Low-cost production centers like the Far East are attracting a growing number of global retailers to source merchandise directly. But when working a long way away from suppliers, good communications and process compliance are vital as US electronics chain Best Buy has discovered.
With a 13-hour time difference, language issues and thousands of new products in the pipeline at any one time, sourcing from the Far East presents its challenges to U.S. companies. For North America's largest consumer electronics retailer, Best Buy, the solution has been to implement Eqos' Collaborator™ platform as the backbone of its new global sourcing system: a system which has succeeded in reducing errors and lead times and is simplifying operations for buying teams on both sides of the Pacific.
Like many U.S. players, Best Buy has been sourcing increasing volumes of products from the Far East, and specifically China, over the past few years. It began by working through agents and distributors buying an assortment of branded merchandise and has advanced to an expanding private label portfolio by developing products with contract suppliers.
From a business perspective, private label helps Best Buy build a competency short term, and reduces selling, general and administration (SG&A;) rates. Equally important, direct sourcing helps Best Buy fulfil its commitment to deliver value, quality and selection to its customers.
To build these product lines, Best Buy's merchandising teams need to work very closely with contract manufacturers: designing and developing unique products and managing production and supply to stores to coincide with marketing plans and seasonal trading peaks. In September 2003, Best Buy opened its own sourcing office in Shanghai. Here, a team of 30 acts as the vital link between Best Buy's merchandisers and buyers back in Minneapolis, and dozens of outlying Chinese factories.
The Eqos solution is Web-based, giving Best Buy staff in Minneapolis and Shanghai a common Web portal for exchanging information. The system creates and monitors critical milestones to ensure successful implementation and provides a single common record -- of both product images and information -- for all project plans.
By far the biggest benefit has been to give Best Buy a one-stop shop for all information. Employees were communicating via e-mails, conference calls and Excel spreadsheets, and the time difference was a real problem. Now if they log queries on a Monday night they have the answers back by Tuesday morning and everyone involved can check developments on the website which can be accessed from anywhere. All information is stored in one place, which speeds things up and reduces errors.
One near-term goal is to extend the system so suppliers can directly input production information and bids including quality assurance and social compliance details, to help identify the most reliable suppliers with whom Best Buy can build long-term relationships.
