Collaboration Between Retailers and Suppliers

The word ‘collaboration’ gets a lot of press these days – seems like a good thing but what does it really mean?

David Zehner and Melanie Sanders of Bain & Company have some practical advice about collaboration. They observe that many suppliers still rely mainly on a single point of contact with retailers. That contact is usual in sales and their relationship is with the buyer.But retail organisations are large and complex.

Every retail buyer has a host of internal relationships to manage as well as all the salespeople knocking on their door. Imagine the benefits of building multiple touch points by enabling finance, supply chain and marketing counterparts on both side to start talking. This would generate continuous flow of insights and strengthen the supplier-retailer relationship. For example, a supply chain manager might get a tip about how to make the product packaging easier for the retailer to handle in store, or maybe the marketing manager might get an insight about better ways to target promotional spend.

This is not a new concept and has been talked about for years. Many Australian suppliers have taken up vendor replenishment planners and there are a handful of examples of one-off category development project. But have Australian suppliers and retailers fully realised the benefits of collaboration?

Collaboration may occur at any part of the process or project including strategy, design, implementation and review. Knowing where it can be used and optimised is the real challenge. Gaining insights from a range of people involved, and from their preferences and capabilities as they apply to the task also provides direction on how collaboration can be utilised in a practical sense.

David and Melanie report the example of a global food manufacturer implementing a sophisticated retailer collaboration program in its Australian business. Under this program the supplier and retailer work together to identify and capture specific opportunities to create mutual value, whether by growing the supplier’s category in the retailer’s stores or by improving efficiency through joint planning or shared distribution and integrated logistics management.

What differentiates this supplier’s collaboration program is that it has become a capability within the business and a platform for ongoing dialogue with the retailer, rather than a one-off effort. Ultimately, both suppliers and retailers need to embed a culture of win-win thinking and that’s a big ask in the current environment. However, there is room in product investment frameworks, creation of performance-based trading terms, and customer satisfaction to deliver outcomes that create value for both parties.

The first practical step on this path is to build multiple relationships between supplier and retailer and generate the insights that allow other tangible areas for collaborative activities to emerge.