August 15, 2024

Leveraging Third-Party Companies to Optimize Supply Chains: A Competitive Edge for Retailers and Brands

By Michael Florkowski ,  Sr VP of Operations of SPAR Group

Ensuring smooth supply chain operations is as fundamental to success for retailers and brands as knowing what shoppers want and having it available for them when they want it. Now, companies are increasingly turning to third-party companies to tackle challenges caused by variables like climate change and other destabilizing factors to limit the risk of out-of-stocks, damaged goods and more. By leveraging the expertise and resources of these external partners, businesses enhance their operational efficiency, reduce costs and ultimately provide a better shopping experience for their customers.

Addressing Damaged or Faulty Products

One of the most persistent issues in the supply chain is the handling of faulty products. More frequently than manufacturers would admit, products are shipped to retailers and even sold to consumers with defective or damaged parts. Third-party providers and specialized workforce companies offer solutions to mitigate this risk by quickly and accurately delivering fixes, whether that’s a new part or a service call, to address the issue.

Damage Inspection and Reporting: Some third-party companies offer services to inspect products at various stages of the supply chain. By identifying damage early, these companies can take corrective actions, such as repackaging or repairing items before they reach the retailer or end customer.

Returns Management: Efficient returns management is another area where third-party companies excel. They handle the logistics of returns, ensuring that damaged products are processed swiftly, thus reducing the financial impact on retailers and brands.

Enhanced Packaging Solutions: Many third-party companies specialize in providing robust packaging solutions that minimize the threat of damage during transit. These companies use advanced materials and technology to create packaging that can withstand rough handling and environmental factors.

Mitigating Out-of-Stock Issues

Out-of-stock situations can severely impact customer satisfaction and loyalty. Third-party companies provide several services to help retailers and brands maintain optimal stock levels.

Inventory Management Solutions: Many third-party providers offer sophisticated inventory management systems that use real-time data and predictive analytics to forecast demand accurately. This helps retailers keep their shelves stocked with the right products at the right time.

Automated Replenishment: Third-party companies help automate the replenishment process, ensuring that inventory is reordered and restocked promptly based on actual sales data and trends. This minimizes the chances of stockouts or overstock situations.

Distribution Network Optimization: By leveraging the extensive distribution networks of third-party logistics providers, retailers can ensure faster and more reliable delivery of products. This is particularly beneficial for meeting sudden spikes in demand and managing seasonal inventory.

Other Critical Supply Chain Issues

Logistics and distribution cover a lot of ground, too much for a single blog. There are two other supply chain challenges that retailers and brands are specifically drawing on third party companies for assistance. One is critical right now and the other is always important.

Supply Chain Staffing: Every manager in the retail value chain is intimately aware of the workforce challenges since the pandemic began. Not a week goes by for most that they are short staffed, particularly with jobs that require skills beyond basic stocking and checkout. Third party companies provide the temporary experienced support for even the highest skill level jobs, often at a moment’s notice.

Recalled Products: In terms of the speed required for the effort, recalled products are related to damaged items and situations that involve replacement parts. The typical recall involves going into stores, removing the items from both the shelf and the backroom, safely disposing the items and auditing for products sold. That’s a lot of work to put on the back of already busy associates and often requires training they don’t have so third party specialists are perfect for the task.

A great real-life example of third parties helping retailers and brands is from a company that discovered an imported product with a faulty part that negatively impacted the performance of the item. SPAR was hired to go to warehouses around the country and remedy the issues, so the supplier could ship out the product and not miss any merchandising opportunities created by a retailer advertisement or other promotion. In this case, the client realized the problem when the product was being shipped from the port and needed to address the issue at dozens of warehouses around the country within one week. 

The collaboration between retailers, brands and third-party companies is proving to be a game-changer in the competitive retail market. By outsourcing critical supply chain and merchandising functions, businesses can focus on their core competencies while benefiting from the specialized expertise and technology that third-party companies offer. This strategic partnership not only addresses challenges like damaged products and out-of-stock situations but also drives operational excellence and boosts customer satisfaction.

As the retail landscape continues to evolve, the role of third-party companies in optimizing supply chains and merchandising will only become more significant. Retailers and brands that embrace these collaborations will be better positioned to compete and thrive in the marketplace.

SPAR Group experts help retailers and brands turn their supply chain and fulfillment challenges into opportunities every day. Contact us HERE to find out how.

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