No. Too many retailers are still expecting their suppliers to be a “cash cow.” This is the perception of old, not that of a modern retailing partner. Vendors don’t “come expecting to make deals,” at a vendor conference any more than any other meeting. This mentality has to change. Retailers have to start thinking like a supplier in order to driver their business forward. This means how do they increase volumes, standardize packaging, focus on standardized product placement within their vision, and deliver at cost-effective times (and locations). The days of having suppliers act as the “bank” and long-term T’s and C’s are over. The modern retailer knows this and partners with their suppliers. This is a symbiotic relationship, not an adverse one.
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Annual vendor conferences are a great way to transmit information and high level strategies. They also level the playing field to ensure vendors of all sizes have a chance to learn from retailer senior management. Winners think of them as the beginning of a conversation, not an event. Too often the event mentality sets in with major retailers telling vendors what to do. Even worse, they become group negotiating squeezes.
I remember sitting in one a few years back where in the morning general session, the customer’s senior management announced a mandatory cost-cutting effort, and then we spent the afternoon being paraded through 15 minute breakouts with their procurement team forcing us to identify cost reduction opportunities on the spot. No warning. No time for leveraging the smartest thinking. Just a squeeze — and a buzz kill for the partnership mindset that we all need to win today.
I see nothing but good coming out of these types of events. In order to manage it, a retailer could have multiple sessions for different vendors. The IT leadership could have a session with their vendors and the same for merchandising, finance, and operations. As long as the same goals and objectives are related and then specific for the functional team it would be of great benefit to the vendors as well. It puts everyone both retailer and vendor on the same page. Vendors who do not participate nor assist in anyway should be in jeopardy as a continuing vendor for that retailer. Just saying….
The greatest problem with an annual vendor conference is the difference between senior management vision and the super buyer (category manager) decisions process. Too often the vendor prepares a presentation/offer supporting the management vision only to have it knocked down by the buyer. The annual vendor review rarely achieves much as it becomes the annual vendor beating on price.
There is a better way. There should be an annual vendor review, but on the complete transaction process, not just price. Each side needs to prepare detailed numbers and get input from everyone who touches the transaction. Each side should define what their plans are for the coming year. Then identify opportunities to increase sales and reduce cost. Examples could include change case pack, change pallet quantity, increase fill rate, reduce cycle time and/or increase communication lead time. Consider what each party many be doing with others to determine if it would be beneficial, etc. There are many common ground issues that can be improved on. Only by continually improving will the process get better.
To chime in with Frank Dell, a number (many? most?) retailers would benefit just as much from a session focused on aligning their internal reward systems and operating procedures with the stated senior management strategy. They simply don’t match far too much of the time.
We are sometimes asked to participate in or lead client strategic planning exercises. Occasionally some wise guy in the room (OK, me) will pose this question: “What are we working on today, our stated strategy or our realized strategy?” Of course, someone asks what that means — usually with phrasing that includes derogatory adjectives.
The difference is this. Your stated strategy is what you write down and share with others in those vendor alignment meetings. Your realized strategy is the sum total of every action your organization takes every day — and they seldom match.
BTW, this is NOT the exclusive province of retailers — vendors are equally susceptible.
Whether negotiation should be included at such an event depends on the retailer and their strategy. With some retailers, their strategy and supplier negotiation are almost the same thing(!); with others this combination does not make good sense.
This latter group should put more focus on joint value creation opportunities and that clearly align with the strategy that has been communicated and will create a win for all parties: the shopper, the retailer and the manufacturer.
I am struck by the first three responses that almost seem like the story of “Goldilocks and the Three Bears” — we have one strong proponent, one middling proponent, and one unsatisfactory proponent. Makes me think it is not the process per se, but the execution. Each person’s experience with the vendor conference came up very different from the others.
It is a drum that has been pounded before in our industry — if there is not trust, if there is not a genuine desire to deal fairly, if there is not a desire to work toward a common good, then we can try any initiative and it will fail.
The process is agnostic. It can be used for positive engagement and productive uses, or it can be used for the purpose of gaining an upper-hand, control,concessions, or other non-collaborative outcomes.
Ben Ball hits the nail on the head. None of this time in annual vendor conferences matters if the reality of day-to-day operations is inconsistent with the stated strategy.
For six months, I literally lived full-time within a major grocery retailer’s offices, working on evaluating promotional initiatives via shopper marketing analyses, with the stated objective of improving these initiatives’ short and long-term profitability. Yet, when reviewing results with a specific Category Manager, his response was, “But I don’t give a damn about profitability…I get gold stars for volume results!” (verbatim)
So I agree wholeheartedly with Ben…unless the infrastructure is truly aligned with the strategy, the real value of such conferences is minimal at best and, at worst, a costly set of exercises.
It is great to get the vendor community together with the retailers. I would add two caveats: The conferences HAVE to be hard-hitting with tangible and tactical direction for the vendors to follow, rather than the meeting turning into a boondoggle. The other piece is that collaboration opportunities should be acknowledged among the vendor ecosystem in front of the retailer, so profitability can be maximized by all constituents.
No. Too many retailers are still expecting their suppliers to be a “cash cow.” This is the perception of old, not that of a modern retailing partner. Vendors don’t “come expecting to make deals,” at a vendor conference any more than any other meeting. This mentality has to change. Retailers have to start thinking like a supplier in order to driver their business forward. This means how do they increase volumes, standardize packaging, focus on standardized product placement within their vision, and deliver at cost-effective times (and locations). The days of having suppliers act as the “bank” and long-term T’s and C’s are over. The modern retailer knows this and partners with their suppliers. This is a symbiotic relationship, not an adverse one.