Michael Taylor is chairman of Daymona global solution provider impacting all aspects of private brand development.
Since 2020, businesses have been inundated with unparalleled global supply chain challenges. By now many of the people involved are exhausted, and it feels like we’ve been playing a game of whacking for a few years – when one problem seems to be solved, another seems to take its place.
As we enter 2023 in hopes that supply chain issues will subside, they persist relentlessly. I still get involved day in and day out in conversations about supply chain challenges in the retail and consumer goods industries, and how to make sure they become the elephant in the room. I am writing this to bring together three key fundamental shifts to bring the needle to actionable supply chain solutions.
1. Shift to a partnership mindset versus simply purchasing goods.
Over time, I’ve noticed that the relationship between retailers, brands and manufacturers has become more and more transactional, with little to no long-term collaboration. Manufacturers are grappling with capacity constraints due to increased demand, giving them more control over who they work with and what programs. At the same time, brands have tightened the reins within manufacturer contractual obligations, creating a fee-based environment. The combination of these responses can lead to short-term cost savings, but in reality they exacerbate the problem, cause supplier outages and fail to resolve the root cause, threatening the hope of collaborative solutions. The fact is that retailers, brands and manufacturers certainly need each other, and this constant pressure is not good for the long run.
To achieve supply stability, I suggest that retailers and manufacturers enter into a two-way dialogue, allowing for necessary contingency plans regarding raw material procurement, packaging component solutions, and longer or shorter production time. The supply chain has proven that tactics such as standard RFP cycles or just-in-time manufacturing strategies can fall short when challenges arise. Stronger partnerships continue to exist with long-term contracts, helping to identify issues together without creating a fee-for-service environment. These partnerships allow retailers and manufacturers to align and work together to best solve the challenges that arise along the way.
2. Reduce friction.
While there is no one-size-fits-all guide to avoiding supply chain issues, I have witnessed the power that flexibility has in closing the product-to-customer buying cycle. Too often, unnecessary hurdles in the supply chain process and information silos create friction, preventing tangible real-time solutions that can keep the line moving and products out the door. Teams that break through these barriers with each other can do much stronger, by providing room for flexibility and honest and open communication.
The first step to reducing friction revolves around simplifying your internal business processes to better support solving supply chain challenges. This allows organizations to adapt to deviations from the original schedule by reducing unnecessary bottlenecks. Another way to reduce friction is to ensure clear cross-functional communication about key elements that affect purchase orders and inventory, such as details of merchandising displays and promotions.
Finally, brands and suppliers can reduce friction by regularly re-evaluating cost implications to improve manufacturing efforts. The costs of holding packaging or raw materials now, for example, can help prevent rising market costs later on. It’s most important to handle complications on a case-by-case basis, and it starts with learning these best practices to reduce friction and create flexibility.
3. Focus on areas of mutual profitability.
The interconnectedness of supply chain challenges has shown that retailers, brands and suppliers must work together to create equally interconnected solutions. The combination of creative and proactive planning to stay nimble during supply chain disruptions can result in mutual profitability for all stakeholders involved in the product-to-shopper environment.
This approach includes minimizing and reducing costs in favor of problem solving, finding efficiencies through packaging and specification consolidation, and collaborative business planning for inventory planning, SKU optimization, and merchandising. Where possible, tactics such as purchasing inputs collectively can also go a long way toward better overall business planning. These efforts prioritize creating solutions that maximize execution and sales while reducing costs as a partnership rather than adding them.
Ultimately, everyone wants to be profitable. Taking these steps back to see how you can work together can better position you and your partners for lasting success, not just for now.
A rising tide lifts all the boats.
Ultimately, pointing the finger won’t solve the disrupted supply chain. The global scale of delivery problems requires a shift in mindset from identifying the culprit to nurturing relationships and developing partnerships to solve these problems.
We need to go our separate ways, and I believe we can do that by focusing on how to be better partners. Prioritize critical areas to engage in a two-way conversation first and diversify where appropriate to ensure contingency planning. Layers of support are needed to reduce friction, collaborate creatively, and ultimately deliver mutual profitability – all while helping restore the supply chain for a less tiring year in 2023 and a better consumer ecosystem.