For retail and CPG companies trying to make a significant presence in today’s ever-increasing competitive landscape, it is imperative that they search for innovative ways that can render them to stay cost effective and relevant in the concentrated market-place. Industrialists look at some measures like price cuts or passing on pricing pressure to their upstream partners as solution to cut down costs. But are such measures really long term? Can they really bring about a sustained competitive edge for companies and enable them to stay top of the mind in the market for a long time. The answer is no.
Price cuts simply isn’t possible because, how low can companies really go? Each company in the industry will try its best to outdo each other and there will be a time when prices will not be able to pull down any further. So, price cut is isn’t the solution. What about passing on the price-cuts to their suppliers and forcing them to share costs? This is again simply not feasible as there is less room for manufacturers to take in additional costs. Bearing additional costs will only squeeze their margins further, and these partners will not be willing to support the company. In fact, such a move or these kinds of pressures can create an antagonistic relationship between the company and its suppliers; something that should be avoided at all costs.
All retail companies must remember that in order to survive in today’s age, it is important to build a healthy rapport with all their partners, internal or external. So, in accordance to this, supply chain collaboration has become the industry buzzword. The supply chain forms a significant piece in the business puzzle. If a company is able to look into its supply chain model and revamp it in a way, that enables the entire business to cut costs where required and increase its potential to earn revenues, nothing can be better than such a strong supply chain strategy. Here is where supply chain collaboration comes into play. When we say collaboration, we do not just mean day to day communication, but rather a strategic initiative that goes beyond the normal, day to day interactions. We are talking more on the lines of a joint venture or a partnership of sorts between the company and its supplier. The prime objective of this partnership would be sealing in revenue making opportunities, ensuring competitive advantage and bring to the table innovation and strategic thinking in play. With a well thought-out collaboration plan in place, both the parties, in this case, the suppliers and the company can bring in mutual benefits in the long run and tap into profitable territories. Companies that are able to effectively collaborate with their trade partners can surely be able to witness a dramatic reduction in overall costs of operations. They are able to optimally balance their inventories, coordinate well their logistics teams, ensure a seamless structure and bring about a high degree of accuracy, quality and speed in their operations.
A strategic collaboration is a win-win for all, but this kind of a venture is not easy to achieve. One of the prime reasons why this effort can fail is the very fact that it may lack commitment. Collaboration requires effective change management. It is a kind of an irreversible process, a transition from one end to another. It is a big change and to make sure that everyone including employees, partners, agents alike, understand and adopt this change, requires gargantuan effort from top management. Many a times, even though the leadership is pro-collaboration, their messages don’t go through the various funnels of the organization. The essence of the message is lost. It gets ‘lost in translation’ or diluted as it passes down through the organization, with the result that managers, team leads and the front-line teams do not get hold of the original message, and they are not enthusiastic about the collaboration.
Collaboration in the CPG and retail supply chain network, thus is difficult to achieve but if the organization is able to partner well with its external agents, it can ensure long term success, and enjoy benefits of decreased costs and increased revenues.