Using supplier relationships to serve customers better

To compete in today’s modern retail environment, an organisation depends more than ever on its ability to develop business opportunities as and when they arise. A key element in developing a business strategy is for decision-makers to build on the unique elements which help that organisation to do well.

Understanding and building on this capability is particularly important in ensuring that the core strengths and competencies of the organisation not only fit the business environment but also help to develop it further and faster than its competitors. This strategic capability to respond to changing conditions will help counter threats to the organisation’s development.

Marks & Spencer aims to become the world’s leading volume retailer with a global brand and global recognition. Its unique retailing formula has already enabled the company to enter a large number of markets around the world. Marks & Spencer owns no factories and does not make the goods which are sold in its stores. The core competence at the heart of this formula, which provides many advantages over competitors, is that of the supplier relationship.

All organisations have to obtain resources in order to provide goods and services. This is known as the supply chain. Marks & Spencer has a policy of buying and dealing directly with suppliers. This partnership spans the whole supply chain, including producers and raw material suppliers. It is a symbiotic relationship – the organisations work together and depend on each other for success. The strength of these relationships has provided Marks & Spencer with many advantages over its competitors. These advantages, in turn, lead to benefits for customers, such as better product quality, value, availability and constancy of supply.

This case study focuses on how this special relationship with the supply base enables Marks & Spencer to serve customers better. The lingerie market will be used as an example.

Market position

When looking at an organisation’s competitive position, it is important to understand the opportunities that exist within a market, as well as other competitive threats. A market can be defined as: ‘a collection of individuals and organisations who are actual or potential buyers of a product or service’. The market environment in which organisations compete is usually known as the micro-environment.

This refers to all the factors that influence an organisation’s activities in a market, such as changes in the needs and expectations of customers, as well as patterns of competition.

Lingerie is a market which incorporates both core and fashion products – changing consumer trends and tastes influence the type and nature of products produced and required. As a result, organisations must constantly develop new product concepts in response to customer demand. If an organisation does not meet these demands and expectations, it will fail. For a company like Marks & Spencer, building on one year’s product successes presents a challenge for the following year, while products which have been less successful will leave gaps to fill and areas to develop.

Decision-makers at Marks & Spencer cannot afford to be complacent when developing goods for such a market. Sound judgement, experience and entrepreneurial flair are all required to understand the complex cycle of the fashion market.

The lingerie market in the UK is worth more than £1.75 billion. Marks & Spencer has a 40% share of this market and is, therefore, a clear market leader. However, the improved performance of competitors and new entrants to the industry mean Marks & Spencer must strengthen its position. Consolidating a market position is concerned with strengthening and further developing that position – it does not mean standing still. Competencies, such as mutually advantageous supplier relationships, must be continually developed to improve competitive advantage.

Integration of the supply chain

The common objectives for Marks & Spencer and its suppliers are to:

• increase sales
• minimise stocks
• minimise commitment
• maximise flexibility.

The key to doing this has been to manage, or integrate, the supply chain so that both Marks & Spencer and its suppliers are working towards the same business objectives. Communication is therefore important between all parts of the chain to ensure that the differences between demand from customers and the suppliers’ ability to meet such demand can be minimised.

Developing supplier relationships

Marks & Spencer’s ability to respond quickly to changing customer needs lies with mutually advantageous relationships developed with suppliers throughout the supply chain. Many of the suppliers have seen their businesses grow alongside that of Marks & Spencer. The strength of these relationships and the mutual trust and support each provides is a critical element for the development of each business.

An important element in managing this supply chain is ‘fairness’. Working closely with a limited number of suppliers involves helping each of them to meet their own business aspirations, but not at the expense of other key suppliers. The starting point for managing the supply chain is to coordinate Marks & Spencer’s business strategy with each of the suppliers’ business plans. This will provide the structure and direction for each supplier to follow.

Marks & Spencer’s strategic objectives are to develop all new products so that they:

• fully satisfy the customer in terms of comfort and fit
• are available at the required time
• are clearly specified so that they can be launched into any manufacturing site
• provide the maximum benefits permitted by each design.

The beginning of season strategy meeting provides suppliers with the opportunity to discuss their expectations with Marks & Spencer, such as the areas of business they would like to grow. It also enables Marks & Spencer’s decision-makers to provide suppliers with a realistic assessment of where they need to develop. Discussions at this stage may broach issues such as how to encourage others to take their products further forward and how to spread knowledge.

At the heart of this process is integrity. It is important that all parties are dealt with in a fair and equitable way which sustains relationships to provide long-term business opportunities and developments.

Supplier strategy

For many lingerie suppliers, Marks & Spencer is often their main customer. These relationships are interdependent – Marks & Spencer depends on the capabilities of its suppliers to help meet customer requirements. If Marks & Spencer is successful in meeting the needs of its customers, then the suppliers will also reap the benefits and rewards.

Planning a business strategy with suppliers helps to provide a clearer brief for all parties involved in the process of supply. Interim meetings provide a useful opportunity for suppliers to provide feedback from trade fairs and discuss trend predictions. Much of the information provided for these meetings is market-driven. Working with suppliers enables Marks & Spencer to combine its own experience with that of suppliers to identify new product ranges which will fit in well with other existing product ranges.