RetailWire Discussion: SCDigest: Top Consumer Goods and Retail Supply Chains for 2009

By SCDigest Editorial Staff

Through a special arrangement, presented here for discussion is a summary of a current article from Supply Chain Digest.

Each year, SCDigest reports on the annual survey results from Cannondale Associates, which ranks the top consumer packaged goods industry supply chains and the top retail supply chains in the primary store segments that sell those packaged goods products. The full Cannondale survey and report, which it calls PowerRankings, was released in late 2009 and covers a number of company performance measures for both consumer goods manufacturers and retailers, including such areas as brand power, marketing programs, sales teams, overall business fundamentals, etc., as well as supply chain.

Too often, Cannondale says, pressures lead manufacturers and retailers to focus on "the right now" instead of doing what is "right" for long-term business success.

As a result, Cannondale says manufacturers and retailers too often seem to be working at cross purposes. Instead, both sides need to pursue a more collaborative model that focuses on the five elements of the Cycle of Success:

Simplicity
Consistency
Follow Through
Creativity
Involvement

We'll start with the top consumer packaged goods supply chains, as rated by their retail channel partners. The percentages in the chart below reflect the number of retailer respondents who said a given manufacturer's supply chain was in the top three in the industry. For a number of consecutive years, Procter & Gamble has come out on top, though it took a bit of a hit, down almost 11 percentage points from its 2008 rankings, which were down five percent from 2007. The report says there was some feedback from retailers that P&G had become "less flexible" than in the past. However, it still has a fairly sizable margin over second place Kraft.

Meanwhile, Nestlé made a big move both positionally and percentage-wise, up five percentage points over last year's rankings. ConAgra and Campbell cracked the top 10 this year, replacing Clorox and Coca-Cola on the Cannondale list.

One retailer, for example, said "ConAgra has really stepped up its game on supply chain. They went from a middle of the pack supplier to one of our best."

Among consumer packaged goods focused retailers, it should come as no surprise that Walmart came out on top, named among the top three by an astounding 95.6 percent of manufacturer respondents - increasing that number by 3.5 percentage points in 2009.

Costco, meanwhile, jumped from fourth to second place, moving past last year's number two Target, which fell 4.7 percentage points. Meijer also took a fairly large percentage drop, while Kroger enjoyed a big percentage gain, up 6.3 points.

Because of a tie, the top 10 is really a top 11, with Safeway and Giant Eagle new to the list for 2009, and SuperValu falling off.

"Costco is a Supply Chain that just happens to have a big box on the end of it. They are relentless when it comes to improving the efficiency of every aspect of the supply chain," one manufacturer noted.

Kroger also got kudos from one manufacturer respondent, who said that the grocer "is extremely progressive in what they are trying to do with their supply chain."

Discussion Questions: What’s your reaction to this year’s Cannondale CPG manufacturer and retail supply chain rankings? Of the five listed criteria (simplicity, consistency, follow through, creativity, involvement), which ones do you consider becoming more critical to supply chain management in the coming year?

Top Consumer Goods and Retail Supply Chains for 2009 - Supply Chain Digest

Comments:

There is an interesting dynamic going on that Brick and Mortar retailers must face up to or they're going to lose out completely. More often, the Brick and Mortar retailer is being bypassed by the Internet. Amazon's results have shown this clearly and other online merchants are doing the same thing.

I always like the definition of the supermarket supply chain that says: "The supermarket supply begins in the farmer's field and does not end until the product passes through the bowels of the consumer." Perhaps a little too graphic, but the point is that the player in the supply chain who can demonstrate they have the consumer's best interests in mind will win their loyalty.

This makes customer service a big and important differentiator between the remote service of an Internet retailer and the local store. From a supply chain perspective, this puts a big emphasis on "reverse logistics." Unfortunately, I don't see any discussion here of this portion of the retail supply chain. Many retailers have actually worked to unload this responsibility, the very role that allows them to keep business. Retailers have insisted that manufacturers put in return policies that include direct customer support. Some products come with gigantic labels pronouncing "Don't go to the retailer for problems." Retailers need to recapture this role.

You can no longer bifurcate the supply chain between the manufacturer and the retailer. You must take the supermarket perspective and also consider the consumer experience.

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Bill Bittner, Principal, BWH Consulting

Retail is all about follow-through. And the manufacturers that support them also have to follow through on their commitments.

Having said that, this list strikes me as a bit arbitrary and doesn't really tell me very much about customer satisfaction - it's very inward-facing. I mean, seriously, are we surprised that Walmart and its most favored nation P&G come out #1? Of course not. But how does the customer feel about the products and service?

Bigger and more efficient is not always better.

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Paula Rosenblum, Managing Partner, RSR Research

It's always a pleasure to see companies get recognized for improved processes, procedures or technology. Sometimes it takes a couple of years for the changes to get noticed. Supply Chain is not rocket science but if the supply chain's not consistent, it has been proven that business will suffer. Retailers are finally getting this message after years of many of us preaching it.

To paraphrase former Wal-Mart CEO Lee Scott, when he was VP of Distribution almost twenty years ago: Walmart is not a retailer, they are a distribution company (supply chain had not become the new vogue word to say at that point). Because of that commitment and the consistent execution of their team, they still receive accolades for their results. And by pushing many of their CPG partners to perform as such they have made them better companies.

In the future, supply chains will need to become more lean (inventory costs money!) and efficient, therefore making the need for technology with complete visibility and collaborative involvement of both the CPG vendor and retailer more strategic and concise.

Susan Rider, President, Rider and Associates, LLC

This is probably coming in too late for most to see, but I will just respond to a couple of Paula's comments.

(1) The whole purpose of the study has been for etailers to rate manufacturers and manufacturers to rate retailers. Maybe that is too "inward" a view, but that's what it does. While perhaps the perception doesn't meet the reality, perception as we all know in many ways is reality.

(2) As noted, the Cannondale report tracks many categories--supply chain is just one and a relatively minor one at that--it just happens to be what we do. There are a number of more consumer-centric measures.

(3) I guess it isn't surprising that Walmart and P&G are number 1--probably rightly so, from my view--but this is all retailers who together rating P&G to that position. But as we noted, P&G's percentage rankings have dropped considerably over the past two years. That probably says something.

My experience is that changes in position and percentages from year to year do tend to accurately reflect what we are seeing and hearing--Kroger's big supply chain push over the past few years being just one example.

Dan Gilmore, President and Editor in Chief, SupplyChainDigest

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