supply chain

Why it pays for manufacturers and retailers to work together throughout the supply chain.

                               When consumers requested specific products, retailers didn't always pass along the information to suppliers, in part because the adversarial relationship that had developed between major retailers and CPG manufacturers wasn't conducive to it. Controlling the flow of information as well as the shelf space allowed retailers to maintain the upper hand, while manufacturers had to glean consumer insights on their own. But the advent of technology and a prolonged slow-growing economy are encouraging a new mindset. Increasingly, retailers and manufacturers are collaborating throughout the supply chain, though most experts say plenty of work still lies ahead.

         "There's a huge need for [collaboration]," says Steven Gold, managing director at Alvarez & Marshal, a global professional services firm with offices in Chicago. While CPG manufacturers might meet with retailers to discuss ways to innovate together for improved efficiency or to meet consumers' needs, most companies are too busy managing day-to-day operations to act on the ideas, says Gold, who is also a former chief supply chain officer at Peps i Co. "The idea of strong collaboration with retailers is something nice to talk about, but very few do it well?"

      Even when some participants say they're willing, collaboration often requires a dose of change management. "Global CPG and retail companies find it difficult to deploy the new processes and systems across the chain because of chain management and training factors," says Niles Auti, general manager of the CPG and manufacturing industry group at Mind Tree, an IT and product engineering services company with offices in Warren, N.J., and Bangalore, India. "While new IT solutions are promising to add value, adaptation and deployment at a fast pace is a challenge," Auti says.

      But taking time out to implement a collaborative logistics program might be the most effective use of a company's resources. In fact, companies that encourage participants throughout the supply chain to work toward the same goals managed to grow during the recession, according to a 2010 report by Kurt Salmon for the Trading Partner Alliance, a joint industry leadership group formed in January 2009 by the Grocery Manufacturers Association and the Food Marketing Institute.