The New Collaborators

The New Collaborators

Copyright 2004, Traffic World, Inc.

Moen knows getting bath and kitchen products to consumers is not as simple as turning on a faucet. Distribution pipelines are changing for the North Olmstead, Ohio-based manufacturer of residential and commercial plumbing products.

"The big wholesalers are moving to the retail model and the retailers are moving to the grocery store model," said Scott Saunders, Moen''s vice president of logistics. So the manufacturer - the number one faucet maker in North America and part of $6.21 billion Fortune Brands - is developing new distribution practices in cooperation with its trading partners.

Market changes like this are driving supply-chain collaboration. Not the kind that was hyped a few years back as a revolutionary movement that would transform dysfunctional business relationships into seamless trading communities. This collaboration is focused on meeting customer demands and it comes in many forms.

In Moen''s case there are variations for customers in two primary distribution channels: wholesale and retail. In wholesale "there are a handful of big ones and then several hundred small to medium-sized ones," said Saunders. Most of the minnows "still send orders through fax," he said. The manufacturer has introduced an Internet portal that these operators can use to access pertinent information such as stock levels and order information. "Our next big step this year is to let them do online order entry," he said.

As regards the big wholesalers, Moen is piloting vendor-managed inventory were "they will send us information and we will create replenishment orders," Saunders said. The manufacturer already has reached a point with these larger players where it follows set shipping schedules to specific warehouse locations and "the demand becomes very consistent." This system is akin to the distribution model used in retailing, noted Saunders.

In its other channel Moen is working with a big box retailer to change the way demand is managed. "What we call customer-centric teams" have been created that are responsible for demand and order management, Saunders said. The teams include representatives from transportation and distribution. There also is an operations person who is based on-site at the retailer, who manages the transactions and oversees replenishment orders into the retailer''s distribution network. "If their shelf is empty we have failed," said Saunders. "That''s a different mindset, the grocery store model."

It is a mindset that is becoming more common. Boston-based supply-chain research firm ChainLink Research recently completed a study of companies that are "ahead of the curve" in managing demand, particularly in the high-tech and consumer packaged goods industries. It found that closer trading relationships between companies and their suppliers is an important part of the leaders'' ability to predict demand and plan manufacturing and distribution, said ChainLink''s chief research officer Bill McBeath.

Tapping into suppliers'' expertise is nothing new; automated distribution systems such as collaborative planning, forecasting and replenishment were introduced years ago to bring suppliers and their customers into the same information loop. However, although CPFR has been adopted successfully by many companies, "the collaboration part of it is hard to do" because it represents a major change in management challenge, McBeath said. Also, CPFR has tended to be championed mainly by industry leaders.

Another approach, vendor-managed inventory, also is being used by to make distribution more efficient. However, "there is the perception on the supplier side that it is getting dumped on us," said McBeath. On the other side, OEMs recognize that giving suppliers greater visibility into their production schedules can yield substantial supply chain savings. But OEMs want suppliers to "have some skin in the game" by owning the inventory, he said. They fear that without that commitment suppliers will load their DCs with too much inventory.

While CPFR and VMI continue to be important in improving demand management, companies are developing their own methods that mix and match existing and new approaches. Underpinning these efforts is a willingness to develop collaborative trading relationships.

And the relationships are not only external; they can be internal as well. "That''s one of the biggest changes over the last few years, better internal collaboration," said Saunders. For example, Moen sales reps are more open today than they were a few years ago to logistics specialists visiting customers to discuss problems. "Quite often problems go away if you look at them holistically," he said.