The shift in executive priorities from cost reduction as their major focus to driving growth has forced attention outside the four walls of the enterprise where the greatest opportunities to drive growth reside. This has emphasized a need to effectively practice multi-enterprise collaboration (MEC).* In turn, it highlights the need to achieve visible business. In Part II of this multi-part series on MEC, we look at the conditions triggering this heightened attention to the need for visible business in the supply chain.

CHANGING LANDSCAPE

Few would argue with the fact that effectively applied MEC techniques deliver remarkable results. The advances that can be made when interacting enterprises can do so with greater speed, accuracy, efficiency, knowledge, coordination, etc. create enormous competitive advantages. As META Group said, “Current initiatives in retail and consumer products enterprises carry one common thread: collaborate to survive.” Michael Hammer, esteemed author of the seminal work, “Reengineering The Corporation,” in his latest work * describes “business of the future” as being “virtually extended enterprises.” Wal-Mart’s Randy Salley, VP Merchandising Systems emphasizes that “The ability to compete at the speed of information will determine the winners and losers.”*

But, there’s perhaps more insight here than might immediately meet the eye. It’s easy to acknowledge that retailers daily find themselves in a highly competitive world with ever-shifting consumer behavior and market conditions. And, this incredible pace has long forced them to continually apply the very latest innovative techniques to simply survive…let alone get ahead. But, their suppliers have never been quite as exposed to this dog-eat-dog world as the retailers—until more recently.

Consider the conditions we now see for manufacturers selling into retail consumer product channels. Retailers have long been thinning out their supplier base in order to reduce costs and increase efficiency. Recognizing that it costs more to buy the same total number of items from two vendors than it does from one, they’ve long been reducing the number of different brands they carry. [After all, as a consumer, think about how few brands are so important to you that if the store was out of—or didn’t carry—a particular brand you would either (a) do without it for the time being or (b) drive to another store to buy it.]

But, with a smaller supplier base—and, therefore, fewer backup relationships to cover poor order fill rates—retailers are becoming more demanding of their surviving suppliers. In order to ensure that product is on the shelf, these retailers have been placing ever-increasing requirements on their remaining suppliers to improve order fulfillment performance levels. And, they are generally able to bolster those demands with threats of switching suppliers in the face of sub-par performance. [After all, consider the long line of suppliers that would love to take your place in your relationship with this customer. What’s even worse is that line’s gotten even longer courtesy of reductions in the retailer’s supplier base.]