Through a special arrangement, presented here for discussion is an excerpt of a current article from Retail Paradox, Retail Systems Research's weekly analysis on emerging issues facing retailers.
There have been many inhibitors to collaboration between retailers and their partners - technical, attitudinal and philosophical. But as assortments grow larger and more complex and companies spread their networks globally, there is much less room for error.
Retailers and manufacturers both must operate with a greater degree of precision and greater responsiveness in order to accommodate the twin pressures of greater, more granular assortment and decreasing inventory levels. For that reason, there is a more willingness to address the collaboration agenda than ever before. What gives this special impetus is that literally every penny counts in these economic times.
"We're moving forward as an industry," said Joe Andraski, CEO of VICS and a long time collaboration advocate to retailers, suppliers. "Everybody realizes that it has gotten much more complex than when we were manufacturing products in the States and had relatively short lead times. If you don't have a collaborative strategy, you're going to have one hell of a time competing, whether you're building cars, or are into medical supplies, or apparel - whatever it is, nobody can do it by themselves."
The extent to which collaboration strategies are being executed depends on the retail vertical, according to Mr. Andraski. "When people say 'retail', they tend to throw a retail blanket over everything. The fact of the matter is that some of retail is struggling and taking pretty dramatic steps to take costs out and make numbers. Others are in fact moving along, taking collaborative steps to do things differently."
But this behavior extends to whole verticals, according to Mr. Andraski. "Take the Sporting Goods vertical, for example," he said. "They've hooked up with EDIFICE, which is a company that provides point-of-sale information along with other mission critical information like inventory-in-transit, inventory-in-storage, inventory at distribution centers - they help trading partners answer questions like, 'how can we get more hot selling products to the stores that are selling them?' or 'if something isn't selling, how do we slow down and stop shipments to those stores?' Sporting Goods is a good example of a vertical that has seen that there are advantages to doing business differently and taking more of a collaborative approach."
According to Mr. Andraski, "Some retailers have said, 'we've got to change, and we need to get to our top suppliers to get them to help us change', but then they fall off the wagon. But then you've got companies like H&M and Zara who have taken lead times down to 6 weeks (compared to 9 months). They call their programs 'runway to rack' and they've done it by re-engineering their businesses. They use the same material but they cut it differently with different designs, while other companies start over every time."
Discussion Questions: What's the likelihood that the tough economic times will lead a push toward more collaboration in processes between vendors and retailers? Which of the inhibitors mentioned - technical, attitudinal and philosophical - are the biggest hurdles to improved collaboration?