GLOBAL RETAILER

REVERSING THE INFORMATION ASYMMETRY

Negotiating better based on a deeper understanding of customer behavior and product economics

“This is exactly what we need”

THE CHALLENGE

Historically, consumer product manufacturers have had the upper hand when negotiating with retailers. Their organizational structure gives them a big advantage: Each account manager at a manufacturer is responsible for only a few dozen similar products, while retail buyers often have to cope with hundreds of dissimilar ones. That is the situation we found within this client. 

To get the best deal, we needed to reverse the “information asymmetry” with its suppliers. Good arguments mean lower costs – and building good arguments begins with collecting data about sales, margins, space productivity, market share evolution, and commodity prices. 

The client already possessed the data they needed to reverse the information asymmetry: The problem was that it was scattered, and important value-added insights were missing. 

The key was to collect robust data efficiently in one place, process it to generate the insights required, and serve it up in a suitable format to the buyers so that they had information at their fingertips.

“Your work was a strategic turnaround for us"

EXEC COMMITTEE

What we did

WE BENCHMARKED

WE BENCHMARKED

We performed a detailed, quantitative benchmark of the retailer’s performance across all commercial levers. In record time, we assembled a group-wide fact-base encompassing economic, operational and customer metrics. We compared this to Oliver Wyman’s proprietary benchmarks of industry best practice and identified the strongest opportunities for commercial improvement.

WE PRIORITIZED

WE PRIORITIZED

We identified that the retailer – while present in multiple countries, though not necessarily a leader in any one – did not fully exploit the international dimension of their business in dealing with suppliers. In addition, the information available to buyers on the performance of the categories and suppliers was inadequate and often did not meet best practices. Building the capabilities within purchasing, it was decided, would have the biggest impact and was prioritized by executive management.

WE PILOTED

WE PILOTED

Better supplier negotiations required a methodology that would go hand-in-hand with better information. During the pilot our focus was on rapidly integrating data sources from each of the focus countries, and on arming the Oliver Wyman consultants on the ground with the insight required to help the buyers in each country negotiate successfully. The methodology—and leveraging information to drive fact-based arguments—was at the center of the process, and was proved successful through systematic measurement of the commercial impact and results achieved.

WE SUSTAINED

WE SUSTAINED

Once the pilots had delivered the results, our focus moved on to ensuring that the benefits were sustained. We helped build an organization within the client to support the methodology and update data within the supplier negotiation tool. We finalized the supplier negotiation tool with on-going data feeds from the various participating countries, and trained buyers on how to use it on their own. We provided the client with the capability to continuously monitor supplier performance.

IMPACT

AN INTEGRATED NEGOTIATION TOOL

AN INTEGRATED NEGOTIATION TOOL

At the core of what we delivered was the Oliver Wyman Supplier Negotiation tool, hosted by Oliver Wyman Labs. The tool integrates dozens of different data sources from the client, validates and cleans the data, performs sophisticated value-added analysis, much at the customer level, and generates easy-to-consume graphical reports in a format suited to supplier negotiations.

DRIVING INCREASED VALUE

DRIVING INCREASED VALUE

The Supplier Negotiation tool identifies the best arguments to use with a particular supplier and the associated value potential of such argument.

The result was a leap forward in buying capabilities, that delighted the commercial organization and that has delivered significant and sustained commercial benefit.

IF YOU WOULD LIKE TO DISCUSS THIS PROJECT FURTHER PLEASE CONTACT
Salim Poonawala, Partner   salim.poonawala@oliverwyman.com
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