to succeed. Indeed, participants in the 2010 CCM
survey said that only two in 10 of their collaboration
efforts delivered significant results. The remaining 80
percent represent more than just lost opportunities
to add value. If companies can’t make collaborations
work, they will not only fail to achieve the potential
benefits that supply chain collaboration can provide,
but they will also risk destroying the enthusiasm for
further attempts, both inside their own organizations and with their trading partners.
The high rate of failure among today’s collaborations is not inevitable, however. There are several
ways CPG manufacturers and retailers can avoid
some of the common pitfalls and achieve the benefits they seek. This article will first consider some of
the conditions and practices that prevent effective
collaborations, and then outline six actions manufacturers and retailer partners can take to ensure
successful supply chain collaborations.
WHY COLLABORATION IS HARD
In our work helping retailers and CPG manufacturers manage their collaboration efforts, we have seen
a handful of basic factors that make collaboration
problematic. Some of these factors will be familiar
to any organization that’s involved in a large-scale
change process. Companies may, for example, lack
the commitment they need from senior management
to drive the collaborations, or the message that the
collaboration is important may be “lost in translation” as it passes down through the organization,
with the result that middle managers or front-line
teams don’t show the same enthusiasm and commitment as their leadership does. Sometimes companies
fail to provide collaboration efforts with sufficient
resources to make them work, or they spread limited
resources too thinly over too many initiatives.
These issues are difficult enough to overcome, but
they are compounded by the fact that collaboration
initiatives must align two separate organizations. To
make the collaborations work, the players involved
must navigate differences in organizational design
and culture. At the same time, a history of difficult
relationships can make partners reluctant to share
important information, leading them to work on
their parts of the “collaboration” in separate silos—a
recipe for suboptimal solutions.
Finally, the incentives of the different parties
involved in the collaboration may be fundamentally
misaligned, making it difficult even for enthusiastic,
committed staff to make the collaboration work
while still fulfilling their other targets. These mis-
aligned incentives arise because different players in
the supply chain may see the world in very different
ways. A manufacturer, for instance, might want to
grow its market share by improving its own offerings
relative to competitors, whereas a retailer might be
interested in increasing sales or margins across the
category, not in changes to product mix.
This difference in outlook can mean that retailers
and manufacturers want very different things from
the collaboration. Growth-focused manufacturers
may be enthusiastic about new promotional opportu-
nities, while retailers operating on thin profit margins
may be much more interested in taking cost out of
product handling and storage. The relationship and
power dynamics between collaborating partners can
be dramatically different, too. Manufacturers typical-
ly will have relationships with a small number of key
retailers, while those same retail partners will have
relationships with hundreds of different suppliers.
The following case of a major food manufacturer
and a retail chain provides an instructive example of
how collaboration can go wrong when participants
don’t trust each other enough. The two companies
agreed to collaborate on a co-branded product line.
The retailer hoped that the manufacturer’s brand
name would boost both the credibility and the sales
of its product, while the manufacturer saw the part-
nership as a way of increasing its own market share
within the retailer’s network.
The collaborative effort failed to play to either
company’s strengths, however. The retailer’s rich
point-of-sale and consumer-preferences data provided the information needed to develop an accurate
profile of its customers’ requirements, but concerns
about sharing that information led the retailer to
analyze the data and develop the product specification itself without the benefit of the manufacturer’s
category expertise. The resulting product was expen-
