Last month I wrote about customer business planning (CBP). It clearly struck a chord with many suppliers facing the challenges involved. I will answer suppliers’ key questions here with some of our CBP principles at Sentinel MC.
The hottest topic is how to navigate the closing of one year at the same time as setting up the next for joint success. It’s crucial to have no collision of interests and no late surprises.
Aligned interests through agreement of joint targets that balance short-term, long-term, internal and external priorities is vital. The right analysis indicates not only the best KPIs and targets to unify both parties, but also how they will be achieved.
Suppliers shy away from including retailer profit as a KPI. The reality is that topline turnover, retailer profit and retailer margin will always feature at the top of the retailer’s list. If you don’t have these KPIs in mind, you are not being realistic about a joint approach.
How to work with suppliers
It’s important, though, to recognise a supplier’s role in contributing to these, without taking accountability or underpinning them. Equally, of course, there should be a supplier volume element – driving investments to give the retailers skin in the ‘joint’ game.
Never enter retailer margin-maintained deals. So many have done this, and it allows retailers to mess with pricing willy-nilly, knowing suppliers will make up their profit.
To avoid ‘you owe me’ surprises in the last month of the year, total upfront commitment to tracking/review processes and relentless measurement of performance is needed. This should be against not only KPIs but also the building blocks to achieving them.
Year-end wrangling fundamentally indicates you are not in a trust-based process that fosters sustainable planning. The boom-and-bust annual plan is a power-play tactic by the retailer, in which they build a supplier’s competitor in alternate years. It can be avoided through medium and long-term KPIs.
‘In-plan’ contingencies
Our work with suppliers over 20 years has proven the pivotal nature of a review mechanism to invoke ‘in-plan’ contingencies. Early ‘we are off track’ conversations can only happen with top-level commitment to check steps. Even off-track reviews can be positive conversations about adding further top spin to the performance and team recognition. Both help build trust for a sustainable approach.
Another major question suppliers are asking is how far they should work on joint planning when the customer is not making it easy. The answer is ‘not too hard’. The more important thing is to have a methodology that works regardless of the customer’s input, then continuously demonstrate how better collaboration can make it easier for bigger and better plans.
Keep the outputs simple, regardless of how analytical and rigorous the inputs are. Where there is rigorous data, use it – but then ensure it’s reviewable on the same format as a simple small-customer brain-to-page approach.
Great customer plans shouldn’t be a Christmas miracle. But the fight for market share across all grocers is at an all-time high, and CBPs are set to rise in importance still further.
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