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Why Strong Supplier Relations Matter to FairPrice

Mr Tng Ah Yiam (Chief Procurement Officer, FPG) on how analytics and supply chain capabilities help drive win-win partnerships between retailers and suppliers

Supply chain resilience began to gain more attention at FairPrice Group only with COVID-19. For the longest time, few cared about this subject as the goods always arrived on time, shared Mr Tng Ah Yiam, Chief Procurement Officer of FairPrice Group (FPG). Mr Tng added that strong relationships with suppliers and partners can increase supply chain resilience and bring benefits for all parties, including Singapore’s consumers.

“We tend to only think about how the goods should arrive on time and in full, but often not investing sufficient time and effort to strengthen our working relationship with suppliers, like the farmers that support us,” Mr Tng said. “When there is a crisis, and crises have definitely become more common in recent years with trade disputes, bad weather events, pandemics and wars, you see the importance of coming together. It’s when you see that you can’t do it alone, that you need help.” He points out that not all food suppliers have the resources like the major FMCG brands. “We help them, so that they can help us to improve our service level in the store, so we can serve the customer better.”

Mr Tng witnessed supply disruptions in the early 1990s, when he was a junior buyer on a mission to help diversify Singapore’s egg supply. The tiny local egg farms knew little about supplying to retail stores. They did not know how to package, design, label, or correctly use barcodes. Our team guided them, to help ensure the products complied with Singapore’s food regulations, so they could sell to FairPrice.

Working together towards 5PL

Today, FairPrice Group Supply Chain is moving from a 3PL service provider (retail, transport, and warehousing) towards a 5PL model that includes supply chain management, analytics, and other solutions. Mr Tng observes that smaller suppliers still try to do it all on their own, using an old warehouse, buying their own delivery vans, which can be costly. So he would ask them: “FairPrice is your biggest customer. We have modern warehouses and new trucks. We have the Supply Chain Operations Centre (SCope) for monitoring and analytics. Why don’t you leverage on that? It would be cheaper for you and more sustainable for everyone in the value chain.”

“Singapore is a small market with a population of 5.8 million,” Mr Tng said. “If everyone tries to do things on their own, it is going to cost too much money. Who is paying for it? The consumer.” As a socially responsible enterprise, FairPrice is a value player, aiming to offer the best prices to its customers. It has a responsibility for low-income groups that feel the impact of price increases. For Mr Tng, the only way to do this is for FairPrice to bring its partners on board to work closely together, and minimise inefficiencies in the end-to-end value chain.

There are other benefits, too. A stronger partnership between FairPrice and suppliers will improve overall service levels,allowing partners to be better able to respond to market changes. Earlier awareness of new product trends, better response to the different needs of shoppers, to evolving consumer choices, such as the rise of plant-based and organic food – these are just some of the many benefits made possible by the stronger partnership.

Automating to avoid out of stock situations

Suppliers can, above all, lower the cost of their operations. Instead of investing in the latest technology themselves, suppliers can leverage FPG’s in-house capabilities and technologies to save money. In particular, data analytics and operations automation are amongst areas that supplier could better embrace or support, according to Mr Tng. “They have some technology, but they are not using them to the fullest potential without good data inputs.”

Stock replenishment tools, for example, can reduce manual intervention in the ordering process. The out-of-stock situation in Singapore is prevalent , according to Mr Tng, and results directly in a loss of sales. Some suppliers claim that such situations are beyond their control. But he strongly believes that there are solutions that can solve the problem. “How do you do your inventory replenishment with overseas suppliers? Do you have a real time or automated system that helps you with the forecasting?”, he often asks suppliers. Many don’t – often just managing their efforts with an Excel spreadsheet.

Mr Tng believes that replenishment will soon be seamless. “Suppliers will be able to open a gateway to FairPrice and see how much product they are selling,” he said. “And they will know how much they will have to produce without us sending a purchase order.” Suppliers will be able to respond a lot faster then. These developments may sound like a distant future, when in reality, they are not. And building these capabilities for the near future begins with embracing and adopting data and analytics today.

Coming together

“I’m concerned about the small SMEs,” he said. Global retailers already know and adopt all these tools and capabilities. Smaller players in Singapore and other parts of the world may not have the technology and understanding on how to use data analytics to improve the end-to-end supply chain system. “The question is how do we ensure that data flows to our business partners, because we cannot leave our suppliers outside of the ecosystem,” he said. “They are part of the family. They are playing a very important role to secure food supplies for us and for the end customer.”

Prime Minister Lee Hsien Loong reiterated during the National Day Rally how critical supply resilience is for the country. “Without food, you cannot begin to talk about anything else,” said Mr Tng. He is especially proud of how Singapore, which depends significantly on imports, is able to come together to ensure it does not run out of essential items. “This is where we are always showing a good example to the world.”

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