Top-down approaches to trading partnerships can have costly effects on a retailer’s bottom line. Retailers overly focused on compliance will find their orders deprioritized in fulfillment queues and end up paying more for inventory as suppliers recoup chargebacks. They’ll also receive a steady stream of dummy inventory data sent by trading partners trying to satisfy SLA requirements. All this will lead to higher opportunity costs, late and canceled shipments, and a lower quality customer experience.
In studies performed at The Ohio State University, randomly assigning individuals to arbitrary groups (such as retailer or vendor) nearly immediately alters our brains’ ability to process information related to those inside and outside that arbitrary group label. In fact, your orbitofrontal cortex, a part of your brain heavily involved in cognitive processing and decision making, becomes far less active when processing information related to people of an opposing, yet still arbitrary, group label. And when words like “orbitofrontal” and “cortex” are being bandied around, you know the situation is serious.
Good data, good communication, and aligned incentives do more to help retail supply more perfectly than any amount of penalties and severed partnerships ever will.
The problem with safety stock buffers, however, is that they represent unsold inventory. A 10 item buffer across all of a supplier’s inventory means absorbing a lot of opportunity costs to prevent cancellations
Super Bowl assortments, filled with apparel, home goods, and jewelry merchandise, are usually drop shipped because of inventory availability and other supply chain considerations. Unfortunately, a small number of retailers are dropping the drop ship ball by including products featuring the likenesses of players no longer on rosters of the Super Bowl teams. In one example, a major retailer is featuring a wall decal of a former player that has not been on the roster since 2012!
In the coming year we’ll be adding some cool data features to the Dsco platform that will allow trading partners to not only access such data but perform just these types of correlations with their own data in real time to tackle issues such as excessive upgrades, late shipments, and cancellations.