S upply chain collaboration is a hot opic today—and no wonder: compa- nies that collaborate effectively across
the supply chain have enjoyed dramatic reductions in inventories and costs, together with
improvements in speed, service levels, and
customer satisfaction.
Collaboration between companies—joint
initiatives that go beyond their normal course
of day-to-day business, with the aim of delivering significant improvement over the long
term—is particularly attractive for the consumer packaged goods (CPG) sector. With
pricing under pressure from recession-scarred
consumers, the temptation for retailers is to
transfer the pain upstream to their suppliers by
passing on price reductions and forcing them
to bear an increasing share of costs. On the
supply side, however, there is less and less room
for manufacturers to absorb additional costs as
volatile input prices put the squeeze on margins and the marketing investment required to
differentiate branded products from private-label competitors continues to rise.
CPG players are looking at collaboration
initiatives as a way out of the damaging spiral
of antagonistic relationships. That’s one reason
why collaboration efforts between manufacturers and their retailer customers have dramatically grown in popularity in recent years.
That was clearly evidenced in the 2008 annual
Customer and Channel Management (CCM)
Survey, conducted by McKinsey & Company,
Nielsen, and the Grocery Manufacturers
Association, 1 when chief executive officers
in the CPG industry identified collaboration
with partners as their highest strategic priority.
In the 2010 edition of the same survey2, more
than 80 percent of the companies surveyed said
they were involved in at least one collaboration
initiative, and some were involved in as many
as 10 such arrangements.
Supply chain collaboration has delivered
some real value for participants, but overall,
these initiatives are more likely to fail than
Although collaboration offers many benefits for consumer
goods manufacturers and retailers, too often their joint
initiatives don’t work out. To ensure success, partner
companies should take these six actions together.
Six steps to
successful
supply chain
collaboration
IdeaBook
