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Omnichannel commerce | Management

Joint Business Planning: Not for Large Retailers Only

image: business man completing annual business reports
The whys and hows of long-term collaboration with a manufacturer

Think joint business planning (JBP) is just for large companies? Think again. Midsize and even small businesses can benefit from this sort of long-term collaboration with a manufacturer or other supplier. And just as important, manufacturers and suppliers are often just as keen to work with SMBs. "Almost every manufacturer strives to do some sort of joint business planning with their customers," says Ric Noreen, managing partner of retail consultancy Waypoint Strategic Solutions.



What is joint business planning, anyway?

Generally speaking, JBP is a strategic collaborative relationship between manufacturer and retailer. The partners share sales, product, category, and customer data and insights with the goal of increasing revenue for each of them in the long term.


"This is not an annual operating plan," Noreen says. "The first year of this three- to four-year plan will be more heavy with details. It should include a promotional calendar. It should include an optimised assortment. It should include a better approach to getting your shelves right. Three years on it might be more focused on creating a dedicated section to innovation in the ****product**** category, perhaps organising store shelves by customer need state rather than by brand. It's about focusing on how the customer things about the category, not how the retailer or the manufacturer thinks about the category. That goes for all elements of the plan."


JBP is quite common between manufacturers of consumer packaged goods and supermarket chains, but manufacturers of other types of goods are now following suit. And now that they've entered partnerships with many of the larger retailers in their sectors, they're willing—even eager—to work with smaller businesses as well.


"For midsize companies it really solidifies their position as a trading partner," Noreen says. "Midsize companies view it as a way to elevate their stature with manufacturers. By striking a JPR you can be like the view in a rearview mirror and appear larger than you are. Small and midsize businesses typically have less sharper insights, may have less sophistication data input, but that's really the only difference. And you can work around that, as the trading partner typically brings that information."



What do you need to bring to the table?

The good news for retailers is that the manufacturer does most of the initial work. "The majority of the insights are theirs," Noreen says, adding what they most lack—and most want from their retail partners—is information about the buying habits, demographics, and priorities of the retailers' customers.


While you as a retailer might be relieved that you don't have to do much of the preplanning, there is a drawback. "Typically the manufacturers have a deck ahead of time and tend to run the meeting themselves," Noreen says. "It typically has the same dynamic as a sales call—but you want to avoid that at all costs." To that end, you might want to call upon a third party to facilitate the JBP process, "encouraging interactivity between the companies."


Of course, the manufacturer "doesn't show up with a plan, a bag of money, and say, 'Please execute,'" Noreen says. You must be ready to share information. According to Noreen, "This is the kryptonite of a JPB. You need to share not just POS data about the manufacturer's brand but also about the product category. I won't say without it a joint business plan is a nonstarter, but almost by definition it becomes less collaborative."


Though you might lack the data and analytic prowess of Tesco or Walmart, your point-of-sale system no doubt yields plenty of actionable, readable, and transferrable data. And if you have some sort of loyalty programme, you possess a wealth of usable information about customers' shopping behavior, including how many trips they make to your stores and which channels they prefer to shop from and what they buy from each. It also helps if you can conduct some primary research prior to the initial meeting.


Beyond data, you should bring to the partnership a true commitment to building out the product categories of the manufacturer you're collaborating with. That does not necessarily mean you are committed to carrying the manufacturer's brands exclusively or primarily. "I've had instances where an optimized assortment actually hurt the sponsoring company but provided additional benefit," Noreen says. The manufacturer might have gleaned greater insights into its position in the competitive landscape, for instance, enabling it to hone its product pipeline and refine its marketing.


Perhaps most important, you need to be ready, willing, and able to hew to the plan for at least several years. The initial planning session is typically two days of intense cross-functional collaboration, and "creating a plan might be easier than sticking to it," Noreen notes. "The retailer needs to know that they're going to manage it for a number of years. It's really easy for the plan to lose its momentum."


Both the retailer and the manufacturer "have to create mechanisms to sustain the plan. Governance is a really important part of that," Noreen continues. "Who owns this thing? Let's get a steering committee established whose primary charge is to maintain the momentum and acquire the resources it takes to maintain the plan."


Managing the plan is likely to require investing funds as well. You might have to buy deeper into the product category, contribute to additional marketing, buy new store fixtures, and the like. "It might cost a point or two of margin" initially, Noreen warns.



So why bother?

For a retailer, the benefits of entering into joint business planning with a manufacturer are many. We already mentioned the prestige you'll gain within your market sector from partnering with a supplier; now that one manufacturer has deemed you worthy of partnering with, other manufacturers and vendors will view as being an important player as well. What's more, the manufacturer is likely to favour you over comparable competitors when it comes to incremental programmes. And you'll have a large vendor with deeper pockets than yours taking a category-wide view of a segment of your business in a holistic way you'd never be able to afford on your own.


With joint business planning, "you have the basis for stronger growth. Each subsequent initiative should better the trend for the category overall," Noreen says. "If you come to the table with an open mind and an open heart, you're going to garner benefits from this planning process that really aren't available any other way."



author: Sherry Chiger

Sherry Chiger

The editorial director of Your Commerce, Sherry Chiger is an award-winning writer and editor. She was formerly editorial director of Multichannel Merchant and Catalogue e-business magazines.


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