Last week, while attending the 2012 Supply Chain Conference – hosted jointly by the Food Marketing Institute and Grocery Manufacturers Association – we gathered among Consumer Product manufacturers and leading retailers to discuss ways they can work together more profitably. The agenda was kicked off with a presentation suggesting that what the industry needs is “Better collaboration–Not just more collaboration.” At Clarkston, we couldn’t agree more. There’s no question that Consumer Products trading partners have material opportunities in the supply chain. Collaboration is motherhood and apple pie, but too many big brands and big boxes are behind the curve.
P&G and Wal-Mart pioneered the Continuous Replenishment framework over 30 years ago. Since then, we have seen several new models move through the hype cycle without really fulfilling the promise of collaboration:
- Efficient Consumer Response (ECR)
- Internet Exchanges (Transora)
- Collaborative Planning Forecast & Replenishment (CPFR)
The Perspective Remains Conservative
The perspective from a GMA panel of industry practitions remains conservative. Guidance was peppered with statements like “start with small, easy wins” and “crawl before you walk.” Apparently, the buyer-seller relationships are still being held back by misaligned incentives and organization structures.
The Balance of Power has Shifted
Over that same 30+ year window, the balance of power in the retail value chain has shifted from branded manufacturers, to big box retail, and today the consumer is king. Empowered by the adoption of internet technologies and social networks, today’s consumer is challenging the retail value chain to:
- provide greater service;
- greater product diversity; and
- better value.
In a recent letter to suppliers, Target asked for help to thwart “showrooming”– “What we aren’t willing to do is let online-only retailers use our brick-and-mortar stores as a showroom for their products and undercut our prices without making investments, as we do, to proudly display your brands.”
It is not clear how big box retailers, like Target, will meet evolving consumer demands. It does seem clear that Consumer Product manufacturers and retailers need to be working together to better understand:
- what the consumer wants; and
- how they prefer to shop.
The days of “starting small” with collaborative initiatives like backhauling and deduction management are behind us. Looking forward, we must focus on a deeper understanding of shopper insights and creating responsive value chains.