Ask Michael Forhez, CSC consumer & retail practice director, about the current state of collaboration, and he starts with a simple statement: "As an industry, we say that we are committed to 'thinking and breathing' the consumer, but are we really?"
"As an industry, we say that we are committed to 'thinking and breathing' the consumer, but are we really?"
That question is just one of many food industry executives should be asking as the spotlight brightens on collaboration and the important role it will continue to play moving through 2014 and beyond.
With the first quarter of 2014 approaching rearview-mirror status, Retail Leader asked industry pros to discuss the strides made in 2013 and the challenges and opportunities that lie ahead where collaboration is concerned. Their comments fell into three general categories: understanding customers, pursuing private label opportunities and improving data quality.
THE CUSTOMER CONNECTION
Pleasing customers is–or should be–any collaborative effort's goal. At the end of the day, if retailers don't have inventory that gets shoppers in and keeps them coming, everyone throughout the supply chain loses in some way.
The problem, Forhez posits, is that many retailers don't really know their customers–what they want, how they think and how they behave–and/or they don't know how to use such knowledge to the shopper's benefit.
"This hurdle," he says, "is where retailers and manufacturers could collaborate more thoughtfully, going beyond data and displays, moving to a deeper understanding of shopper behavior using social listening platforms, sentiment analysis and even ethnography, adapting to changing consumer preferences in a more dynamic marketplace."
Taking it a step further, Forhez says the industry is moving from chasing the competition to chasing the consumer. "It's no longer only about 'loyalty,' it's about 'engagement,' which means that retailers and manufacturers have a fresh opportunity to share their specific insights on how shoppers shop and consumers consume," he explains.
"This is where trading partners, if they can agree on how to share and value the specific insights they possess, would have a much better chance of capturing and profiting from a shopper who, today, is ready to buy virtually anytime, anywhere," Forhez continues. "That's a powerful rationale for taking another look at true collaboration."
PRIVATE LABEL'S POTENTIAL
One place those parties should consider taking that second look is in private brands–an area that "offers the greatest challenges but most rewarding opportunities," says Mark Baum, senior vice president of industry relations and chief collaboration officer for the Food Marketing Institute (FMI).
Private label, in fact, can be a great way for retailers and manufacturers to share insights that will help them create brands that appeal to shoppers concerned about quality and cost. Loyalty to those brands, and thus to the stores, could follow.
"Private brands are a significant growth area for retailers post-recession, especially as consumers increasingly demand new choices and better value in their everyday lives," says Baum, who joined FMI last July to "champion a collaborative spirit among the organization's 1,225 retailers and wholesalers representing nearly 40,000 stores."
"Retailers can pursue creative paths in presenting, branding and merchandising those products," he continues. "This creates differentiation in the marketplace; it also extends the reach and increases the equity that retailers can have with customers. Still, it will be incumbent on retailers and their suppliers to find new ways to collaborate and innovate to make that happen."
A program that Topco Associates, which offers product procurement, services and distribution to the grocery and foodservice industries, launched last April exemplifies a private label initiative that relied on collaboration among suppliers, member retailers and brokers.
Topco and its private label Full Circle Brand partnered with Project 7, an organization dedicated to its Feed the Hungry initiative, to create a co-branded line of 26 food and beverage products. The line, which includes bagged granola, granola bars, cobbler bars, coffee and tea, is available in participating Topco member stores.
A portion of proceeds from every purchase of a Full Circle + Project 7 product is contributed to local organizations dedicated to alleviating hunger. For example, the purchase of just one can of Full Circle + Project 7's organic, whole-bean coffee helps provide two meals to people in need.
The program underscores the benefits collaboration can deliver, not only to retailers and suppliers, but to customers and local communities, too–a win-win proposition, since a growing number of consumers report they are more likely to support companies they view as socially conscious.
"Full Circle and Project 7's co-branded products are a perfect solution for shoppers looking for great-tasting food and beverages," says Glenn Backus, Topco senior vice president, Center Store Program Management and Innovation, in a press release about the initiative. "Families will be able to enjoy these quality goods and, at the same time, make an impact in their communities."
Echoed Project 7 CEO and founder Tyler Merrick, "We are thankful for Topco's leadership and for this special opportunity to partner with the Full Circle brand. The social good that will come from the sale of these great items serves both families and their communities."
THE DATA QUALITY DILEMMA
Another area ripe for collaborative reform is data quality. According to a recent Boston Consulting Group study, data sharing issues are among the food industry's biggest concerns.
"Data quality continues to be a major challenge...and collaboration will certainly be a part of the solution," says Tom Marchisello, senior director, Industry Development-Grocery Retail at GS1 US. GS1 US is a member of GS1, an information standards organization that brings industry communities together to solve supply-chain problems through the adoption and implementation of GS1 standards. "It is encouraging that nearly all manufacturers and retailers recognize the importance of collaboration in addressing data quality," Marchisello says.
Bad data can negatively impact profits and customer service, while standardized, complete and accurate product data–exchanged throughout the supply chain–plays an important role in reducing costs and improving efficiencies for all trading partners. "Quality data is foundational to collaborative commerce and global data synchronization," Marchisello says.
"Inaccurate data is an impediment to collaboration, creating miscommunication, exacerbating administrative errors and requiring rework in order to reconcile."
Food Marketing Institute (FMI)
FMI's Baum agrees: "Inaccurate data is an impediment to collaboration, creating miscommunication, exacerbating administrative errors and requiring rework in order to reconcile.
"For example, when purchase orders and invoices are mismatched along with other order-to-cash data sets, the net result is additional costs and barriers to value-added discussions around programs and promotions. Additionally, when case and product dimensions do not align, a small discrepancy in measurement could snowball into a multimillion-dollar problem," he says.
One point of progress on the data front is the Data Quality Discussion Group that GS1 US introduced in 2013 to address the root causes of data inaccuracies and to identify potential solutions. Enhancing current data quality programs, minimizing delays with new item setup, reducing transportation costs, improving warehouse and logistic operations, reducing order mistakes and returns, and maximizing data synchronization processes are among the issues the group will tackle.
Ultimately, the goal is to create a national, universal industry data quality program designed to meet the needs of all sectors, Marchisello says.
The kind of accurate, timely, high-quality data for which the Data Quality Discussion Group, FMI and other leading industry organizations are striving is imperative to ensuring food safety throughout the supply chain.
As "Expanded Barcode Scanning," a recent report from supply chain services company McLane, notes, "It's no secret that tracking the food supply is an important element of the often-complicated supply chain. From manufacturers to processors, importers to consolidators, and distributors to restaurants, each and every player has a vested stake in knowing the location and condition of goods."
Progress in 2013 also came via the Trading Partner Alliance (TPA), a collaborative effort between the Grocery Manufacturers Association (GMA) and FMI. Baum cites the strengthening of Rapid Recall Exchange (RRE) and the implementation of Facts-Up-Front as two positive strides taken last year. RRE is an online service that allows suppliers to communicate to retailers 24/7, alerting them that there is a product recall or withdrawal event, while Facts Up Front is a labeling initiative introduced in 2011 that brings information from the Nutrition Facts Panel on the back of food and beverage products and displays them in a simple and easy-to-use format on the front of the packaging.
Last April, the GMA enhanced Facts Up Front by launching an interactive website (www.factsupfront.org) that consumers can visit to find a nutrition calculator, a nutrition quiz, shopping and meal planning tips, recipes and more.
"Facts Up Front empowers consumers to make informed choices. It arms them with critical nutrition information about their favorite products," said Pamela G. Bailey, president and CEO of the Grocery Manufacturers Association, in a press release announcing the website's debut. "But to make the most of Facts Up Front, Americans need to understand what that information means, and how it relates to their calorie and nutrient needs. Through this website, we are providing consumers with the knowledge and tools they need to build a healthful diet."
This year holds even more promise.
GS1 US' new Retail Grocery Initiative will bring together what Marchisello calls "a cross-section of grocery industry stakeholders including suppliers, manufacturers, distributors, wholesalers, retailers, logistics providers, technology providers and leaders from industry and trade associations and academia." Its goal, he explains, is to enhance "end-to-end supply chain visibility...improve product information, reduce supply chain inefficiencies, improve product traceability, facilitate effective implementation of the GS1 DataBar barcode for various product categories, and define a guideline for more comprehensive and specific data capture."
And Baum says FMI is "diligently working to complete and implement a new strategic plan with collaboration as a key component.
"One of the plan's prominent pillars is an initiative called Total Store Collaboration, which calls for FMI to lead in developing an executive forum that will provide a unique vehicle for change throughout the industry," Baum says. "We are exploring new ideas to drive overall industry growth and reduce operational inefficiencies."
The Total Store Collaboration effort encompasses categories throughout the store, including center store, GM/HBC, private brands, fresh foods including meat, seafood and produce, and pharmacy departments.
"This model will also build on the success of, and deepen support for, current initiatives, notably those undertaken by the implementation of Facts Up Front, the identification of best practices in brand protection, and the improvement of the bar code standard through a long-term project titled 'Next Generation Product Identification,'" Baum says, adding the organization "will continue to make the business case for long-term sustainability initiatives, which will deliver greater efficiency, conserve resources, and align with consumer expectations."
With that comment, Baum ties it back to the customers waiting at the last stop in the supply chain–the customers that any collaborative initiative's success ultimately depends upon.
"Collaboration and partnerships are critical to long-term success for both retailers and suppliers," says Baum. "It takes two interested parties to discover, innovate and create new and better products, and to improve the overall customer experience in a resource-constrained environment. Therefore, together, retailers and their suppliers must continue to relentlessly seek ways to reduce supply chain costs and explore new opportunities for growth."