Vendor managed category management – an outsourcing solution in retailing

Outsourcing is expanding from parts and components to include services and process management. The question is no more just who designs and manufactures the goods, but also who manages the logistical processes along the supply chain. In this paper, we argue that this approach to outsourcing provides new opportunities for those retailing and grocery sectors that traditionally have not considered outsourcing as a strategic option to develop their operations. Retailers, especially supermarkets, are managing an increasing number of product categories and stock keeping units (SKU) that have forced them to develop their replenishment practices in order to minimise out-of-stock problems. This paper examines the options open to the grocery retailing industry that will enable it to attack the problem through outsourcing. A new process innovation, vendor managed category management (VMCM), is proposed. A potential application is presented by means of one real-life case, in which a distributor offers the retailers full management of one category that includes assortment forming and logistical functions