A digital revolution has changed the retail landscape, and supply chains must rise to the challenge. An ever-elusive digital consumer, new channels of distribution, changes in load sizes — if retailers and suppliers are to adapt, they need close collaboration. One way to accomplish this is with intelligent sourcing.

What is intelligent sourcing?

Intelligent sourcing is a process by which trading partnerships and sales performance are continuously re-evaluated and improved for the greatest efficiency and the best price points for the retailer, supplier and the customer.

Intelligent sourcing is an important function for addressing the complexities of today's retail supply chain. Traditionally, delivering goods to a customer was pretty straightforward: a customer ordered a product and the retailer shipped their item. Today, with the advent of new order fulfillment models including drop shipping and buy online pickup in store (BOPIS), order management is much more complicated.

Perhaps a vendor is out of stock of a specific SKU or a retailer is inundated with an item that isn’t selling well. Or maybe a supplier is located too far away, resulting in higher shipping charges and longer delivery times. No matter what the situation is, retailers must determine how well a vendor is meeting their requirements for goods and services so the consumer gets a seamless shopping experience.

Getting started with intelligent sourcing

There are a few important questions to consider when devising an intelligent sourcing strategy:

• Can you consolidate suppliers?
• Can you find suppliers closer to specific locations to reduce delivery times and shipping costs?
• Can you get a lower price buying in higher volumes and are there suppliers out there who could meet your needs efficiently and accurately?

Knowing the answers to these questions will help when developing an intelligent sourcing strategy.

Use Big Data

Having actual numbers to support the sourcing strategy will optimize decision making throughout the supply chain, and is an important part of intelligent sourcing.

As supply chain risk, market volatility and competitive pressures mount, sourcing professionals must work smarter than ever. In the current environment, retailers and suppliers must know what’s selling as well as what is not selling. It seems simple, but it might not always be obvious what the right sourcing strategy should be and how to optimize relationships with suppliers.

Doing sourcing right requires the use of metrics to help understand how products are performing across channels and the marketplace overall. This information helps to identify suppliers whose product capabilities align with customer preferences.

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Intelligent sourcing is an important function for addressing the complexities of today's retail supply chain.

Pete Zaballos

Senior Vice President and Chief Marketing Officer, SPS

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To capitalize on all opportunities, a thorough audit of spending, sales, sourcing and supply chain plus a detailed market analysis is imperative to keep track of progress.

Also consider external data when developing your strategy. What is the addressable market for the products in consideration? What other products should be stocked? How does geography and proximity factor into the retail strategy? This type of information is key to figuring out different ways to improve the business.

For intelligent sourcing to deliver results, all parties, including retailers, suppliers and logistics providers must be on the same page and collaborate to improve supply chain performance and fulfill customer demand. Intelligent sourcing is not possible without symbiotic partnerships that help all of the parties involved. In short, relationship building is key.

Considerations for intelligent sourcing

Gathering the relevant data needed to make sourcing decisions can be a challenge. There is usually more data than most organizations need or know what to do with, so pinpointing which data will meet your business objectives will help in strategy development.

When implementing an intelligent sourcing approach, keep in mind that it will take time and resources to get results. Collecting data requires storage space, processing power and IT staffing. Additionally, hardware and software evolves quickly, which can require regular upgrades that come with costs.

The retail landscape will continue to change rapidly and companies need to collaborate more closely than ever to reap the rewards of an effective intelligent sourcing strategy.

Peter Zaballos is senior vice president and chief marketing officer at SPS Commerce, which perfects the power of trading partner relationships with the industry’s most broadly adopted, retail cloud services platform. Share your omnichannel insight with Peter at @peterzaballos.