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Profitable Growth and the Supply Chain

How product manufacturers and their channel partners can capture the value they deserve



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For mature businesses, in an ever more competitive world, adding customer value to stimulate growth is hard. Made harder still if product manufacturers and their channel partners fail to collaborate effectively to create value through the supply chain and deliver profit for the whole network.

Recent research, undertaken by Vlerick Business School and PwC, considers how working together more seamlessly offers greater potential for profit for all parties. The researchers looked at how companies engaged in ‘B2B2C’ relationships manage the power game with their partners, and questions how suppliers can reinvent their relationship with channel partners to spur profitable growth for all.

Click Download this Resource to read the White Paper: Getting Fit for Profitable Growth

In an ideal mutually-beneficial relationship manufacturers and product suppliers can focus on their strengths - refining processes and innovating for the future - while their channel partners receive fair compensation for their expertise in delivering to customers. Unfortunately, too often, the parties act as competitors, chasing gains, and endangering the profitability of all.

In recent years, bargaining power has shifted in favour of the channel partners. This is largely due to increased use of digital technology enabling better distributor shelf management, and channel partners’ ability to leverage their direct consumer contact and insights. Research around the relationship mindset between suppliers and their channels revealed that suppliers feel that they provide most of the ‘time and resources’ in the relationship but in return have too little of the ‘say’.

The researchers recommend that suppliers and channel partners stop considering their collaboration to be a zero-sum game in which the gains of one will be a loss for the other, rethink how they value each other’s contribution, and actively invest in the relationship with partners and creating superior value for consumers. They go on to suggest several ways to approach this:

Build the relationship

Rather than working in silos to optimise ‘shelf-back’ and ‘shelf-forward’ activities, parties should conduct joint projects to mutually design and operate analytics infrastructure and management practices based on POS data, and they should collaborate via multiple touchpoints.

Expand pricing strategies

Channel partners should be incentivised to focus on providing value-adding services and complementing supplier’s sales efforts. Create performance-based trading terms where channel partners ‘earn’ additional trade spending when delivering outcomes that create value for both parties.

Go beyond incentives

Educate channel partners to sell products and capture value for the whole chain. This approach benefits both parties; you significantly increase margins and channel partners receive higher revenues.

Offer exclusivity

By offering exclusivity to channel partners, as well as consumers, you assure your relevance and sustained partnership with channel partners. Exclusive deals, services and solutions give channel partners the feeling that their relationship matters and that there’s something to gain from continuing or investing in the relationship.

 

Click Download this Resource to read the White Paper

 


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