Article
Call for collaboration

Call for collaboration

November 17, 2023

Why joint business planning is vital to growth and how best practices make it work

Retailers and the manufacturers whose products they sell instinctively know it makes sense to work together and not against each other. Why, then, does collaboration consistently prove to be so difficult? As macroeconomic factors put enormous pressure on every kind of supplier relationship, the temptation is for either side to try to do everything itself. However, the need for efficiency and impact makes one thing abundantly clear: Collaboration is more crucial today than it has ever been.

The case for robust collaboration between brand manufacturers and retailers is clear and compelling.
Roland Berger has been able to benchmark successful joint business planning approaches on a global basis.

This article addresses the “why” and the “how” questions: Why is it critical for brand manufacturers and retailers to align their approaches and work together to drive mutual success? After briefly outlining current macroeconomic challenges, we delve into key benchmarking results, showcasing different models for collaboration, explaining varying levels of maturity and addressing regional differences. We also discuss the impact of trends that are shaping consumer markets today. Shifting to a hands-on focus on delivering success, we then explore best practices – and potential pitfalls – to help businesses successfully navigate the complexities of joint business planning.

Macroeconomic challenges

High inflation has significantly increased the cost of raw materials, labor, transportation and other factors, squeezing profit margins and putting pressure on retailers and manufacturers alike. This pressure is made worse when customers are unwilling or simply unable to swallow price increases, causing sales and profits to tremble. The food industry is only one sector where disputes over pricing have thus flared up between retailers and brands, with both sides preferring to “go it alone” rather than pulling together. In many cases, existing relationships have suffered and opportunities to jointly add value have been missed.

The rationale behind collaboration

Instead of turning inward and trying to solve macroeconomic problems on their own, market players would do better to collaborate with partners and engage in joint business development. What is more, a recent Roland Berger survey shows that most stakeholders already know this! As the figure below shows, both sides understand that working together lets them leverage each other’s strengths, realize synergies and share greater success.

In a worldwide benchmarking study, Roland Berger recently evaluated the most effective joint business planning practices in the consumer goods and retail ecosystem. Our findings revealed what works and what doesn’t – the best practices and pitfalls that are described below. The principles discussed can be applied to supplier/client relationships in various industries, but are of tremendous importance to retailers and brand manufacturers.

Four key factors that influence the success of joint business planning

Our study identified four key factors that are instrumental in determining the collaboration between retailers and manufacturers.

"Data is key to digital transformation. Sharing data and generating relevant insights to win with shoppers is key to effective JBP collaboration."
Portrait of Beate Rosenthal
Partner
Frankfurt Office, Central Europe

1. Collaboration models

The models adopted should reflect the partner’s importance to the other party, their potential, their willingness to collaborate and/or their strategic fit. The organizational structure should then be aligned with this model. A “basic” collaboration model may be sufficient for low-level cooperation – focusing on annual transaction negotiations with secondary partners whose potential and willingness to collaborate is limited. Conversely, an “advanced” model embracing cross-functional elements would be better suited to a more important partner. Both parties would expect to invest more resources in this kind of collaboration, which could involve setting up strategic joint projects. Longer timeframes and top management commitment are strongly advisable for advanced projects.

In practice, most forms of collaboration will be somewhere between these two extremes and will therefore take on a multifunctional nature. For example, collaboration could be built around a specific function such as marketing or IT.

2. Collaboration maturity

The more mature the collaboration between partners, the more trust the partners will develop over time. A firm foundation of trust in turn encourages the partners to widen the scope of collaboration across more departments or functions, extend the timelines for cooperation, accept greater risks and share the resultant gains. The kind of open or cross-functional models described above are thus a clear sign of mature levels of collaboration. Comparatively immature constellations will initially restrict themselves to more basic collaborative topics.

3. Regional differences

Our benchmark study found clear variations in the joint business planning practices adopted in different countries and regions. These differences center in particular around the level of digital advancement and, hence, how companies collaboratively harness data to add value. On the other hand, it is important to align collaborative approaches with any such regional differences and adopt the appropriate regional best practices to the according data use and collaboration maturity.

4. Key industry trends

Major trends affecting the consumer goods and retail industry as a whole also influence collaboration between players in this industry. Our study shows that four such trends are currently having the most powerful effect on brand-retailer collaboration:

  • Inflation and cost pressure
    For the reasons discussed under “Macroeconomic challenges,” cost pressures in the value chain and consumers’ unwillingness or inability to cope with higher prices are prompting frequent disputes between retailers and manufacturers. Rather than trying to cope with these challenges in isolation, closer and more open cooperation could help market players ease rising costs by sharing risks and optimizing synergies. Some partners are doing so, but the trend is exacting a heavy toll.
  • Sustainability
    Stakeholder expectations are forcing companies in all industries to prioritize environment, social and governance (ESG) criteria. Brands and retailers therefore have important choices to make about how they share data and what innovative solutions they pursue to realize their own ESG ambitions and help other players meet their goals. The higher cost of sustainable materials and products, for example, often necessitates adjustments in assortments and pricing. If brands and retailers work together to share the same understanding of stakeholders, they can streamline the task of redesigning both products and processes (for example by shortening logistical paths).
  • Supply reliability for retailers
    In the wake of a series of supply chain challenges, retailers increasingly want to work with suppliers that can satisfy their demands quickly and, above all, reliably. Since volume demand and demand for different types of products can be very volatile in the short term, it is more important than ever to collaborate closely on forecasting sales and managing inventories.
  • Data and technology
    The increasing availability of data and technologies such as AI and automation will deliver a smoother digital experience (thanks to AI applications and RFID tags, for example), while also reducing headcounts. Leveraging data across market players will enable more accurate predictions and facilitate better decision-making. Companies that drive this change – ideally in collaboration with trusted partners – will find themselves well placed to maximize the resultant benefits.

This list of influential trends is by no means exhaustive: Many other factors clearly affect cooperation between retailers and brand manufacturers to a greater or lesser degree. Contact our experts to gain insight into all the trends.

Getting the most out of joint business planning – Best practices to adopt and pitfalls to avoid

By combining in-depth research with executive interviews and our own project experience in the consumer goods and retail industry, Roland Berger has been able to benchmark successful joint business planning approaches on a global basis. We have thus distilled best practices that support effective collaboration between retailers and manufacturers, but also identified pitfalls that must be red-flagged as joint activities develop and grow.

Best practices to be adopted
1. Sharing data

Sharing data delivers superior shopper insights that both partners can leverage for marketing or category optimization projects. Loyalty card data insights, for example, allow market players to improve space allocation and fine-tune their assortments.

2. Fostering a common understanding

A clear understanding of each others strategies, opportunities and pain points puts everyone on the same page and can yield key insights to accommodate retailers' and manufacturers needs.

3. Plotting a joint roadmap

A multi-year roadmap and commercial plan covering all cooperation partners should be embedded in the vision and mission of each player and yield benefits for everyone.

4. Launching joint lighthouse projects

Working together on functional and/or multifunctional lighthouse projects within selected areas (such as product development, operations or sales) reinforces integration and, hence, collaboration within both organizations.

5. Establishing clear governance

A transparent and harmonized governance structure for industry-retailer collaboration eliminates friction and misunderstandings. Everyone on both sides knows who is responsible for what and what resources have been allocated for which purposes.

6. Introducing joint scorecards

Joint (two-way) scorecards help buyers and suppliers understand and quantify what they are contributing toward shared goals (e.g. product launches, KPIs, targets, promotions and pricing strategies).

7. Committing to shared value creation

This overarching principle should underpin all the six collaborative practices described above. All the parties involved must commit to shared value creation by showing a genuine willingness to work together in practice, sharing both goals and risks and cultivating an understanding of the other party's objectives and business situation, while being aware of conflicts of interest.

Alongside the above “do’s”, our study also identified a number of definite “don’ts” – practices that it is critical to avoid when seeking to nurture joint business planning. Three of the ten pitfalls we identified are outlined below:

Pitfalls to avoid
1. Top-down impositions and misalignment

Effective communication and close alignment between executives and operating teams is critical to realize a shared vision, allocate resources efficiently and successfully execute joint business planning initiatives. Above all, it is important to avoid imposing practices from the top down: Individuals and teams in both organizations and on all levels must be encouraged to buy in to collaboration. Accordingly, any misalignment can seriously impair the success of joint business planning and must be addressed quickly and resolutely across all business levels.

2. Disclosure of classified innovations

Due care and restraint must be exercised when determining the timing and scope of moves to share information about innovative products. Strategies to protect innovation include implementing intellectual property safeguards, utilizing non-disclosure agreements in partnerships, and conducting thorough competitive analyses. The need to share information in order to build anticipation and market products in advance must always be weighed against the need to safeguard critical and sensitive information.

3. Strategic inconsistencies

When collaborating across numerous product categories, and especially between different countries, inconsistencies are bound to arise. Companies should therefore prioritize the alignment of strategies across countries and product categories, balancing this requirement with the often locally different needs of consumers and shoppers. In most cases, this will necessarily involve central standards, cross-functional collaboration and robust communication. It is worth the effort, however: By achieving greater consistency, organizations can streamline their operations, enhance the customer experience and improve their overall competitiveness in the global marketplace.

Getting started with more robust joint business planning

The case for robust collaboration between brand manufacturers and retailers is clear and compelling. A good place to start is therefore to think carefully about – and provide honest answers to – the following questions:

  • Do we feel well equipped to respond to the rapidly changing retail market landscape – locally and globally?
  • When and where are we getting maximum value from our relationships with retailers?
  • Are we genuinely willing to engage in joint business planning at scale? If so:
    • What will be our approach to joint business planning in the coming years?
    • What resources (manpower, capabilities, network, organizational set-up etc.) do we need to develop and strengthen this approach?
  • Which retail partners are worth considering for joint business planning? How do we segment them (by country)?

Roland Berger would be happy to place its expertise at your disposal as you seek to implement best-practices for joint value creation. We relish the chance to join the discussion and work with you toward more successful outcomes. We look forward to hearing from you!

We would like to thank Robert Baker, Stephane Tubiana, Artem Zakomirnyi, Siobhan Gehin, Kathy Jiang, Fernando Lopez de los Mozos, Michaela Wrede and Charlotte Kasper for their contribution to this study.

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