When you think about a collaborative approach to finding value in supply chain, it makes sense to get everyone at the table. So you call a big strategy session and include representation from operations, fulfillment, warehousing, transportation, merchandising, finance, IT, process improvement…all the usual suspects. But, if you really want to add impact that drives profitability, ensure your trading partners are at the table too.
This is the fifth installment in my series on finding value in the reverse supply chain. This segment is an overview of how having a collaborative, transparent trading partner relationship can transform supply chain improvement from a tactical, cost-saving focus to one that can optimize across the shared value chain and product life-cycle.
Your supply chain is bigger than just what your employees touch. Every factor that affects the development, production, movement, merchandising, sale and support of a product impacts profitability, so it only makes sense to seek optimization across every step of the process. When trading relationships are new, we focus on getting product in front of the customer and getting it sold, but more can be gained when trading partners work together to evaluate the entire value chain in a collaborative manner to unlock shared opportunity. A helpful way to think about it is, “What would I do if I were both the manufacturer and retailer?”
Here are some tips for taking trading partner relationships from tactical to a focus on building a shared competitive advantage:
Sharing Data and Insights
In the early stages of a trading relationship, when the primary focus is alignment for efficient execution, issues are addressed as they arise. For a more proactive approach, gather and share data, and work with trading partners to leverage insights from the data to address opportunities.
Inmar often supports these types of collaborative efforts, bringing retailer and manufacturer data together and leveraging our data science and analytics platforms to identify opportunities. Data can include DC and store inventory, out-of-stock, promotions, POS and unsaleables causal factors. Combining these data often provides a more comprehensive picture of product and retail performance and deeper, more actionable insights. Increasingly, we are leveraging some of the breakthroughs in big data, including the use of open source tools that allow us to create and analyze vast “data lakes” from disparate data sources.
Sharing that data with trading partners from the start gives everyone the opportunity for foresight. Problem solving becomes more proactive and less reactive while also creating an environment to foster novel ideas.
Absolute performance matters, but relative performance is just as important to understand opportunities. Gaining an advantage over the competition must start with market intelligence – knowing what the market is doing and how it is performing. Benchmarking against your industry peers puts a true “you are here” mark on the roadmap to success.
Inmar leverages benchmarking in a number of ways. For example, we benchmark retailers across the various value drivers of supply chain performance to identify potential opportunity. The inverse of that is benchmarking products for performance, including new product launches, benchmarking of performance across the supply chain or benchmarking across retailers. Bringing our retailer and manufacturer benchmarks together in collaborative projects among a retailer and its vendor partners can produce powerful insights. We shared an example of this at the 2015 GMA/FMI TPA Supply Chain conference where Inmar partnered with Target and a number of its key vendors to identify shared opportunity and execute initiatives to capture that value. This effort has produced hundreds of millions of dollars in annual shared value for these trading partners.
Aligning Strategies and Incentives
This means breaking out of the reactive, continual problem-solving mode to the proactive mode that allows new improvements and ideas to come forward. Companies that share their objectives beyond the obvious touch points can better see each other’s capabilities and from there see new possibilities in doing business together. Joint business planning can provide an excellent venue for aligning on opportunities, initiatives and incentives.
Shared Investment and Shared Return
To capture shared value, shared investment will be required. This can come in the form of project team members, data, analytical tools or support from a third party like Inmar. Investment could also come through active participation in a trade association working group. Aligning at the onset of an initiative on the resources required for success and what each trading partner can bring to the equation can help accelerate momentum. Investment also means gaining the right executive support for an effort before beginning.
Just as important is aligning on how the value created will be shared. If one party insists on keeping all of the gains from a collaborative effort, prospects for future collaboration are diminished.
Across the retail industry, approaches like those mentioned above are increasingly being used to create shared value. The power of technology and big data are helping to accelerate these efforts. The trading partners that are collaborating in this manner are gaining a competitive advantage over their peers through these efforts.
What challenges do you see in collaborating and sharing supply chain data with your trading partners to optimize your supply chain? What’s your perspective on the future of trading partner collaboration? Let me know by commenting below.