When retail rivals Bentalls, Allders and Selfridges realised they had common supplier problems, they collaborated to share a Web-based supply chain management system and now trade electronically as one entity. Lindsay Nicolle reports
In an industry first, arch-retail rivals Bentalls, Allders and Selfridges have buried their differences to exploit the efficiencies of e-business in dealings with their shared suppliers.
The three have collaborated to share a simple and inexpensive Web-based supply chain management system that enables them to trade electronically as one entity, generating substantial savings and improving business efficiency.
The retailers share the same business drivers - a lack of individual buying power to get their suppliers to adopt a more efficient supply chain management system; adversarial relationships with some shared key suppliers; and the need to resolve the major cost problem of deliveries not matching orders.
The system that resolved these issues costs suppliers less than the price per month of subscribing to BSkyB, compared to a traditional electronic data interchange (EDI) approach of £8,000-10,000. Suppliers no longer need to buy three different trading systems, they just rent the new Web-based PC solution and trade through an e-commerce co-ordinator who represents the trio's interests.
And yet just two years ago it would have been unthinkable that Bentalls, Allders and Selfridges would work together in this way. What changed this situation was the emergence of the online world and the need to remain competitive against larger retailers.
Bentalls made the first move in 1996-97 when its operations director, Sarah Roper, began to look for a cheaper and less complicated alternative to trading with suppliers via electronic data interchange (EDI).
Something had to be done to manage Bentalls' complicated supply chain more effectively.
The retailer maintains approximately 333,000 stock keeping units (SKUs) - products individually catalogued by size and colour and counted as one unit for each variation - from hundreds of suppliers. Plus, around 25 different fields are attached to each product variation, to log things like cost and selling price. All this information had to be keyed into Bentalls' database.
"The manual effort required was terrible, and no matter how quickly we updated the database, it went out-of-date because the suppliers' product details were always changing," says Roper. "We kept ordering against the wrong items.
"Between 15%-20% of everything that arrived at our distribution centre had a query on it. The on-cost to the business was phenomenal," says Roper.
The advance ship notice was another problem area. Each delivery note was converted into the suppliers' picking sequence as its associated product progressed to its destination.
A seminar presentation on trading via the Internet inspired Roper to search for a Web-based solution.
Traditional e-commerce suppliers were unhelpful, but then Roper discovered supply chain software and services company, Kewill Systems.
Kewill was also exploring the potential of creating an Internet-based supply chain management system, so the software house and retailer created a prototype. "It had to be simple and cheap," says Roper.
Together, Bentalls and Kewill defined Web-based trading messages covering cataloguing, orders, advanced ship notices, invoices and sales information. Kewill then developed the system for less then £50,000, co-funded by Bentalls, and thus, Xtratrade was born.
"We knew that we didn't have the clout to get our suppliers to adopt what appeared to be another EDI system on our own," says Roper.
It was then that Roper played her ace. She spoke to ex-colleagues who now worked for Allders and Selfridges, reasoning that the three retailers have a shared supplier base of around 70%.
"They confirmed they had the same adversarial relationship with their suppliers and that individually they didn't have the clout to do much about it, either," says Roper. "We agreed to club together."
Amazingly, there was no management conflict or need to work at building trust. All three retailers realised that, united, they could solve their shared supply chain management problems without compromising their competitive edge.
"We might consider ourselves in competition with Allders and Selfridges commercially, but on the operational side we were wading through the same toffee," says Roper. "However, we have all been surprised at how amicable it's been."
Allders and Selfridges recompensed Bentalls for its investment in Xtratrade with an undisclosed mix of money and business value.
Today, hundreds of suppliers have signed up to trade with the trio using the new system, and those that haven't can still trade using traditional EDI passed through a clearing house managed by Kewill.
Roper concludes, "We now get what we order, we've saved time and money, and our supply chain management is far more efficient. It's been fantastic."
Sarah Roper has since left Bentalls.
Founded in 1867, Bentalls is a retail group consisting of seven department stores based in the south east and Bristol, with a head office in Kingston-upon-Thames, Surrey. Its turnover is approximately £120m and it employs over 1,500 staff.
Originally based in the south of England, Allders now has 37 department stores nationwide that together generate annual sales in excess of £500m. The UK department store group enjoyed a turnover in 1999 of £511m.
Top London store Selfridges was founded in 1909 and became part of the giant Sears group until 1998 when it demerged. Today, there are just two stores - Manchester and the head office in London.
Problem synopsis and solution
In an online world, Bentalls, Allders, and Selfridges individually lacked the buying power to get their suppliers to adopt a more efficient supply chain manage-ment system. Each also had adversarial relationships with the same suppliers, mostly because they were spending too much time and money trying to resolve the mismatch of orders to deliveries.
The three retailers have united to negotiate as one with their hundreds of shared suppliers through a Web-based supply chain management system that's simple and cheap to run. Its five trading messages have resolved the problem of matching orders to deliveries and turned suppliers into business partners rather than adversaries.