Reinventing Who Owns Supplier Fulfilment

Written by Senior Solutions Engineer, Tim Hay-Edie

Retail has already reinvented supplier fulfilment. It now needs to reinvent who owns it. Retailers have evolved supplier fulfilment from a logistics capability into a merchandising capability, but many retailers haven’t changed their organisational structure to reflect this.

Why do so many retailers continue to struggle to unlock the full value of supplier fulfilment? The technology has improved dramatically, supplier onboarding has become significantly easier, and the commercial opportunities are far greater than they were a decade ago. Yet many retailers continue to organise themselves as though supplier fulfilment was simply an operational workaround for products that are a pain to warehouse.

From Logistics Workaround to Merchandising Strategy

That wasn’t always an unreasonable assumption. When supplier fulfilment first emerged (long before it became known as 2P), it existed to solve a logistics problem rather than a commercial one. Retailers basically used a workaround in order to sell products that were expensive to warehouse, difficult to handle, or costly to transport. Allowing suppliers to ship these problem products direct to the customer enabled retailers to offer a wider range than their DCs could comfortably support. Ownership naturally sat within logistics or supply chain because the primary objective was operational efficiency.

Over time, retailers realised that supplier fulfilment could solve a very different and much more significant problem. Instead of simply helping the warehouse cope with difficult products, it enabled merchandisers to rethink how they built and managed assortments. If suppliers retained ownership of inventory until the point of sale, retailers could introduce entirely new brands, extend existing ranges, test emerging categories and offer a longer tail – all without committing additional working capital or consuming scarce fulfilment capacity. Supplier fulfilment stopped being a logistics capability and became another merchandising lever.

The Decision that Changes Everything

This shift changes the nature of the decision being made. The first question is no longer, “Can our warehouse cope with this product?” It becomes, “Is this a product our customers want to buy from us?” Once that question is answered, deciding whether inventory sits in the retailer’s warehouse or with the supplier becomes a secondary consideration.

Why the Organisation Hasn’t Caught Up

Many retail organisations still reflect the old world. Dedicated supplier fulfilment teams sit alongside traditional buying teams, each maintaining relationships with many of the same suppliers while making overlapping decisions. Category managers determine which brands deserve a place in the assortment, while specialist teams manage the products to be fulfilled by supplier direct. The consequence is duplicated supplier conversations, fragmented accountability and, in some cases, conflicting commercial priorities.

The irony is that both teams are trying to achieve the same outcome. They are attempting to build the most compelling assortment for their customers. The only meaningful difference between them is where inventory happens to sit before it is sold.

That raises this important question: if supplier fulfilment has become a merchandising capability, why is it still organised as though it belongs to logistics?

One Customer Proposition. One Team. One Owner.

The category team owns the customer proposition. The decision to stock a product, fulfil it through a supplier, or carry inventory internally should sit with them. They understand their categories, know their customers, manage supplier relationships, and are accountable for commercial performance. Choosing between retailer fulfilment and supplier fulfilment is simply another merchandising decision, no different in principle from deciding whether a product should be stocked in every store, sold online only or introduced as a seasonal range. It is one commercial strategy expressed through different fulfilment models, not two separate businesses requiring different organisational structures.

Supplier Fulfilment Changes the Economics of Merchandising

This distinction matters because the economics of retail have changed. Historically, expanding an assortment meant buying more inventory, finding somewhere to store it and accepting that some of it would inevitably turn less than expected.

Supplier fulfilment changes that equation. It allows retailers to increase customer choice without the inventory risk; enabling category managers to think more ambitiously about the breadth and depth of their ranges. If they want to add a niche colour, a specialist accessory or an emerging brand, a business case is no longer required.

Once supplier fulfilment is viewed through this lens, the organisational consequences become difficult to ignore. Maintaining separate buying and supplier fulfilment teams means dividing responsibility for what is, in reality, a single commercial strategy. Instead, why not organise around the customer?

Incentives Drive Change

Incentives are another lever to pull. Many retailers still reward category teams primarily for the performance of the inventory they purchase directly. That was entirely rational when virtually every sale depended on owned stock. It becomes much less rational when supplier fulfilment is expected to play a significant role in category growth.

If success is measured only through owned inventory, supplier fulfilment appears to dilute performance, even when it increases overall sales, improves customer choice, and releases working capital for investment elsewhere. Retailers that genuinely want category managers to embrace supplier fulfilment need to align incentives with total category performance rather than with the owned inventory model.

Technology Has Removed the Barriers

Technology has quietly removed many of the practical reasons for keeping supplier fulfilment separate. Onboarding suppliers, validating product data, monitoring service compliance, etc. once demanded specialist operational expertise and over-engineered business processes.

Today, modern commerce platforms, APIs and AI have dramatically reduced much of that complexity. Supplier onboarding that once took months can increasingly be completed in a fraction of the time. Product content can be enriched automatically. Service issues can be identified before customers even notice them. The operational burden has reduced, yet many organisations continue to preserve structures designed for a world in which those capabilities were exceptional rather than the rule.

It’s Time to Rethink the Operating Model

This is why I believe retailers should stop thinking about 1P and 2P as different businesses. They are different fulfilment models supporting the same merchandising strategy.

Every category manager should own the complete commercial proposition for their category, deciding not only which products deserve a place in the assortment, but also which fulfilment model best serves the customer and the business. Sometimes that decision will favour owned inventory because speed, margin or availability make it the right choice. Sometimes supplier fulfilment will unlock range, conserve working capital, or reduce logistics complexity. The important point is that both decisions belong to the same team because they are both expressions of the same strategy.

Retail has always adapted its organisational structures when customer expectations changed. The creation of e-commerce teams, omnichannel functions, and digital trading departments reflected genuine shifts in how consumers shopped.

Supplier fulfilment deserves the same reconsideration. It has evolved beyond its origins as a logistics workaround and become an integral part of modern merchandising. The retailers that recognise this first will not simply run more efficient supplier fulfilment programmes. They will build organisations in which every merchandising decision begins with the customer, while fulfilment becomes one of several tools available to deliver the best possible proposition.