Collaborating for Competitive Advantage

A recent study carried out for the European Logistics Association by Accenture and two leading European Universities—Insead and Technische Universität Darmstadt—has projected that, within the next three to seven years, the European market will be dominated by a small number of strong pan-European players, a forecast with which the majority of both manufacturers and retailers appear to concur.

Economies of scale resulting from consolidation are not, on their own, sufficient to generate sustained competitive advantage. For this reason, industry leaders increasingly are focused on collaborating across their supply chains and on overcoming the very significant hurdles to that collaboration.

These pioneers believe that increased focus must be brought to bear on a number of key areas including:

• Assortment rationalization
• Consumer focused promotions
• Reduced shelf replenishment
• Inventory
• Transportation

Moreover, they already are considering unprecedented collaboration between retailers and manufacturers through such initiatives as the exchange of point of sale information, shared promotional calendars and joint forecasting.

How far down the collaboration road have European companies gone? The joint study confirmed that, while most companies are well beyond "piloting" with basic collaboration initiatives, the more advanced collaboration techniques, which coincidentally offer the greatest potential competitive advantage, are only just beginning to take off.

Thus, at the basic level, vendor managed inventory and continuous replenishment programs now account for more than 30 percent of sales to European hypermarket and supermarket chains in certain specific product categories. Similarly, electronic data interchange now accounts for a significant proportion of all message exchanges covering invoices, orders and inventory, while basic category management techniques are increasingly commonplace. With these basic techniques well known and easily copied, leading players argue that they must be rolled out as fast, with as many additional partners and in as many countries as possible. Even then, they increasingly are seen as minimum requirements for successful operation rather than as a source of significant competitive advantage.

Advanced techniques such as the systematic exchange of point of sale information still represent a very small proportion of industry sales, in turn ensuring that ongoing joint promotional planning and monitoring are still the exception, rather than the rule. Three key enablers will help overcome barriers to collaboration.

• Agreed standards and protocols for the exchange of a much broader range of information than conventional electronic data interchange.
  
  
• Development and acceptance of aligned data structures including, for example, standard product codings and price and promotional data structures. These structures have the potential to take tremendous administrative costs out of the value chain, while at the same time adding clarity, retaining flexibility and allowing the introduction of higher degrees of automation.
  
  
• Focused organizations. Companies are in agreement that, without focused organizations, the benefits offered by the collaborative model will not materialize

Jaume Ferrer is a partner in the Accenture Supply Chain Line of Business. He is based in Barcelona.

Olivier Vidal is a partner in the Accenture Supply Chain Line of Business. He is based in Paris.