Collaboration has long been a key theme in supply chain, but one area where it seems to have run into headwinds is in the relationship between consumer packaged goods manufacturers and retailers.
Consultants McKinsey point out that large CPG players have been fighting to protect market share and margins partly by taking a harder stance in negotiations with retailers.
At the same time, retailers are facing their own problems and this has meant they are also pulling back from collaborating too closely with CPG manufacturers.
But, McKinsey argues in a new report entitled “Power partnerships: Manufacturer–retailer collaborations that work” that closer collaboration with retailers is the most effective route to improving performance for CPG manufacturers.
It sets out four principles for successful collaboration:
– Co-develop long-term strategies
– conduction advanced analytics at a detailed level to jointly determine where and how to place bets
– Set up an agile operating model
– Collaborate across the full value chain
Clearly, these four principles have significant implications for the functioning of supply chains. For example, McKinsey’s research found that winners are 40 per cent more likely to create account-dedicated functional roles, particularly for capabilities such as category management, e-commerce, and supply chain.
Not only that, winners are almost three times more likely to apply their advanced-analytics capabilities to predict and manage out-of-stocks at the store level.
However, McKinsey admits that its four principles are tricky to execute – and there’s the rub. Can the two sides overcome the obstacles to closer collaboration to reap the benefits? Perhaps the time has come to try harder.