It had been 10 years since Recreational Equipment, Inc. (REI) evaluated its overall vendor relationship structure. "Leadership felt we may not be optimizing relationships with merchandising vendors to the mutual benefit of both REI and our vendor partners," says Russell Paquette, treasurer. So it was time to reassess.
That was two years ago. Since then, the $1.3 billion retailer of outdoor gear and apparel established the Merchandising Vendor Partnerships project (MVP). The MVP is a cross-division effort to research payment terms and discount arrangements to determine ways to optimize supplier relationships. "We wanted to take a holistic approach," says Paquette.
Lorraine Weber, treasury manager, and Brian Foley, merchandising product manager, led the successful effort. "REI will free up $25 million to $40 million in cash flow and add from $1 million to $5 million to REI's bottom line from additional investment income and cost of goods sold reductions," says Weber.
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But another, less calculable benefit was the bridge building. "Over 18 months, MVP transformed into a broad cross-divisional project impacting merchandising, logistics and supply chain, distribution centers, retail operations and information technology units," says Paquette. "We built relationships that have changed the way we approach and manage the retail challenges we face today."
Treasury helped merchandising teams understand the cumulative impact of negotiations for days-to-pay and trade discounts and how they can affect cash flow and sales. Foley stressed the importance of teamwork. "Finance not only provided excellent benchmarking data from other retailers and industries, but also provided our merchants with solid financial perspectives and negotiating tools," he says.
There's more to come. "Working with purchasing, accounts payable and our legal teams, we expect to bring the same focus on benchmarking and process improvements to our expense vendor relationships as well as our other international trading partners in support of REI's Gear and Apparel unit," says Paquette.
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