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Collaboration Becomes Key To Success For Retailers And Suppliers Featured

  • Written by  Alicia Fiorletta

FEAT Collaboration1 imageIn the age of the omnichannel consumer, retailers need to ensure products are available at the right time, through the right channel and at the right price.

While it seems collaboration between retailers, suppliers and manufacturers has existed for as long as the industry itself has existed, it has become more pivotal to success as consumers grow more demanding.

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“The need for collaboration — on a micro and macro scale — is greater than ever,” noted Mark Baum, SVP of Industry Relations and Chief Collaboration Officer at Food Marketing Institute. “This is a consumer-facing industry. They’re more in control of relationships with brands and retailers and are more aware of products and services they’re being offered.” 

Consumers have evolved to become harder to find, engage and please, explained Baum in an interview with Retail TouchPoints. “They challenge the companies they buy from more than they ever have in the past.”

Businesses across the entire retail value chain can conquer this challenge by banding together, sharing information and truly collaborating to exceed customer expectations.

The benefits of collaboration are “tremendous” and “impact every aspect of all companies’ functions,” said Joy Peters, a partner in the Consumer and Retail Practice at A.T. Kearney. “Companies have seen 10% to 15% lift in topline performance, 40% to 60% faster new product launches and up to 20% decline in total inventory. As the ties get stronger, so do the results.”

But collaboration as a discipline is still very immature in the industry. Some organizations have improved business results by sharing information and developing joint business strategies, some retailers and suppliers are struggling to do so.

“Retailer-supplier collaboration…is not standardized,” noted William Dankworth, an independent industry advisor and retired VP of Grocery and Natural Foods Merchandising from the Kroger Co. “This does not mean that there is not a desire to do so. The data is available even in smaller retailers but time, system limitations, lack of automation and even culture are impediments to sustainable retailer-supplier collaboration.”

Setting The Stage For Collaboration Success

In the early stages of the relationship, retailers and suppliers should work together to develop a set of key performance indicators (KPIs) based on a joint business strategy, according to David Gottlieb, VP of Worldwide Sales at Market6. Potential data points include: Total sales, inventory levels and gross margin.

Even shopper-focused insights, such as customer segments, promotional analytics and offer redemptions should be shared to create a 360-degree view of business operations.

There is a plethora of data available to provide retailers and suppliers with a comprehensive view of business results. With these data points in hand, suppliers are able to monitor store-level demand in real time in order to ensure the top-selling items remain in-stock. Having an understanding of promotional performance also empowers suppliers and retailers to determine how to adjust tactics moving forward.

“If you don’t collaborate better with everyone in the supply chain you can guarantee you will never meet customer expectations,” said Scott Welty, Vice President of Industry Strategy for JDA Software. “Without the proper collaboration you can’t create a proper and effective flow of inventory to meet customer demands. You also can’t understand the cause and impact of a promotion from a forecasting and replenishment perspective.”

However, the level of information sharing taking place varies significantly, which can put a strain on relationships, according to Eric Green, Co-Founder and CEO of Askuity. “If retailers don’t share information but then expect vendors to hold themselves accountable, it’s difficult to get into that partnership mentality. They’re hiding the metrics that vendors have to hit.”

A Trust Issue

Collaboration is not yet being tapped to its fullest potential in the retail industry because many retailers and suppliers still keep their partners at arms’ length.

“What is at the heart of the issue is trust,” Peters said. “The retailer-supplier relationship has long struggled with distrust stemming from both parties acting in vigorous self-interest. This is exemplified by the prevailing price discrimination laws such as the Robinson-Pactman Act of 1936, enacted to ensure fair and equitable treatment of retailers by manufacturers.”

Though progress has been made over the past decade as a result of governmental intervention, new trends are bringing lingering trust issues to a head, Peters added. “More readily available price transparency across retail, prevalence of product exclusives and retailers focus on store brands all have continued to stoke concerns by retailers that ‘someone else is getting a better deal’ and, conversely, for manufacturers to lament ‘some other brands (or private label) are favored by the retailer.’”

Another factor hindering the relationship is that both retailers and suppliers fear their respective partners will share sensitive data with competitors.

To facilitate organizational transparency and create true collaboration, Dankworth recommends that the proper security measures are implemented on both sides. He explained: “I would include a zero-tolerance policy on data security breeches or confidentiality of retailer-supplier plans.”

Creating Cultural Change

Once organizations overcome their trust issues, they can openly share historical data such as store sales performance, as well as more forward-looking information, including joint sales forecasts and promotion plans.

As the relationship matures, there is “a more open-book approach to collaborative new product development and assortment planning, with joint tackling of a category gap for a retailer,” according to Peters.

But for some organizations, creating a joint go-to-market strategy is easier said than done. These retailers and suppliers need to undergo a cultural change that starts from the C-level and trickles down through the rest of the organization.

“Many retail executives have spent many years sitting across the table from their suppliers as adversaries,” Gottlieb said. “Now we’re seeing the landscape changing and they’re realizing that they can be more successful if they work together.”

Baum recommended that retailers take the following steps to build valuable relationships with their suppliers:

  • Define success up front: Identify the goals for the partnership;
  • Ensure collaboration extends across both organizations: The retailer and supplier both need to see it as a true partnership and even consider themselves “vertically aligned”;
  • Establish KPIs: Define performance metrics that need to be captured to determine success;
  • Test, pilot, succeed and scale: Work together to test new tactics and strategies.


Suppliers Across Categories Ramp Up Collaboration Efforts

Cosmetics brand Maybelline relies on its retail partners to engage customers and sell its vast line of products. Because shopper tastes and preferences vary from state to state, or even city to city, Maybelline needs to keep a constant pulse on promotion and sales activity.

“Working for a cosmetics business is so SKU intensive and fashion-driven; trends determine what’s going to be sold and when,” noted Monica Fullenkamp, Customer Development Manager at Maybelline. “For example, collaboration is really key with Kroger. We were just in a meeting discussing what’s going on with the business, and we’re really lucky because we both see it as a joint relationship. They need our brand to drive sales because it will drive category growth for them.”

Maybelline uses Market6 to share POS and inventory data, as well as promotional activities and results. “We need to understand which promotions are driving sales, what’s working and what’s not,” Fullenkamp explained. “Kroger is unique because the company partners with dunnhumbyUSA on mailers and promotions, but we work together to see what’s going on at the consumer level.”

Using Market6, Maybelline and Kroger have access to the same real-time data, which provides a better, more comprehensive view of inventory levels and customer activity.

“We get information at our fingertips, and having Market6 has allowed us to get a better picture of our business,” Fullenkamp said. “We can better manage shipments and prevent out-of-stocks. The main underlying theme is we’re both talking the same language.”

H. Paulin & Company is a distributor and manufacturer of fasteners, fluid system products, automotive parts and screw machine components. A division of The Hillman Group, H. Paulin strives to give partners the ability to serve customers with 100% fill rate, while minimizing inventory investment. 

H. Paulin uses Askuity to get “fast, meaningful snapshots of our current situation with retailer partners in Canada,” said David Paulin, Project Manager at H. Paulin & Company. “Having the correct data by SKU, by store and by region allows us to act dynamically and not rely on static historical information.”

The Askuity user interface allows the H. Paulin team to “quickly identify SKUs that are running low or are overstocked,” Paulin explained. “We intend to use this improved data by our Marketing and Supply Chain Management teams to better tailor the product mix seasonally and geographically. Additionally, Askuity’s cloud-based system takes the hardware-management burden off our IT department.”

Omnichannel Fulfillment Encourages Next-Gen Collaboration

Certainly, retailer-supplier collaboration is paramount for keeping products on store shelves and ensuring shopper satisfaction.

However, omnichannel fulfillment strategies, such as buy online/pickup in-store, or order online/deliver to home, also are turning collaboration into an industry imperative.

“Each fulfillment offering requires different mechanisms of collaboration,” said Bob Heaney, Research Director and Principal Analyst of Aberdeen Group's Retail & Consumer Markets practice. “The systemic trend driving more collaboration is the advent of these new multichannel logistics channels.”

Just recently, shipping items directly to consumers has overtaken shipping through distribution centers, according to Heaney. Up to 61% of retailers are either delivering products direct to consumers or through traditional distribution centers, while 56% are offering direct to store, according to Aberdeen Group research.

As these multi-logistics formats are becoming more popular among consumers, retailers need to ensure these offerings are price and time sensitive. Doing so is a “major undertaking” that requires ongoing collaboration and real-time visibility.

“Retailers are working with third-party logistics companies, suppliers and manufacturers to address this omnichannel challenge,” Heaney said. “They need to consider a multitude of factors, including: The availability of the product, timeliness, freight costs, margins and the price point of the product, while determine the best way to get products to customers.” 

Omnichannel retailing is in a constant state of change, and retailers and suppliers both are expected to keep pace. Businesses can only reach true excellence, however, if they collaborate throughout the entire customer journey. 

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