Millions lost through bad supplier management

UK retailers are losing tens of millions each year by using manual processes and spreadsheets to manage the deals they strike with their suppliers, shows new research undertaken by Martec on behalf of IT and business services company, Enabler Wipro.

The research, the largest of its kind conducted in this area, found that 95% of retailers use spreadsheets for evaluating alternative deals from suppliers. In addition, 63% of retailers feel they are challenged in ensuring that deals are managed effectively because of administration and management costs, and also because the knowledge of deals in place tends to be lost when buyers leave or move within the business.

In money terms, Supplier billing is a major contributor to inefficient margin management, estimated to be costing UK retailers 1-5 per cent of turnover per year, translating to as much as 10 per cent of profits.

The survey was based on interviews with 40 retailers with sales totalling 68bn, equivalent to 25% of the UK retail market. Six out of the top 10 UK retailers participated, and 31 out of the top 100 retailers.

Only 33% of retailers claimed to use a deal evaluation simulator to identify which is the best deal option. And yet, 93% of retailers expected to increase their margins through better supplier deal management. 

One retailer in the research said, Its about really understanding the profitability of individual items in the category and refining the assortment in turnover terms; its an area where you can certainly go wrong.

To solve the problem, some retailers choose to outsource the rectifying of mistakes in their billing process to a third party auditor, which will typically take anything from 25-35% of the money claimed, which can run into millions.

Enabler Wipro however suggests that an automated solution is the way forward in improving margin recovery and cash flow, as well as releasing commercial teams to do what they do best. It has provided one of its own food retail customers with a system to centralise and control all deals across their group. Rather than the commercial teams spending hours each week trying to collate data to justify supplier rebates, the system automates the complete process and has provided the commercial team with more time for decision making and greater confidence that there numbers are 100% correct.

About Enabler Wipro

Enabler Wipro is an international IT and business services company that delivers measurable value to the worlds best-known retailers. The company works with retailers on their business and IT transformation programmes to achieve competitive advantage.

Enabler Wipros knowledge, retail and IT experience help retailers reduce risk when deploying critical projects. With an increasing worldwide presence, the company has over 300 employees and reached a turnover exceeding 30 million in 2005.

Enabler Wipro is proud to serve leading international retailers and wholesalers including Tesco, Nisa-Todays, Sonae, AVA, Esprit and Despar.

In 2006 Enabler became a part of Wipro Technologies, a division of Wipro Limited (NYSE:WIT) ,  the first PCMM Level 5 and SEI CMM Level 5 certified IT Services organization globally. Wipro is one of the largest product engineering and support service providers worldwide. Wipro provides comprehensive research and development services, IT solutions and services, including systems integration, Information Systems outsourcing, package implementation, software application development and maintenance services to corporations globally.

In the Indian market, Wipro is a leader in providing IT solutions and services for the corporate segment in India offering system integration, network integration, software solutions and IT services. Wipro also has profitable presence in niche market segments of consumer products and lighting. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services for global corporations. Wipro's ADS are listed on the New York Stock Exchange, and its equity shares are listed in India on the Stock Exchange - Mumbai, and the National Stock Exchange.

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