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A new era of retail collaboration finds suppliers managing their products in a granular fashion, and responding instantly to any issues that might arise, says Cedric Guyot, vice president of marketing with Retail Solutions.
Retailers these days have much different expectations of their consumer packaged goods (CPG) suppliers. They've been practicing Collaborative Planning, Forecasting and Replenishment (CPFR) for more than a decade, but true collaboration now goes all the way to the store shelf. Walmart was a pioneer in that area, offering point-of-sale and planogram data some 15 years ago. "Today, there are a whole lot more retailers starting to share data, taking a very different approach," says Guyot. "They're telling suppliers, 'I want to treat you as a strategic part of my organization.'"
For years, the biggest retailers essentially dictated terms to their suppliers. Now, says Guyot, they're seeking more balanced relationships. The common goal is to satisfy the ultimate customer - the shopper. "Both [retailer and supplier] have the same objective," he says. "The right place and time for the right new product. Today what we see is a willingness to work together in a more effective and efficient way.... It's different from the old adversarial relationship."
For the most part, suppliers are required to meet that challenge with smaller staffs. They have fewer people on the ground, visiting stores on a regular basis. Retailers, too, find themselves with shrinking resources to manage the flow of merchandise. To cope with the shortfall, both sides need to do a better job of managing promotions, even as they cut back on safety stock. Guyot cites instances of suppliers boosting sales by 3 to 5 percent, through the better use of demand based on sell-through. New products usually take four weeks to reach 90-percent distribution, he notes. "If you are able to point out issues, you can gain two to three weeks of sales on every new-product introduction that you run."
The new concept of retail execution management is the next step after CPFR, Guyot says. The latter did a good job of extending visibility to the retailer's warehouse. "At that point, all the rest became a black box." Now it's the task of retailer and supplier to stretch that capability to "the first moment of truth - the moment when the consumer first picks up an item on the shelf."
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