NACDS: More collaboration needed between retailers and vendors

March 19, 2009

Drug chains and vendors need to do a better job of collaborating and sharing information, particularly in this tough economy, according to a panel of retail executives and manufacturers at the National Association of Chain Drug Stores conference in Orlando.

Drug chains and vendors need to do a better job of collaborating and sharing information, particularly in this tough economy, according to a panel of retail executives and manufacturers at the National Association of Chain Drug Stores conference in Orlando.

“I don’t think we have gone as far as we could. We are arms-length on a lot of initiatives,” said Wilson Lester, senior vice president of supply chain for Rite Aid. Retailers and vendors of OTC healthcare products, cosmetics, and other health and beauty care products have been working together for years to find ways to improve the efficiency of the supply chain and the flow of products.

While drug chains are working more closely with their vendors to reduce out-of-stocks and get the best assortment on the shelf, they can be more open about sharing sales information, the panel acknowledged.

Lester said that in this economy everyone needs to work together to make supply chain and distribution more efficient. “I would like to challenge our community. We have to synchronize more as a community and go to another level in interactions with our trading partners,” Lester said. Every retailer and brand manufacturer is looking at ways to independentlyreduce costs and better satisfy customers, Lester said.

The industry needs to work together and share information on these initiatives. “We need to look at ways we can talk about this unilaterally. There are probably four or five broad solutions that can help everyone,” Lester said.

“We don’t do a lot of things we could be doing as a whole,” said Paul Trueax, vice president of customer service and logistics for Colgate Palmolive. He said some drugstore chains are more willing to share point-of-sale data than others.

Instead of getting caught up in the points of difference between retailers and vendors, Lester said now is the time to work more closely toward common goals. “Initiatives to better serve our customers are the ‘wins’ we should be working on. The maximization of our total effectiveness is more important [than points of differentiation],” Lester said.

Ron Link, senior vice president of logistics for CVS Caremark Corporation, agreed. “There are opportunities for more strategic collaboration…and for gaining savings on both parts,” Link said. Instead of one-on-one meetings between vendors and retailers, Link suggested that multiple suppliers and retailers work together to solve problems.

“Creating cross-functional groups … is a matter of efficiency. We have to think about multiple groups working together,” Link said.

One way retailers and vendors can save is by collaborating on inventory reduction, said Marc Urowsky, vice president of customer supply chain logistics at L’Oreal USA. “We really have to focus on the top movers, and keep the inventory down of non-performing SKUs [stock-keeping units],” Urowsky said.

Vendors and retailers need to have “exit strategies” in place, Urowsky added, to identify SKUs that are not working earlier in the sales process and save money on product return costs.