In the first part of this article, I described the first step to implementing a successful strategy to improve profitability for a consumer products company, whether generic or branded: an approach that integrates sourcing, distribution and retail. In this part, I discuss the step two for improving profitability: coordinating between the different departments of your company and with your supply chain partners, especially retailers.
Step 2: Coordinate Relentlessly
An important way to combat loss of focus is to require a highly focused, weekly discussion with your top team. This should include leaders of each of the departments or business disciplines that you hold accountable for the performance of the company, including the heads of Marketing, Sales, Product Design, Product Development, Merchandising, Pricing, Finance, Operations/Supply Chain and IT.
And don’t leave out the head of Human Resources, who can help you evaluate which departments are performing and coordinating well and which need remediation. HR can help you evaluate whether a shift in managers between departments could give you a performance boost. Meetings should be structured and crisp, focused on enhancing your clarity of purpose and staying the course.
Ask Probing Questions
Require meeting participants to provide detailed answers to the following questions:
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Where are we? Why are we where we are? Are we satisfied with where we are?
- Where do we want to go from here? Are we on track to get there? What tools do we need?
While these questions may seem basic, if you ask them properly, you will drill down to the root of operating issues.
For example:
- Has Product Management inputted all the information required to be printed on product labels correctly?
- Does shipping personnel have adequate access to information required to run bills of lading for customers?
- Does Operations have what it needs to run the business?
Excellence Requires Coordination
Improving the profitability of a consumer products business requires that, when the retailers you rely on to bring your products to the consumer look across all your activities and touch points with them, they rate your performance favorably. To be viewed as a viable supplier capable of maintaining or expanding market share, you must be seen by retailers as capable of coordinating and executing across the board. Shipping a high quality product at the lowest possible cost requires close integration across disparate business disciplines. The days when each branch of operations functioned mostly in its own silo are gone. Organizations where people can foresee and raise issues when they are still down the road, before they become problems are the winners in the market place.
Retailers are demanding a rigorous commitment to operating excellence---and you get penalized and fined for not delivering it. Market leaders are the companies that are all over details like the volume of gross-to-net adjustments and the rate of defective products that result from manufacturing and packaging errors. They avoid the kind of chargebacks that occur when boxes aren’t labeled properly. Consumer product profitability goes to companies that reinvest in operational excellence, thereby creating a larger point of difference against competitors.
In the final article in this sequence, I will discuss one of the thorniest problems involved in improving consumer product profitability: finding the right balance between the retail and online channels.
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Jack is an executive with 30 years of experience in consumer products, in both private equity-backed middle market companies and large multinational corporations.
He is Newport Board Group partner in the New York area.
To learn more or contact Jack, click here.
