HOW TWO TRADING PARTNERS COLLABORATED TO LIFT SALES

David Merrefield

Can collaboration between trading partners aimed at improving supply chain practices possibly produce results that would make the effort collaboration requires worth it?

Based on the experiences of Safeway and Kraft Foods, the answer seems to be yes. Kraft sells some 300 million pounds of product to Safeway annually, so the stakes are high.

Details of a collaboration initiative between those trading partners were published not long ago in a booklet issued by Grocery Manufacturers of America, Washington, titled "Case Studies from Outside the CPG Industry." Notwithstanding that title, the experiences of the trading partners are set forth in a detailed report that forms the appendix of the booklet. The Kraft-Safeway project won GMA's 2004 associate member CPG award.

Let's take a quick look at the results of the Kraft-Safeway project, then loop back to see how they were accomplished.

Among the project's results were a 162% increase in one featured category (Capri Sun) as compared to the previous year, and the speed-to-shelf of new products was improved dramatically. There were a number of other favorable results, too.

Here's a little of how the project transpired: The trading partners engaged the services of IDEO, a Palo Alto, Calif., design firm. The objective was to bring into the process a facilitator that had no previous experience with the consumer packaged goods industry so outside ideas might eventuate. The project started with a study of the trading partners' vendor-managed inventory practices, including identification of low- and high-value activities. That was followed by field observations and interviews. Finally, brainstorming sessions produced about 100 ideas that could be put to work to improve the process. Specifically, here are a few of the practices that yielded to improvement: Shipments of full pallets improved across all Safeway divisions; Kraft became Safeway's premier cross-dock vendor, representing 18% of the retailer's total cross-docked volume; Kraft achieved a 90% distribution rate for new items in four weeks, against eight weeks previously; and Kraft redesigned shipping cases for its Capri Sun line that used a "chimney stack" configuration featuring columns of single flavors for ease of building in-store displays. A number of other improvements was made, and collaboration between the trading partners has continued.

According to the report, some of the key lessons learned from the project include these: When a "culture of innovation" between trading partners is fostered, collaboration flourishes; brainstorming drives innovation; ideas from outside the industry can be useful; companies need an innovation "champion" to drive success; methods useful in product design are also useful in the designing process; and change is never complete.

Kraft and Safeway have used results of the project to fashion a "vendor performance scorecard." That scorecard has since rolled out to Safeway's top 40 vendors so that certain Safeway goals concerning out-of-stocks, inventory turn, replenishment levels and the like can be measured, demonstrating that results of the project can be migrated further across the supply chain.

What does all this suggest? Simply that many trade-relations issues could be solved if subjected to a dose of communication.