Retail surgery: How can we improve supplier relations?

A large retailer has to manage four core relationships: customers, staff, suppliers, and financial stakeholders.

AlixPartners director Dan Murphy says that over the past 10 to 15 years, this web of relationships has become more complex with the growth of international retailing and the changing nature of financial structures.

As with any relationship, two key factors are communication and trust. He says: “If relationships with your suppliers have soured, you need to understand the reasons why. Common ones are nervousness about a retailer’s long term financial health, or a lack of visibility around the levels of financial support.

Any retailer in this situation should sit down with their key suppliers (and credit insurers) and share with them as much as possible the current forecasts, business plan, and levels of financial support.”

“At AlixPartners, we often find that just having this conversation can have the effect of calming the situation, allowing suppliers to continue their support. Of course, there are other dynamics which must also be taken into account. For example, if a retailer is the largest customer for key suppliers, then it can be easier to get those suppliers to a position of comfort.”

Whatever the dynamics between the parties, the first step must be one of transparency. “Without this, the other party is almost bound to take a defensive position. By sharing information with them as early as possible, the relationship can only improve, and both parties can start to work towards a mutually beneficial outcome,” Murphy concludes.

• Dan Murphy is co-author of Retail Therapy, a study into how these key relationships are managed in large retailers