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BOSTON and LONDON - Consumer packaged goods (CPG) manufacturers and grocery retailers in Britain are pressing forward with collaborative supply chain initiatives, but they are shifting their focus from CPFR and public exchanges to event management, private exchanges, and in-store logistics, according to a study announced today by Insight Research, the London-based market research firm.
The study, "Future of Supply Chain Collaboration: Which Way Now?" reveals that trading partners remain enthusiastic about the potential benefits of collaboration. However, they are taking a more focused approach than in the past.
"The UK supermarket industry, led by Tesco, Sainsbury's, Wal-Mart/ASDA, and Safeway, is known for its world-class supply chain capabilities," said Fidel Gonzalez, partner, Insight Research. "Retailers are working with manufacturers to uncover win-win opportunities to reduce logistics costs and improve on-shelf availability. Trading partners are now moving beyond the hype and focusing on what works, and they are starting to see real results."
Key findings of the study include:
-- Manufacturers and retailers are skeptical as to whether the benefits of the formal CPFR process justify the high cost and complexity of implementing and operating it. Trading partners believe simpler modes of collaboration, with less emphasis on technology and formal process standards, can deliver more value for the money.
-- Supply chain collaboration should focus primarily on event management. Events (promotions, new product introductions, and holiday/seasonal items) account for the vast majority of supply chain problems, and the demand volatility associated with such events calls for a fundamentally different approach to supply chain management from the approach for routine product movement.
-- Sainsbury's Collaborative Planning System offers a best-in-class example of collaborative event management. Using this software application, Sainsbury's has increased on-shelf availability for promotions from 85 percent to as high as 98.5 percent.
-- Shelf-ready packaging and merchandising dollies have demonstrated success in streamlining in-store logistics. Tesco has made the most progress in this area, using dollies on 60 product lines, as part of its ambitious Continuous Replenishment initiative aiming to increase on-shelf availability to 99 percent.
-- Private exchanges offer much greater potential than public exchanges for enabling key supply chain collaboration initiatives. The top four chains in the UK operate private exchanges, such as Wal-Mart/ASDA's Retail Link. Safeway's Supplier Information Service is credited with helping Safeway boost on-shelf availability from 84 percent to 97 percent.
-- The UK industry will soon reach critical mass in adopting a de facto standard data catalog system that goes beyond enabling data synchronization. Tesco and Sainsbury's are rolling out across all their categories a system operated by UDEX Ltd. This system provides commonly coded product attributes across different manufacturers, reducing errors in product identification and enhancing category management and data analytics capabilities beyond what can be done with data synchronization alone.
Insight's study is based on interviews with global CPG manufacturers, six of the top seven UK food retailers, and leading technology and logistics providers. For more information, visit www.insightreport.co.uk/reports/report26/desc.html.