NO BOUNDARIES

David Merrefield

Those of us who take a look at food retailing and how it's changing often describe the current time as one during which boundaries are vanishing: Wholesalers are becoming retailers, retailers are becoming restaurants, restaurants are becoming entertainment venues, and so on.

And it's all true. But it's sometimes difficult to think about the different, but mutually dependent, ways in which this type of change is occurring. And that's true even though these ideas may find nearly weekly expression in the pages of SN. But Management Horizons, a consulting division of Price Waterhouse, is currently issuing a new report that endeavors to quantify change in several ways, including by listing the ways in which boundaries are falling. The report is called "Consumer Products 2005: A World Without Boundaries."

And, of course, as a world without boundaries approaches reality, the effect falls on much more than food retailing. At the same time, all such changes affect food retailing. So with that in mind, let's take a quick look at an edited version of the collapsing-boundaries list: Supply Chain: Boundaries fall as manufacturers get out of manufacturing and retailers get into product development and brand management. And manufacturers are going directly to consumers. In short, companies do what they do best, and outsource everything else.

Money: Payment schedules premised on the 30-day invoice-receipt cycles are being replaced by pay-on-scan schemes. Moreover, manufacturers are taking a larger role in managing the product-delivery pipeline, raising intriguing questions about who gets the money and when. Who knows, since no one knows who owns the inventory at any given moment? And who has responsibility for shrink, ringing the sale and, by the way, who gets the margin?

Time: Push-driven sales calendars are giving way to consumption-driven continuous replenishment. Speed becomes paramount, truncating order cycles down to days or hours. And time becomes meaningless in global relationships.

Organizations: Functional silos inside business organizations are toppling. Geographic territories and spheres of management control that previously defined organizations no longer do so.

Geography: Retailers outgrow regions or whole nations, and shift to new territory. Similarly, consumer-products companies look far outside home territories for large portions of their revenues.

Place: Electronic commerce is robbing real estate of its meaning by shifting transactions into cyberspace. The proliferation of shopping alternatives may cut the frequency of shopping at stores, attenuating the value of the retail shelf space.

Media: Telephone, television and computer are merging into a single appliance; just as broadcast, print and Internet are meshing. But, at the same time, the efficiency of information delivery means the number of alternatives vying for customer attention is expanding exponentially. Target marketing is devolving from mass audience to a market segmentation of one.

Information: The direction of information technology is moving toward sharing, and away from collecting. That's because the price of owning an information system is dropping at the same time the capacity to store information is leaping, and cross-functional barriers are being overcome.

In sum, the world is becoming one with new rules, new roles and new relationships.