Collaboration Drives Sales Gains at Meijer

MARK HAMSTRA

CHICAGO — Meijer Inc. has seen increased sales gains as a result of the collaborative relationships it has with its largest suppliers, according to Paul Boyer, vice chairman and chief executive officer of the Grand Rapids, Mich.-based supercenter chain.

“Clearly, there have been improved business results,” he said, citing category sales gains of 1.5 to 3 times expected results when collaboration occurs. In a collaborative relationship, retailers and vendors work together on business plans with common goals, often looking three to five years ahead.

At Meijer, the highest level of collaboration — what the company calls “team-to-team” collaboration — occurs with its largest suppliers (those with whom it does $50 million per year or more of business). In these relationships, the presidents and CEOs of both Meijer and the suppliers meet once a year to discuss mutually agreeable goals for the companies. The company also has defined two lower levels of collaboration with smaller suppliers.

Although there are other benefits that can accrue from these relationships, such as shared consumer research and better communication, Boyer said it is important that the collaborative relationship focus on financial goals.

“This isn't a feel-good exercise,” he said. “You have to focus on what pays the bills: sales, margins and inventory levels.”

Collaborative relationships often begin by attacking low-hanging fruit, such as logistics issues, and evolve over time, he said.

Meijer began working collaboratively with five key suppliers in the mid-1990s, Boyer said, and has since expanded, both by reaching out to other vendors and by forming relationships with vendors that have approached the company seeking to collaborate.

The keys to the success of these relationships are for the retailer's leadership to buy into the collaborative concept from the top down, and to be willing to be open in sharing data with the supplier partners.

“The hallmark of good collaboration is that you have to be open and candid,” he said. “For a long time, we were under the impression that the less information we shared about ourselves, the better.”

The suppliers who partner with Meijer in these collaborative relationships also have to take a holistic view of their categories, Boyer noted.

The result of collaboration, in addition to improved sales and margin performance, is that there is a “halo effect” that impacts other areas of the relationship — there's a lot less “finger-pointing” that goes on when things go wrong, for example, Boyer said.

Jim Hertel, managing partner of Willard Bishop, Barrington, Ill., who also presented at the session, along with Bill Bishop, chairman of Willard Bishop, said collaboration requires five elements in order to succeed: vision, culture, C-level support, internal alignment and trading partner alignment.