INCREASING SPECIALISATION THE NORM

In recent years, particularly among the larger UK supermarkets there has been a move towards reducing the pool of suppliers. This strategy of giving selected suppliers more business (as category managers) means that retailers have greater influence in the supply chain, as well as reducing costs through economies of scale. It also raises the stakes for suppliers and encourages greater co-operation between suppliers and distributors, out of the desire to retain business or gain new business among retailers. It is likely that this trend towards greater consolidation (and integration) of the supply chain will be a major feature in the medium term.

Category management is a principal driver in increasing specialization. This requires that 'Suppliers and retailers work in partnership to satisfy consumer demand.' For suppliers, this means changing from a grower focus (selling what the growers produce) to a consumer focus (making sure growers offer what the consumer wants). Categories in this context are groups of products e.g. citrus, brassicae, legumes, etc.

The key elements of category management are:

• The consumer is at the centre of business decision-making.
  Categories should reflect how each retailer's consumers define the category through in-depth research of their decision-making process. From this information, retailers can reflect an optimum product range for each category, which will ideally satisfy their consumers' needs.
• Extending the Marketing Mix to the point of sale
  With 75% of consumer brand decisions made in front of the shop shelf and often within three seconds, the category offering needs to be easy to buy to maximise sales and profits. Pricing, new product introductions and promotions need to reflect what consumers want to make decision making efficient and effective.
• Closer working relationships between suppliers and retailers
  Category management can only work effectively if suppliers and retailers work together to develop the whole category to fulfil consumer needs. This requires a mind-set change for suppliers to focus on the development of the whole category, rather than purely focusing on production. This closer relationship requires a greater level of trust and openness with a need to share data and information to ensure that decisions are based on facts as well as consumer demands. Communication is required between managers at all levels through the supply chain, not only at the buyer/sales interface.

The implications of this trend are that:

• Reliability of suppliers is essential
• Consistent high quality product is essential
• Dedication of lines and teams is necessary/helpful
• A pro-active approach from suppliers is needed.
• New skills must be developed to permit new roles to be adopted.