Today’s supply chain is about more than trucks and loading docks. Instead, exceeding customer expectations necessitates a truly collaborative supply chain environment.
In 2008, results from the annual Customer and Channel Management (CCM) Survey, by McKinsey & Company, Nielsen, and the Grocery Manufacturers Association, suggested that the top CEOs viewed collaboration with partners as the CPG industry’s highest strategic priority. In the 2010 edition, more than eighty percent of the companies surveyed reported involvement in at least one collaboration initiative, and some participated in as many as ten.
These CEOs understand that companies cannot envision a collaborative supply chain as merely a distant goal or an urgent desire. They know that creating and maintaining long-time customers dictates that companies provide a “Wow” experience.
Of course, marketplace technology solutions often reduce supply chain management stress. But all too often, companies and consultants focus their efforts in these endless options and thus lose sight of their purpose among the minutia. Technology is useful, but providing high quality customer service is paramount. Beaird Solutions believes that collaboration enables revenue growth, reduces incidents of depletion, and delivers on value propositions.
David Beaird of Beaird Solutions discusses his supply chain experience, arguing that any successful operation must “firmly understand the commercial strategy of the business.” Otherwise, he insists, an effective solution remains out of reach. The bottom line in this case: “your customer will suffer.” He describes how the Beaird approach is unique, explaining, “We believe that your operational strategy must enhance your customer service.”
The sound you hear may be paradigms shattering, both internally and externally. The functional silos must be breached to make the collaborations work. The key players must navigate differences in organizational design and culture. At the same time, those partners often hesitate to share vital information among these difficult relationships, leading them to labor under the illusion they are collaborating while remaining in their separate silos. The result? Suboptimal performance.
David Beaird names some factors impeding the collaboration process. He argues that the often “myopic, inward focus” of the teams involved juxtaposed with the traditionally “confrontational relationships [between] sales and marketing” makes the already “complex planning” required to “execute…day to day operations” seem near impossible. This dynamic falls short of the spirit of cooperation needed for a successful supply chain cycle.
Sometimes, however, the illusion of collaboration can be more harmful than its actual absence. For example, a major food manufacturer and a large retail chain decided to develop an exclusive co-branded food line. The retailer, lacking trust in the manufacturer, performed its own independent (and secret) tests for consumer preferences. Acting on those results, they moved forward without consulting their alleged partners of their findings. Ultimately, the product was expensive to produce, didn’t meet customer expectations, and was overlooked on store shelves. Sales disappointed, and the partners had to reassess their relationship.
Thus, the key to success is integration: sales, marketing, and supply chain must work together. Marketing can help drive procurement and supply chain planning, cutting out waste and focusing on delivering the best products and pricing for the customer.
Retailers are beginning to understand that simplifying SKUs produces higher sales and customer satisfaction. Customers love to have a few clear choices, rather than multiple confusing ones. And fewer SKU leads to a less complex supply chain and lower cost through inventory reduction and lower labor overhead.
Is cooperation worth the effort? Research indicates that CPG collaborations involving two or three initiatives in a category deliver a profit uplift of five to eleven percent in the affected category, accomplished through a combination of increased sales and reduced costs. But it’s not easy.
Revisiting the 2010 CCM survey, participants said that only two in ten of their collaboration efforts delivered significant results. The other 80 percent represent an important concept. If the collaborations don’t work, companies not only fail to achieve the potential benefits of supply chain collaboration, but they also risk destroying the enthusiasm for additional attempts, both inside their own organizations and with their trading partners.
When customer service drives an organization instead of defending its status quo, change happens.
“Most supply chain professionals focus on the minutia and complexity of the operation and fail to focus on simply ensuring customer service,” says David Beaird. He adds that cooperation between operations and customer service inevitably nurtures higher revenues, appropriate stock levels, and customer satisfaction. Today’s improved technology helps meet some of these goals, but the human element closes the deal. Finally, many supply chain solutions can be customized for any business need, and Beaird Solutions can develop a custom strategy paired with the best in operation technology to deliver a high level of tailored service at a price that disrupts the industry.
If you want to learn more about David Beaird’s collaboration-focused philosophy, visit us online at www.beairdsolutions.com.