76 SHOPPER MARKETING MAY 2015SPECIAL REPORT

wanting to behave as one company. Don’t treat each other as buyer and seller. That is the holy grail that folks are striving for,” he says. “Collabo-ration in supply chain and merchandising gives you opportunities to unlock growth.”

The major benefits include cost savings, speed to market, fewer people involved, and less waste in the process, says Annette Groenink, group vice president at Menasha Packaging. When collabo-rating with other companies in the supply chain, retailers and CPGs need to be willing to share a certain amount of intellectual property that they traditionally have been guarded about, she says.

“People outside your company are going to have different perspectives and views, and those are valuable,” she says. “[The growth in collabora-tion] represents the realization that new products come and go so quickly. If you’re getting hung up on whether you own 100% of the intellectual property, if somebody else gets out there quicker, they’re going to blow you away while you’re sit-ting around worrying.”

“If you’re got a supplier and the CPG and mul-tiple people involved, with multiple sets of eyes and ears, and people coming at it from different angles, you’re going to find ways to do things bet-ter, at less cost,” adds Greg Dugan, regional vice president for Menasha.

John Barnette, vice president for center store merchandising at Food Lion, says he’d be crazy not to work with his business partners around supply chain. “If you’ve got open and honest re-lationships, discipline around the work you do and a collaborative decision process, more often than not, the outcomes are going to be better,” he says. Initiatives “are more fully vetted. When I think about how broad my business is, it’s kind of ridiculous to think about not leveraging that tal-

CPGs, retailers and service providers gain from ongoing strategic partnerships

Sponsored by:

Why Collaborate Around Supply Chain?

SUPPLY CHAIN OPTIMIZATION, PART 1:

By Ed Finkelhen consumer packaged goods companies, retailers and suppliers collaborate vertically around supply chain, the collaboration frequently

is short-term and tactical. But doing the heavy lifting to create more ongoing, strategic partner-ships has myriad benefits, according to a survey conducted jointly by the Path to Purchase Insti-tute, A.T. Kearney and Menasha Packaging.

The benefits are being realized in small pock-ets today, but shopper marketers need to impress upon their supply chain colleagues the need to forge such vertical collaborations by pointing out the positive impacts on the bottom line as well as the competitive disadvantage that results if they do not, Kearney believes.

When the concept of collaboration comes up, supply chain and even some shopper marketing personnel often react by saying that they’re al-ready collaborating. Typically, however, this char-acterization is a stretch, according to Kearney executives. Such partnerships usually amount to “firefighting” because of issues like deliveries com-ing late and products reaching out-of-stock status.

When supply chain personnel complain that they don’t have the time or capabilities to go deeper, the best response is to suggest trying a single campaign or initiative as a pilot, gain sup-port from the top and move forward. Commer-cial teams need to realize that their supply chain organizations alone will not capture the benefits, Kearney says, and those outcomes aren’t simply about dollars saved or earned but also about au-thentic deepening of relationships.

In more advanced cases, retailers and manufac-turers have integrated their supply chain almost as if the two companies have merged, which brings vastly greater operational efficiencies and speed to market, Kearney believes. Companies work jointly when determining new products to launch, slotting and assortment, shelf sets, shopper mar-keting campaigns and promotional events.

Manufacturers and retailers find themselves at different stages of supply chain collaboration because the buyer-seller relationship creates fric-tion, which leads to inefficiencies and waste, says Arun Kochar, principal at A.T. Kearney. “You are

Went. … They’re got their finger on the pulse of that stuff [in their category] much closer than we do.”

CPGs and retailers cannot be complacent, says Jeff Krepline, vice president of national sales, Menasha. “The ever-changing demands of retail are not letting anybody sit still,” he says. “If you think you’ve got it, you need to re-ground your-self. We’ve all heard about speed to market and late-stage customization – all of that stuff is driving continued need for evolution in the supply chain.”

Survey Says …The A.T. Kearney/Menasha survey, which drew 33 responses, revealed five major takeaways:

1. To date, collaboration efforts have not gone as far as most organizations would like. Thirty-eight percent of respondents said they currently pursue a portfolio of mid- to long-term initia-tives, and only 13% are still working toward that end; but only 19% said they already have achieved end-to-end supply chain integration with their partners, while 50% have that in their sights in the next three years (see chart above).

Dugan says that while “very few” CPGs and retail-ers have reached that point, he sees it as “kind of the wave of the future.” “There are a few that will let you inside so you can make an educated decision. The majority still hold suppliers on the outside and give you only what they think you need to know.” Barnette has seen an evolution in the five years he’s been at Food Lion. While some partners seemed more self-serving in his early years, increasingly “we’re comfortable that people are bringing to us insights that will help the overall business and are not just self-serving,” he says. “Some folks I like to lean into because I trust them. They’re going to give me the real skinny on the stuff.”

Source: A.T. Kearney/Menasha Packaging 2015 Supply Chain Optimization Survey. Multiple selections permitted. Responses might not add up to 100% due to rounding.

Which statement best reflects your current and future collaboration vision?

Exchanging relevantfreight, other SC data

Brainstorming ideaswith and pursuing SC

cost improvement

Engaging in discreteshort-term joint

improvement project

Pursuing a portfolioof medium to

long-term initiatives

Creating an integratedSC with suppliersand customers

25%

13%

19%

25%

38%

13%

19%

50%

0% 0%

Currently In 3 Years

SPECIAL REPORTMAY 2015 SHOPPER MARKETING 77

Collaborations are still largely around transac-tions and spot opportunities that will have an im-mediate impact, says Joy Peters, principal at Ke-arney. “When we look at the 50% who want to get there in three years, that denotes aspiration,” he says. “How do we treat two companies as one?”

Kearney has worked with a “middle-of-the-pack” large CPG food manufacturer that saw limited gains from short-term joint projects with their re-tail counterparts. “They said, ‘This is not getting us anywhere,’” Peters says. “We want to have reoccur-ring, demonstrable improvement in our growth.”

Working with Kearney, the CPG company chose two of its largest and most strategic retailers and found “a ton of opportunities in taking out nodes from the supply chain and bypassing distribu-tion networks to get their product to the retailer, avoiding double-handling and finding opportuni-ties in planning more effectively, which means I’m out of stock less often,” Peters says. “Now they’re in a completely different way of working together. There was a relationship transformation, spon-sored at the very top, that changed the way they worked together.”

2. The majority of collaboration efforts are initi-ated by one party rather than both. Fifty percent of respondents said their organization had done the initiating, while 33% said collaboration was jointly initiated (see chart above right). Groenink sees an opportunity for third parties to help facilitate these efforts, although “that’s not happening very much.” But Barnette says that from his vantage point, third parties and suppliers were initiating the process more often in the past, while now “this is a very ban-ner-centric process. We’ve scheduled marketing summits to talk about what’s next: ‘Here are some things we’re thinking about, do you want to play?’ … We’re doing much better solving from within.”

3. Collaborative efforts are more likely to be sustainable if they improve the go-to-market proposition of the parties and build trust. Forty percent of survey respondents said improving their go-to-market proposition helped to build a sustainable relationship, while 33% said the same about increased trust and information sharing (see chart below).

Barnette sees the go-to-market proposition as the ultimate objective and the others as founda-tional pillars. Krepline notes that go-to-market proposition and building trust feed off of one another. “Speed, accuracy and customization, they’re all going to prove that go-to-market prop-osition,” he says. “But for that you need informa-tion. And information builds to trust.”

Dugan has found the same thing. “We have one large relationship, it’s almost like they’re not even a customer,” he says. “We’re with them and talk to them so much, they’re kind of like co-workers.”

Kearney worked with a distributor and a manu-facturer in the wine and spirits industry that had a

With what other companies does your organization collaborate?Collaborating with … Who initiated the e�ort?

15%Consultants/

AdvisorsCompetitor 4%

Non-Competitive Peer 4%

31%Customer

11%A Third Party/Intermediary

33%Jointly Initiatedby Both Parties

6%Other

Organization

50%Your

Organization46%

Supplier

Source: A.T. Kearney/Menasha Packaging 2015 Supply Chain Collaboration Survey. Multiple selectionspermitted. Responses might not add up to 100% due to rounding.

Increased trustand information

sharing

Improvedgo-to-marketproposition

Equitablevalue sharing

Long-termcontractualagreements

Others

33%

10%

17%

40%

0%

How have the collaboration initiativesyou’re engaged in enabled a sustainable relationships between organizations?

Revenuegrowth

Cost of goodssold (COGS)

reduction

Working capital reduction

Improvement inspeed-to-market

Others

2.8 2.72.63.1

0.0

Rate the importance of the benefits your organization hopes to achieve from B2B collaboration in the next three years?(1: Least Important 5: Most Important)

About the SponsorMenasha is a packaging and merchandising solutions company focused on optimizing the retail supply chain. Menasha collaborates with the world’s leading retailers and consumer packaged goods companies to deliver the greatest measurable value across the entire integrated merchandising supply chain. As market leaders within the in-store merchandising industry, Menasha combines an unmatched understanding of the retail sector with a proven methodology for developing efficient, sustainable offerings to meet customer-specific goals.

multi-decade relationship marred by lack of trust. “The CEOs said, ‘We have to do something about this,’” Kochar says. Once both companies received a top-down mandate, they spent about six months building relationships across the chain of com-mand, and for the last two or three years, with trust in place, “the organizations have transitioned from an exchange of relevant data, to starting to pursue broader portfolios of opportunities,” he says.

4. Organizations seek a wide variety of benefits from collaboration, although cost reduction is desired a bit more highly more than others. On a scale of 1 to 5, cost reduction rated an average of 3.1, slightly ahead of revenue growth, improve-ment in speed-to-market and working capital re-duction (see chart below right).

5. The results mostly jibe with these desires, although cost reduction is significantly more frequent than the others. Revenue growth is the next frequently achieved benefit of collaboration, according to the survey, followed by improve-ment in speed-to-market and, somewhat less of-ten, working capital reduction.

Dugan finds that revenue growth and improved speed to market are the most frequent goals of those with whom he works. Groenink finds it very positive that revenue growth rates highly in the survey. “If revenue growth were the least frequent achievement, that would be sad because that’s what we’re in it for, is more value for everybody,” she says.

But Barnette says he’s surprised that wasn’t the most important goal. “If you’re asking supply chain and category management people, whose primary responsibility is to negotiate for a lower cost of goods, I get it,” he says. “But if you’re talk-ing to a banner merchant, ultimately they’re look-ing for top-line growth.”

Collaborations around reducing the cost of goods are easy to justify because the benefits are tangible and tend to be apparent within a year or two, Kochar says. For example, the spirits com-pany with which Kearney worked saw hard dollar

savings from the joint go-to-market.Growth, on the other hand, “doesn’t happen

overnight, and even with an exclusive initiative, like a product launching, there are so many other drivers that could impact growth” he says. “It’s hard to isolate that the growth is because of this particular initiative. That’s where it becomes a lit-tle harder to justify the effort.”

Krepline says measures like working capital reduction, revenue growth, and improvement in speed-to-market are well worth considering, but he considers them traditional and looks to “emerging measures” of collaborative success.

“For example, the execution rate at retail, are we getting the sales lift that the extra dollars [jus-tify]?” he says. “How do we know there’s a return on investment for these elements? … All of this is a very broad stroke for the supply chain.” SM

NOTE: This is the first installment in a three-part series. Next month, we will address some of the “how-tos” of collaboration, such as selecting part-ners, identifying key enablers and establishing a benefit-estimation process. In the third install-ment, we will look at ways to “scale” the effort, decide on key requirements and select from dif-ferent operating models.