Alleviating Challenges in the Consumer Goods Industry with Strong Partnerships
By Stefan Hilger
The consumer goods industry has been through a lot in the last two years and no brand or retailer has been spared from the difficulties.
Particularly, the pandemic has inflated the pressure on margins. Supply shortages have impacted a wide range of product categories while increasing costs for raw materials, logistics, and personnel have only exacerbated the issues.
These challenges reinforced the need for CPGs to rely on flexible partnerships with retailers. For example, CPGs and their partners have had to enter more negotiations to discuss shifts in merchandising and promotional strategies to keep up with shifts in supply. So, despite the time and resources required to build and maintain partnerships, the benefits are increasingly worthwhile today.
In fact, World Commerce & Contracting found that “a typical Fortune 1000 company maintains 20,000-40,000 active contracts at any given point of time.” Moving forward, it’s imperative that retailers and their business partners learn to collaborate in a way that alleviates challenges, rather than adding fuel to the fire.
By automating the agreement lifecycle process, consumer goods companies can increase profitability during new and recurring negotiations by eliminating redundant work, reducing errors, and synchronizing agreements and conditions. There are four main ways retailers can strengthen collaboration and the agreement lifecycle process, including: proactive thinking, scenario testing, and a prioritization of transparency.
1. Think Proactively
Before working with a retail partner, it is imperative that CPG brands have all the sales data and quantifiable key performance indicators (KPIs) needed to ensure a profitable collaboration. CPG brands should take the time before negotiations to analyze the potential retail partner and determine how the collaboration can best fit its growth strategy.
This includes taking the time to identify and share clear-cut goals so both parties understand what it will take to be successful. These steps will help CPG brands predict future opportunities and find the right partner to achieve them.
2. Test Scenarios
The goal of securing partnerships is often to prepare for the future, using past challenges as a reference point. CPG brands should analyze successes and failures and use these learnings to conduct “what if” scenarios that imitate potential issues either party could face.
These simulations improve visibility into how their margin and profits might change depending on external factors and can inform negotiations and settlements. By synchronizing these simulations together in an automated agreement lifecycle management platform, the redundancy usually caused by both parties evaluating scenarios individually is removed.
3. Prioritize Digitization
The agreement lifecycle process does not end when the agreement is signed. Throughout the duration of the partnership, as well as renegotiations, both parties must have easy access to the terms and agreements.
Digitizing the entire agreement management process creates one source of truth which can eliminate miscommunication and minimize errors throughout the partnership. Finally, the automated system reduces lead time in the agreement lifecycle and opens a channel for constant feedback between partners.
The Benefits of Automating the Agreement Lifecycle
By using an automated agreement lifecycle platform and carefully evaluating partnerships before their finalized, CPG brands have unprecedented levels of transparency into their deals and negotiations.
With this transparency comes the most up-to-date information, which CPG brands can use to offer larger assortments with realistic stocking updates and optimized sales, accurate fulfillment timelines, and consistent pricing. Strong partnerships could be the key to unlocking the customer experiences that can differentiate one CPG from another.
Stefan Hilger is a member of the executive board of gicom AG, and is known as “the networker” on the board of directors. He has been the managing director of the gicom group with branches in Overath/Cologne, Germany, and the United States.