CPG Chatter

If there’s one common theme to everything I’ve written about over the past six months, it’s the general trend toward CPG manufacturers losing influence with retailers.  Store brands, price competition, and frugal shoppers have all worked against all but the biggest branded manufacturers.  In many cases, manufacturers are happy just to keep their products on the shelves, let alone dictate the relationship with the retailer.

For that reason, I was rather surprised when I pulled my latest issue of Supermarket News from my mailbox and saw a front-page article entitled “Publix Urges More Supplier Collaboration”.  I immediately had a flashback to the late 90’s when Collaborative Planning, Forecasting, and Replenishment (CPFR) was all the rage.  My second thought was that this concept flies completely in the face of everything else I’ve been reading, so I was eager to find out what gives here.

Without giving away the entire contents of the article (which I regret is only available in full to subscribers of the magazine), Publix believes customer service is of utmost priority.  The store chain’s President, Todd Jones, has found that out-of-stocks can be highly damaging to customer sentiment, especially on promoted products.  I’m with you so far.  But reading further, it seems the theme is really more around a shift back toward automated replenishment or direct-store delivery (DSD) as the definition of “collaboration”, rather than true collaborative forecasting and planning.  With all due respect to Publix, this appears to really be about putting more of the onus on suppliers.

The problem I have is that pushing for increased reliance on is more about fixing the symptom as opposed to curing the disease.  True collaboration would begin at the promotion planning and forecasting process, where retailers and suppliers sit down and agree on the tactics and strategies that maximize revenue and profitability for both, and then putting fulfillment strategies in place to ensure supply is available to meet the forecasted demand.

The main reason CPFR failed in the first place is that it simply assumed too much on an altruistic attitude on the parts of both the retailers and suppliers.  At the end of the day, both tend to act upon their own immediate self- interests rather than the long term best interest of the value chain.  Only when both parties go into the planning discussion with joint value in mind does collaboration truly happen.  I don’t see this happening overnight, but I also don’t see DSD being the solution to supplier collaboration.

I’d be very interested in hearing your thoughts either for or against.

Podcast-The Big Myth