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A STRATEGIC IMPERATIVE FOR RETAILERS
Increase Direct SourcingHow to Decrease Costs and Improve Visibility by Eliminating Middlemen and Connecting Directly to Suppliers
An expansive, global supply chain calls for longer transit
routes and the involvement of many partners. Because
of this, goods often pass through many agents from
point of production to customer delivery. Costs accrue
at each point along the way.
Manufacturing Retailer
Data/Documents
Goods
Middleman
Fees build up and cut into the profit margin when too many
middlemen are involved in sourcing.
Impact of Poor Direct Sourcing Strategy
When retailers are only using legacy ERP systems,
they have two choices. One is to attempt to eliminate
the middlemen without a cloud-based network in place.
This can lead to major headaches, including the need
for increased manpower and the struggle in taking on
direct sourcing duties. On the other hand, they can
keep the middlemen in place, eroding margins and
hindering visibility to factories. Without a way to
increase visibility and automate several functions,
retailers can suffer from:
• Increased time and costs dealing with inquiries
• Increased duty costs
• Reduced profitability
The Root of the Problem
Long, global supply chains require a large number of
suppliers. Traditionally, retailers use middlemen like
agents to manage the connections with suppliers and
financial institutions, but often excess fees and costs
eat away at profit margin. Many retailers would like to
employ direct sourcing as a means of saving money,
but incur new costs when attempting to handle the
tasks of the agents themselves.
1. It’s too expensive or difficult to cut out the
middleman
Trying to eliminate middlemen without cloud is
difficult. When agents are removed from the supply
chain picture, the number of connections to manage
soars. The amount of data to process increases,
and the elimination of agent functions like PO
confirmation and invoice matching must be taken
over by someone in-house. This can lead to:
• Increased head count
• Higher cost of communicating with partners
• Reduced ability to identify issues
2. Eliminating agents means eliminating sources
of financing
In the retail supply chain, there is often uncertainty
around supplier financing. Suppliers have little to no
access to the low financing rates their larger buyers
enjoy. These suppliers often rely on the financing
their agents can secure — however, when they
don’t have that option, retailers can suffer from:
• Delays in suppliers’ ability to deliver on-time goods
• Higher financing costs embedded in COGS
The Challenge
Middlemen like domestic importers and agents increase costs and impair visibility in sourcing.
Before cloud, direct sourcing meant retailers had to fend for themselves with
hundreds of isolated supplier relationships. Now, they can connect in a single
location – eliminating the need for middlemen.
A cloud-based supply chain platform can bring suppliers,
financial service providers, and retailers onto the same
page. By using this technology, retailers can curb the
effects of adopting a direct sourcing strategy. They can
connect to each of their suppliers and offer them
favorable financing rates through the financial institutions
in the network.
Manufacturing Retailer
Data/Documents
Goods
Communicate directly with every supplier and financial institution on
a single network, eliminating the need for extra costs or manpower to
replace agents.
Provide a standard sourcing platform with embedded
financial services.
• Connect to all sourcing partners on a single, cloud-
based platform
• Manage purchase orders, shipments, invoices, and
payments online
• Tap into a pre-existing network of factories, financial
institutions, and global support
• Gain real-time visibility to factory floor production
and packing statuses
How to use a cloud supply chain platform for
direct sourcing:
1. Collaborate with suppliers to ensure on-time delivery
2. Automate manual processes like document matching
and invoice approval
3. Track item statuses and receive alerts to potential
delays
4. Offer supply chain financing programs to suppliers
Value Propositions
By adopting a cloud-based platform that connects all
of their suppliers and financial institutions, retailers can
solve the problems that come with direct sourcing
strategies. The duties previously done by agents are
done seamlessly on the platform. With this technology,
they can:
1. Reduce COGS by eliminating middleman/agent
fees
• Cut out agent fees to buyers & factories that
range from 3% to 8%
2. Avoid adding headcount to support the sourcing
process (reduce SG&A)
• Employ a paperless solution with automation and
integration tools
• Use exception management tools to focus on
the real issues
3. Maintain or reduce supplier cost of capital
• Offer on-demand financial services to maintain
supplier liquidity without the agent
• Reduce delivery delays that are due to lack
of liquidity
• Ensure cost of capital doesn’t impact cost of goods
4. Enhance supply chain agility with direct connection
to factory statuses
• Spot potential delays with real-time visibility
• Enable customer responsiveness with late-cycle
amendment processing
Direct Sourcing and the Networked Company
To increase direct sourcing, companies must transform
themselves from silo-based, inward-facing corporate
operators to interconnected, highly agile business
network orchestrators.
NetworkConnectivity
Agility
B
A
Sense more accurately
Operate more e�ciently
Respond faster
Make better decisions
The Solution
GT Nexus provides the cloud-based collaboration platform that leaders in nearly
every sector rely on to automate hundreds of supply chain processes on a global
scale, across entire trade communities.
Copyright © 2017 GT Nexus, an Infor company. All rights reservedgtnexus.com