Us vs. Them: Retailer-Supplier Collaboration

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A strong retailer-supplier connection can provide big benefits for retailers, suppliers, and even the end customer, but how does one go from a perfunctory partnership to a more intimate relationship that allows for things like common goal setting and joint improvement strategies? The answer is simple. Collaboration. Unfortunately, building and maintaining said collaboration is a heck of a lot more challenging. I recently looked at two surveys examining the retailer-supplier relationship. The first, by SCDigest, gave an overall grade of B- to today’s retailer-vendor supply chain relationships. In its inaugural year, the 2016 State of the Retailer-Vendor Supply Chain Relationships survey focused on retailers and consumer goods manufacturers. What the results reveal is a very strong prevalence of an “it’s not us, it’s them” mentality coming from both sides of the equation. According to the survey, 98% of retailers rate their relationship with their vendors as average or above, with 96% of vendors feeling the same way. Seems positive, right? Almost. Where there’s a bit of a disconnect is how each side views themselves and the other in terms of willingness and success at collaboration. Retailers feel their own knowledge and skill in how to collaborate successfully is a non-issue, ranking it as one of the smallest potential barriers to good collaboration. Vendors however disagree. They rank a lack of knowledge and skill in collaboration among their retail partners as the biggest single hurdle they need to overcome for supply chain collaboration. On the flip side, vendors also rank their own knowledge and skill in how to collaborate successfully as a minor issue. Once again, the other side disagrees. Retailers cite the lack of knowledge and skill in collaboration of their vendor partners as their second greatest barrier to achieving successful collaboration, just behind difficulty on agreeing how to share gains. Level of trust was the third biggest barrier. Another recent study, this one by Peerless Research Group on behalf of Logistics Management and Kane is Able, Inc., examined retailer-supplier collaboration barriers and the impact on supply chain performance. Retailer-Supplier Collaboration: Identifying and Eliminating Barriers to Improve Supply Chain Performance, also interviewed retailers and consumer goods manufacturers. What it found was while retailers and suppliers both see the value of greater collaboration, neither group believes they’re doing a great job at it. The largest alignment gap between the two groups was the accuracy and timeliness of demand forecasts. On a scale of one to 10, where one is poor and 10 is excellent, retailers rated their performance at 7.35. Suppliers however rated those same retailers in the 5.50 range. The survey also highlighted a few key lessons coming out of the results:

  • Collaboration takes time and commitment
  • Communication is number one
  • Mutual benefits of collaboration must be clear up front
  • Issues with lack of trust still need to be overcome

I’d like to add one more:

  • Don’t just point the finger at the other party, examine your own actions to ensure you’re doing everything you can to foster good collaboration

That’s what I found most surprising, and most disturbing, about the results of both surveys. In each, respondents seemed to think any issues with supply chain collaboration originated or were the fault of the other party. Since obviously both sides can’t be right on that point, I’d propose the real culprit is both sides don’t want to take accountability for the role they play in fostering positive and successful collaboration. When it comes to successful supplier-retailer supply chain collaboration, it is not a case of us versus them. That mentality is dooming you to failure. It’s more a mindset that it takes two to tango, and each partner needs to know their own steps, how they relate to their partners, and how to synchronize efforts to achieve harmony. There also needs to be a high level of trust among the partners, with each confident the other is doing what they’re supposed to.

How do you manage supply chain collaboration among your key stakeholder groups? Let us know in the comments.

Discussions

James Sampson
- January 11, 2016 at 9:06pm
From my experience in grocery retail, software engineering, and supply chain studies I feel there are two "simple" steps that can be taken to reduce supply chain inefficiencies by drastic measures. I would expect the same results in other industries outside of grocery if the following steps are taken by both retailer and vendor. The first step is meaningful communication between the vendor and the retailer. This communication should be geared towards improving the transfer of data needed for day to day operations between them. (Ex. sales history, projections, cost etc) .The best way to improve this transfer is minimal human activity. Therefore the communication should be about EDI. This takes us into step two, system developement. This step will be the hardest for both retailers and vendors to accept because of the initial cost. Companies need to accept the cost and build internal systems that are consistent and transfer information seemlisly. How will this help? Vendors and retailers have little linkage in delivery and inventory systems which create lags in data transfer which adds to the ripple effect of the supply chain. The ripple effect is being underestimated and costing companies more than they realize. Companies that make the change will see immediate results and would likely cover the initial engineering cost within the first few years. Once the proper data transfer systems are in place the result will be significant supply chain improvement. Remember two steps. Step one: Communicate about what data is needed to operate effciently. Step two: Build a system to transfer that data seemlisly.
Andrew Downard
- January 12, 2016 at 2:37am
Hi Alexa
The studies you highlight and your comments ring very true with the work we do in helping clients develop highly collaborative relationships. Using the Vested model developed by researchers out of the University of Tennessee we start at the very beginning by setting a common set of goals and desired outcomes. All too often the mis-match occurs here, its not that either party lacks skills or capability to collaborate but rather they are shooting for different goals. Dissatisfaction then occurs because neither party ends up getting what they were after. I'd recommend anyone with an interest in this subject to visit the Universities web page www.vestedway.com to find out more.
Andrew
Alexa Cheater
- January 12, 2016 at 8:53am
Thanks for the comments James and Andrew.

James, agree completely that a back and forth flow of data is critical to reducing supply chain inefficiencies. Without that you're essentially driving your supply chain blind.

Andrew, we're all about collaboration here at Kinaxis! Like you, we believe it's a critically important component to achieving success, not just in supply chain, but across business operations.

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