February 6, 2008
The most recent benchmark report from Retail Systems Research (RSR) titled: “PLM Squared: Product Lifecycle Management Powers Private Label Merchandise” reveals that as brand managers step up collaboration with suppliers on product design, two opposing consequences emerge: they can bring new products to market faster, but at a cost – control over the quality of that merchandise. Post-production audits and improved and consistent vendor scorecarding are critical to overcoming this potentially devastating situation.
Retailers are increasing their reliance on private label merchandise sourced from low cost sourcing countries. This reliance has driven improved gross margin, but also created new risks – last year saw a record number of high profile product recalls, mostly on imported goods. The reason: On the one hand retailers create long term contracts with trusted suppliers and collaborate with those suppliers on product design to improve their speed to market. On the other hand those same vendors cut corners to achieve that speed, resulting in inconsistent and sometimes fatal quality problems.
According to RSR’s just released benchmark report sponsored by Eqos and Microsoft, the best performing retailers lead the pack in collaborative design processes.
Over the past two years 70% of retailers whose comparable store sales outperform the average have increased the percentage of merchandise they design in concert with suppliers versus only 33% of poor performers. Eighty percent of these retail winners have enjoyed improvements in gross margin over the same period vs. only 56% of laggards.
“Outsourced manufacturing is a double-edged sword”, said Paula Rosenblum, Managing Director and author of the report. “Retailers are getting faster, but their products are not necessarily getting better. A comprehensive program of supplier management is critical to insure standards are met consistently”.
RSR’s new study provides recommendations for controlling merchandise quality, and outlines the technologies used to support these initiatives.
Source: www.retailsystemsresearch.com
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