Ardent Partners’ research analyst and editor at CPO Rising, Matthew York, recently interviewed Sue Welch, CEO of Bamboo Rose, a Boston-area digital marketplace that connects retail companies, suppliers, and third parties to manage product development lifecycles and ultimately deliver innovative products to the consumer market. The company was founded in 2001 as TradeStone Software in an effort to digitally transform the way that retailers and their suppliers connect, collaborate, and transact. Following more than 10 successful years of growth, TradeStone spun off Bamboo Rose as “an invitation-only marketplace.” After several more years of growth and success, the two companies merged in 2015 and consolidated under the Bamboo Rose brand in 2016. Bamboo Rose touts itself as “the only B2B marketplace powered by proven trade engines.”
Today, Bamboo Rose strives to connect retail buyers with their suppliers in an effort to discover innovative product ideas and quickly go to market with competitive, ethically and sustainably sourced products that are also high quality. Bamboo Rose also connects retail buyers and suppliers with a wider network of stakeholders, such as raw materials suppliers, third-party inspection agencies and lending institutions, government regulators, customs brokers, and freight forwarders and carriers. “Tier 1” and “Tier 2” retailers, such as Home Depot, Kohl’s, and American Eagle, connect with as many as 50,000 suppliers on the platform to drive collaborative, ethical, and sustainable sourcing practices with their supplier base.
Driving Retailer-Supplier Collaboration
According to Sue, Bamboo Rose’s platform enables retailers and suppliers to collaborate to reduce product development lifecycle times, limit or avoid supply chain risks, cut costs, and enhance performance for all parties. For a process that can take years to complete, this is a welcomed change.
Under a traditional product development lifecycle, a retailer begins with a product idea, designs it, compiles a bill of materials for the product, and presents its idea to the supplier base. This can take four-to-six months, and longer for more complex products. But when retailers include suppliers earlier in the design phase, they are able to reduce cycle times by half or more, Sue said. They can also reduce risks regarding supplier quality, financing, and dodgy sourcing practices.
“When you give the retailer the ability to tap into the supplier’s ideas,” she said, “they really start to leverage that supply base more across multiple suppliers.” The product development process builds from the initial idea to a total product idea, to presenting that product idea to the community via virtual showrooms, to refining it or redefining it, to finalizing production, to ultimately delivering the product to the consumer market. By bringing suppliers into the process earlier, retailers can monitor production progress and drive quality control. By tapping third-party inspectors that tour factories and audit processes, retailers can catch manufacturing problems earlier and ensure that finished products meet their specifications and quality standards. As a result of this collaboration, Sue says that retailers now spend more time on refining the product than on the initial design phase.
Retailers can also bring in banks and other lending institutions earlier in the production process to understand supply risks and help reduce financing costs. As Sue said, many suppliers today pay 20%-40% for interest rates on post-production financing and even more on pre-production financing. But by including banks and other financing institutions earlier in the product development lifecycle, retail organizations can give them visibility into the primary risk points – the design, bill of materials, and production stages – to help banks better understand and mitigate them. They can use machine learning-enabled tools on the Bamboo Rose platform to understand when and where problems occur in the supply chain and what the reactions are by each party. This can give banks and other financial institutions a better sense of how the retailer and its manufacturing and supplier base can mitigate these risks, which can lead to lower financial risks for lenders. As a result, some retailers have been able to get banks or lending institutions to reduce their interest rates to 12%-15%, and sometimes as low as 3%-5%. Companies can then reinvest these savings into their businesses.
About those Risks…
In retail sourcing and procurement as in other industries, reducing risk is not just about dollars and cents. It is also about ensuring that quality products are lawfully and safely produced from responsibly and sustainably sourced raw materials; and that retailers and their suppliers do not end up in the news for the wrong reasons. “Customers don’t want to see that,” said Sue. In the digital age, consumers get to see how the sausage is made, and it’s not always palatable.
Today, the Internet, social media, and the ubiquity of mobile devices and cameras give consumers far more visibility (if not full transparency) into retail supply chains, whereas before, a retailer could hide most of its production processes from the consumer. Thus, a retailer’s reputation can be quickly and permanently tarnished by one high-profile incident involving its brand or supplier base. Even if that company has spent decades building up its brand reputation, bad press can send it tumbling to the ground. And as a company’s supply chain extends further and further across the globe, its ability to control the risks weakens and the likelihood of a risk event grows.
Sue puts it another way. “Ethical sourcing is having a considerable impact on retailers and suppliers while they’re trying to deliver product at a cheaper price that is also differentiated from their competitors.” That is where Bamboo Rose can shine for its users.
“We’re seeing retailer awareness and willingness” to engage in ethical sourcing; to engage suppliers earlier in the design process, she said. And they are using Bamboo Rose to facilitate the process. Previously, retailers would simply provide suppliers with technical product specifications; now retailers and suppliers co-design products. And they can connect with each other and align themselves on corporate social responsibility (CSR) programs and supplier codes of conduct to help minimize the risk of their suppliers going astray. Collectively, this is a huge change in the way that progressive retailers work with suppliers. They can now gain greater visibility into:
- Where and how its products are manufactured
- Where and from whom raw materials are sourced
- Regulatory compliance and consumer reputation
- Commitment to CSR ideals, like fair trade, sustainability, and reducing manufacturing’s environmental impact
Driving Product Quality
For retailers, gaining broad visibility into their partners can help them understand retail manufacturing capacity limits, and whether orders need to be sub-contracted out to other manufacturers. Doing so could degrade the retailer’s commitment to ethical, sustainable sourcing and manufacturing methods and product quality. But tight alignment with manufacturers can help retailers optimize product manufacturing cycles with production capacity and consumer demand, and enable retailers and manufacturers to maintain high product quality.
Tight alignment can also help retail companies ensure that their business decisions do not negatively affect stakeholder operations. Sue cites an instance in which a retail clothing company, seeking to cut costs, changed its purchasing terms with its retail manufacturer in order to receive smaller product shipments and elongate its payment processing cycle. But these changes cut into the manufacturer’s production costs and profit margins; and in order to remain profitable, the manufacturer had to source lower-quality raw materials, resulting in t-shirts that were peppered with pinholes. Ultimately, the retailer sold fewer t-shirts, issued refunds, and put many products on clearance. They also cut additional orders from the manufacturer, which then reduced or eliminated demand for raw materials. Consumers, retailers, retail manufacturers, raw materials suppliers, and workers across the supply chain were impacted. Had the two parties collaborated at the outset to rationalize its cost-cutting measures with its manufacturing base, it could have avoided the quality control issues, profit losses, and labor impact it ultimately experienced.
Final Thoughts
As the speed of business continues to accelerate, enterprise sourcing and procurement teams must keep pace with product innovation, and follow it wherever it is. No party has cornered the market on innovation, including and especially retail businesses. One of the best ways to tap into product and supplier innovation is to connect to digital marketplaces, business networks, or supplier networks, which allow them to reach innovative supply chain partners. And the value for retailers extends beyond reaching first-tier business partners. On the Bamboo Rose platform, retailers can connect with all relevant stakeholders – manufacturers, raw materials suppliers, government entities, third-party inspection, lending institutions, and logistics firms – to ensure that its manufacturing and distribution processes are holistic, wholesome, profitable, and sustainable.
RELATED ARTICLES
Black Friday 2017 – Shopping, Supply Chains, and Sales Reminder
Devil’s Advocate: Does Ethical/Sustainable Sourcing Matter in Procurement?
On Cotton: Understanding Risks in the Global Supply Chain
