Supporting Industry Collaboration
"It is the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed."
-- Charles Darwin
Collaboration is defined as “working jointly with others or together especially in an intellectual endeavor.” The key requirements for successful collaboration are: trust, shared goals, and having a platform on which to collaborate. Establishing these requirements for a collection of multiple manufacturers, many of whom compete, and multiple retailers, most of whom compete is a challenging endeavor. We have worked to ensure that appropriate safeguards are in place, such as antitrust guidelines for interaction by group members, to enable collaboration in a pro-competitive manner.
The Consumer Pachaged Goods (CPG) industry has evolved drastically through the years. Its beginning was, historically, wrought with fierce competition for market share. Now the CPG industry functions with a different perspective. The competition is left for the shelf in front of the consumer. The things that happen before that have opportunities for collaboration, in a pro-competitive way. ES3's philosophy is based on the ideal that collaboration increases efficiencies and profitability for all in the industry.
The challenge of rising commodity and fuel prices, combined with tough economic times for the consumer, has created clear goals for the industry. Manufacturers and retailers are trying to hold shelf prices and manage increasing cost of goods through cost reductions in other areas. Supply chain costs present one of the largest opportunities for cost reduction. Companies have tuned their deployment to reduce inventory, combined multiple shipping points into fewer locations, and optimized their outbound trucks. Manufacturers have done all they can to reduce costs on their own. Collaboration is the next opportunity to further reduce costs.
Category Management helped change philosophies from a “zero-sum game” to a “rising tide”. Now, manufacturers and retailers work together to grow categories and increase purchases. These shared goals have improved the climate for collaboration to enhance industry efficiencies.
Collaboration needs a platform where partners feel comfortable working together. Generally, this means that no partner has a “home team advantage” and everyone is treated fairly. In addition, appropriate legal guidelines for communication are in place. The need for a platform is demonstrated by an industrial park full of single-manufacturer mixing centers where each manufacturer is shipping less-than-truckload (LTL) quantities to a retailer. All of the manufacturers, and the retailer, would benefit from consolidating the manufacturer volume into full truckloads. This rarely happens because none of the manufacturers are comfortable owning or giving up ownership of the process of consolidation. The manufacturers need a neutral, third-party to enable the consolidation and provide the system to support it.
ES3 has provided the platform for supply chain collaboration that has enabled the D2SSM initiative. Manufacturers, retailers, and wholesalers have come together to help define the processes and rules of engagement. ES3 provides a facility that can be shared by all parties fairly. ES3 serves as the clearing house for information on cost and inventory that each participant views as confidential. ES3 ensures that each party sees only the information necessary for their transactions and ensures that antitrust guidelines are in place and are adhered to by all parties.
Ongoing collaboration, through ES3’s D2SSM Governance Council, enables continuous improvement of the model as well as new value creation and value sharing. Manufacturer and retailer partners learn from each other’s best practices and measure themselves on the success of reducing supply chain costs and increasing on-shelf availability.