A shifting landscape for suppliers is creating challenges that require new thinking about growth, efficiency and scale, according to a presentation at the FMI Midwinter Executive Conference in Scottsdale, Ariz.
Steffen Lauster, VP, consumer and retail, and practice leader, North America, for Booz & Co., said the shifts result from increased change and complexity at the retail and consumer levels.
Current business systems are geared for large retailers and manufacturers, he said, but they were created before retail channels such as clubs and dollar stores took on increased importance for grocery. The new growth challenge is to figure out how to customize ways of doing business with some of these channels, and to do so profitably, he said.
"We need to redesign systems to deal with different demand levels," he said. "We're so trained to operate on an efficiency level only, that we see growth in club, dollar and other channels, and we meet it in ways that aren't so profitable. We need to meet demands from growth channels profitably."
As one example, he said variety packs are typical offerings that suppliers bring to clubs, but often they are not economically attractive for manufacturers.
"You need to figure out how to differentiate in economical ways," he said. "Don't just respond to customer demands in ways that aren't profitable."
He urged CPGs to set up business approaches to tailor to different types of demands, including those more scale-oriented, and those more customized and innovation-focused.
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All of this involves new collaboration approaches involving new types of skill sets, metrics and working processes, he said.
J. Neely, partner, consumer and retail, Booz & Co., said the changes impacting suppliers and their trading partners stem from a range of factors. These include growth of new retail formats, increased pressure on shoppers, and demographic shifts involving ethnicity and age.
"New levels of complexity are overwhelming traditional business systems built and designed for efficiency, scale and high-volume," he said.
Read more: Collaboration in focus as Midwinter begins
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