Enduring Collaboration for Long-term Success

{mosimage}Consultants preach it from every podium, distributors clamor for it and operators need it while most suppliers still don’t get it because they’re busily launching new products rather than participating in collective head scratching about what service, information, education, training and – yes – product will bring the best sustainable results to all supply-chain partners.

A chain, intuitively, implies cooperation. Each link holds on to the ones on each side in order to form a strong, functional union of other links.

A supply chain is a series of interconnected direct (food) and indirect (software) suppliers/manufacturers, distributors and operator-customers that takes basic raw material from the beginning and delivers a finished product to the ultimate end user, providing along the way a host of value-added services.

The foodservice industry is not the only business network that has struggled to define the supply chain and how to manage it but also how to take advantage of it for the benefit of all participants. There’s nothing diabolical, devious or conspiratorial in this collaborative process.

“By sharing their resources and capabilities, chain members can exploit profit-making opportunities that they cannot create alone.”
In the course of the past 12 months we have heard chants of supply chain cooperation and supply chain management quite regularly at such forums as the IFDA Sales & Marketing Conference and the Distribution Conference & Expo, the PMA Foodservice Conference, distributor group meetings, pundits’ newsletters and distributor interviews.

In last week’s ID Report, we wrote about efforts by David Matthews, president of Progressive Group Alliance, to spark cooperation and sharing between manufacturers and distributors. Though the emphasis was on moving cases, if you scrutinized Matthews’ analysis and reasoning you would see the importance that he applied to cooperation and sharing.

“Having businesses share information and knowledge, and work better together is a challenge and it is one that we’ve stressed internally. We need to communicate the message that they really need to work better together,” Matthews said. “You have to have appropriate service levels and commitments to marketing and education. With the tremendous amount of new offerings coming out daily, manufacturers can’t expect the independent distributor that is their lifeblood to understand every new product without some sort of education.”

Researching this topic on the web, we came up with numerous salient observations about the inherent benefits of supply chain cooperation or, stated differently, just plain talking and sharing with your partners and friends.

Supply chain cooperation, above, and supply chain without cooperation, below.
From the academic side of the aisle, P. Fiala of the University of Economics, Prague, wrote: “Supply chain is defined as a system of suppliers, manufacturers, distributors, retailers and customers where material, financial and information flows connect participants in both directions. Most supply chains are composed of independent agents with individual preferences. It is expected that no single agent has the power to optimize the supply chain. Supply chain management is now seen as a governing element in strategy and as an effective way of creating value for customers.

“Supply chain partnership leads to increased information flows, reduced uncertainty, and a more profitable supply chain. The cooperation is based on contacts and formal agreements. Information exchange is a very important issue for coordinating actions of units. New business practices and information technology make the coordination even closer,” he illustrated.

Industry experts quoted by ID have stated that the need to succeed is the compelling driving force behind supply chain cooperation. Each partner strives to build revenue and gain market share and thus be more liable to succeed over the long run. Merely doing business 9-to-5 or more likely 24/7 is not sufficient any longer, but doing business in a cost-effective, profitable manner that benefits everyone by taking into consideration their needs will be the hallmark of future achievements.

Togar M. Simatupang of the Institute of Technology and Engineering at Massey University in New Zealand wrote about this mutual objective and responsibility.

“Although collaboration is based on a mutual objective, collaboration is a self-interested process in which firms will participate only if it contributes to their own survival. Each member seeks to achieve individual benefits such as eliminating functions, reducing transactions, achieving lower inventory, increasing responsiveness, and so forth. Nevertheless, the focus of a mutual objective should be on the outcome and experience of joint offers to end customers. By sharing their resources and capabilities, chain members can exploit profit-making opportunities that they cannot create alone,” Simatupang wrote. “A collaborative supply chain develops joint initiatives to ensure that each partner has a stake in success. It is proposed that the chain members should simultaneously consider appropriate performance measures, integrated policies, information sharing and incentive alignment.”

“Operators’ profitability and ability to thrive are closely linked to the success of distributors and suppliers.”
For foodservice, this means that thinking jointly and sharing information – not merely about new products and their applications but more importantly about demographics and consumer likes and dislikes, industry and economic trends, what’s happening down the street and among chains, as well as business and bookkeeping essentials – will lead to everyone getting a bigger piece of the market. If suppliers are successful in teaching distributors about what’s going on in the industry as well as the revenue-building significance of their products, then they – distributors – would be more inclined to buy from them.

NRA’s Hudson Riehle told us that foodservice distributors must “understand operators’ specific wants and needs” He said: “A joint marketing effort, typically involving the operator as well as the distributor, ends up being more effective than each one doing it independently. Because of the growth of new items that are available and the increasing sophistication of the palette of the American consumer, you have to cut through the clutter and so that operators understand the new products and, ultimately, if they like them, incorporate them into their menus.”

Similarly, Sven Risom of Cognitio pointed out: “Distributors should go beyond product and actually fill the gap between increasing customer satisfaction and presentation of foods. Distributors should know their customer, which will become their current strength. They should know what their needs are and they need to bring meaningful data to the operator.”

Kim Rothstein, principal, and William Mason, managing director, of The Hale Group wrote in the current edition of their “Strategic Initiatives” newsletter: “Impactful innovation requires collaboration between operators and suppliers (which means both manufacturers and distributors – ID). For suppliers to deliver best-in-class offerings, there must be trust and a sense of collaboration in both directions. Committed, working relationships take time; but, once the partnership is earned, an open exchange will benefit both parties and lead to innovation.

“Operators should expect a lot from suppliers but collaboration that will have the greatest impact will be based on information only an operator knows and must share.

“Therefore, suppliers need to establish a relationship which allows for the transfer and sharing of information, so insights are gained. This collaboration requires a continuous feedback look that challenges today’s assumptions for tomorrow’s success. This model of ‘continuous collaboration’ will yield valuable and actionable insights.”

“This model of ‘continuous collaboration’ will yield valuable and actionable insights.”
While food remains the backbone of attracting consumers to a restaurant, operators’ success today does not simply rest with the originality of their menus. The interconnectivity of business requires interconnectivity of knowledge. Operators’ profitability and ability to thrive are closely linked to the success of distributors and suppliers. Consequently, each link in the chain must be educated about its partners’ businesses and practices, and fully aware of how they function.

Understanding costs, the sources of unnecessary expenses, and educating all links of the supply chain on how the businesses work create an environment in which all of the parts can truly work together and develop the trust that is necessary to grow business.

This is probably the motivating reason why Steve Potter, senior vice president for industry relations for the International Foodservice Distributors Association, said a key focus of the upcoming Foodservice Distribution Conference & Expo will be the supply chain and how all of its partners can work together harmoniously, efficiently and effectively.

Consequently, start imparting knowledge and information up and down the supply chain. You have nothing to lose but your ineffectiveness, inefficiency, stagnation and their associated costs.


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