Scaling Private Label Requires Automated Supplier Management

Private label’s market share keeps growing. Sales of private-label products climbed in 2022, averaging 11.3 percent growth, nearly twice what national brands saw, according to a report from the Private Label Manufacturers Association. Global inflation helped fuel that growth, spurring consumers to turn to store brand alternatives to save money. However, 73 percent of consumers say they plan to stick with private-label products even after the economy improves, according to a survey released last month.

On the surface, that’s great news for brands and retailers that have committed to expanding their branded product lines, but many of the same global trends that have helped accelerate private label sales have also created enormous business risks. Inflation, material shortages, growing global political tensions and supply chain bottlenecks have all complicated global sourcing, while tightening government regulations have necessitated that retailers pay heightened attention to their supplier networks, which have only continued to grow more complex.

These headwinds make supplier relationship management (SRM) software more integral than ever for brands and retailers. SRM software automates supplier management while providing a complete window into an enterprise’s entire supplier base, from factories and vendors to raw material providers. SRM is an invaluable compliance tool that can ensure a company’s complete supply chain network adheres to company policies and requirements, but its benefits extend well beyond that.

Supplier relationship management software helps retailers bring products to market more efficiently and responsibly. The software monitors vendor certification statuses, sending alerts about expired certifications and other red flags so that compliance teams don't need to monitor each supplier individually. And with these systems, all departments involved in product development have visibility into every supplier’s status.

Automation also speeds up the onboarding process for vendors, shaving days and sometimes even weeks off the process — a huge advantage for retailers expanding their private-label categories. Automated onboarding guarantees that all new suppliers have agreed to the company’s terms and conditions.

Some SRM systems go even further. A cutting-edge SRM system can also integrate with databases that buyers, merchandisers and compliance managers routinely cross-check, such as amfori BSCI, Higg, and WRAP. Integrations like this can eliminate hundreds of hours of tedious manual work for overtaxed compliance teams.

Enabling Due Diligence

Across the globe, governments have been proposing and implementing new regulations, from the German Supply Chain Act to the United States’ Uyghur Forced Labor Prevention Act (UFLPA). A similarly sweeping supply chain law looks likely to pass soon in the European Union. These laws obligate retailers and merchandisers to employ appropriate diligence to ensure the elimination of forced labor and other human rights abuses from their supply chain.

Most retailers aren't equipped to ensure complete supply chain transparency. A 2021 survey of supply chain executives found that just 2 percent could identify their suppliers beyond the third tier. SRM software can help businesses catch up to tightening regulations with traceability tools that provide visibility into vendor, factory and material provider relationships.

SRM software can also safeguard against regulatory violations by monitoring supplier compliance. A smart system can prevent merchandisers from booking orders with noncompliant suppliers and block shipping departments from booking shipments with them. This software prevents merchandisers from looking the other way and ignoring potential violations, ensuring a company’s standards are enforced consistently.

Brands and retailers are under heightened pressure to bring private-label products to market quicker and more cost effectively. As they navigate the added challenges of a supply chain that has grown more fragile and regulated since the pandemic, the strategic advantages, safety nets and time savings that SRM software creates are critical for helping them more efficiently and responsibly grow their private-label lines.

Eric Linxwiler is senior vice president of TradeBeyond, a company that connects retail supply chain operations from product development to delivery.