In-House or Outsource – The GNFR Conundrum
The retail sector is undergoing unprecedented change and while this is bringing amazing opportunities in the customer experience space, it also means that budgets continue to be squeezed in the drive for operational efficiencies. Goods not for resale (GNFR) is an often-overlooked area of retail that when managed properly, offers both smarter ways of working and commercial savings. As a category it can represent up to 25% of your total operating cost (and up to 8% of revenue) yet it is rarely scrutinised in the same way as other high-profile cost centres so the savings on offer are seldom achieved.
Paying attention to your GNFR category isn’t just about the spend though. Its also about how it is managed by your organisation – how resources are allocated to support the efficient procurement of the right goods, how performance is managed and consequently the reputation of the function. Interestingly, many organisations have turned away from a central model and have multiple procurement professionals and decision makers scattered throughout their head office function, creating multiple layers of activity in a significantly uncoordinated way.
This kind of decentralised procurement and management activity does, however, fuel category inefficiencies as the total spend is rarely captured in one space. This means much smaller line items pass through financial reporting without the total spend ever being captured and addressed. GNFR is a complex business, particularly in the retail solutions area, but there are still some key areas of focus that could help drive better performance and results from your investment.
Consider outsourcing your GNFR supply chain
A big decision, but often a worthwhile one to consider. Tapping into the extensive expertise, scale and industry know-how of a category-specific GNFR outsourcer could be the simple answer to a complex question. Here, you can take advantage of greater controls, increased accountability and better visibility of spend all while experiencing consistency in service, performance and reliability. There’s even potential to evolve into a partnership model, working proactively with your outsourcer of choice to consider design, material, production and efficiencies of scale at the very beginning of your retail programmes.
Get creative with your purchasing
Buying cheaper is the obvious answer here; focusing on buying the same or equivalent products at a lower cost by whatever means. But there are other ways to create efficiencies from your spend. Disruptive anti-theft devices, innovative sourcing and exploring global procurement can all help you optimise total costs.
Sounds simple – just reduce your spend and watch the savings roll in. However, practically this can be difficult to implement. To properly optimise your spend needs a culture of cost control backed up by robust systems and processes that allow you to capture the right detail, interrogate it and respond appropriately. It’s unlikely you’d do this just for retail which means designing and implementing a system that will work right throughout your organisation. However, this should deter procurement professionals from understanding areas of low hanging fruit to target for reduced spend. Where this can be quickly and simply achieved, such as reviewing storage options or expanding your procurement options globally, this is an area than can have quick and positive results.
Whether working with you in-house teams or an external supplier, there are some very tangible benefits to better managing your GNFR category that go far beyond increasing your cash position and pure cost savings:
Improved Market Competitiveness –
Either through passing on savings to the end customer or investing in your estate, ultimately improving the overall customer experience
Improved Supplier Governance -
The ability to better articulate requirements and expected outcomes feeding through to better supplier performance
Strategic alignment with your wider organisation -
Contribution of procurement and category management by demonstrating your added value to the wider business strategy
Improved value through total cost ownership -
creating accountability and responsibility from your suppliers and partners
Risk mitigation -
Knowing your area and reporting on it effectively means better decision making, especially when involved in an outsourcing relationship
Control and visibility of your spending activity -
Which means you can actively target areas for improvement and focus
Procurement as a whole will continue to be under pressure to do more with less whilst maintaining quality, standards and delivery for its organisation. As a sector within this, Retail Solutions has one of the most high-profile customer touch points in that it supports, or not, the way your customers interact with the products they want to buy. Despite this, it is rarely a board-level discussion and actually is questionable whether it’s even business-level agenda item given
True benefit can be derived from focusing on how this category is managed, both from a cost and experience perspective. Focusing on effectiveness rather than efficiency, and the value GNFR can offer to the broader business aims and objectives means this area of spend will start to work even harder and smarter for you, especially when you have the right expertise focused on delivering for you.
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