Want collaboration? Let's talk first

Collaboration between manufacturers and retailers isn't a new idea. For more than two decades now, companies have tried working together to ensure that products flow efficiently from the plant to the retail shelf and into consumers' hands. Yet a recent study by the consulting firm McKinsey & Co. suggests that most of those efforts have not yielded the expected results.

The current state of collaboration notwithstanding, that process remains vital to achieving mutual corporate success. At a time when penny-pinching consumers are searching for the best deals and, thanks to Internet retailing, are demanding products around the clock, manufacturers and retailers have little choice but to work more closely together to minimize inventory, boost sales, and increase profits.

To achieve those objectives, manufacturing and retail executives should sit down face to face and personally exchange information. For example, a manufacturer could share details about the production constraints that make it difficult to fill last-minute requests for shipments. In return, the retailer could provide information on the special deals it plans to offer shoppers, explaining to the manufacturer the reasons for and likely timing of last-minute spikes in orders. Once they understand each other's situations, the manufacturer and retailer could work together to better align production with store promotions to ensure the right amount of product is available when needed. Simply sharing data will not produce the desired results.

Lip service about collaboration rather than effective action will not work in the current business environment, as both manufacturer and retailer risk losing sales and customers. Companies today must engage in tighter supply chain collaboration to ensure mutual success. And collaboration starts with sitting down for a frank dialogue.