3. Build outsourcing management capability. Many outsourcing vendors have invested heavily in technology and can customize how they report the costs of every promotion and visit, with capabilities that are often better than those of in-house merchandising departments. But this data only benefits manufacturers with a management team that can work with vendors in a disciplined fashion to support high standards of retail effectiveness. In our experience, a sustainable vendor management capability is based on four building blocks:
• Processes: Manufacturers must build advanced retail cycle-planning processes, which manage the scheduling and mix of merchandising resources, a process that serves the needs of vendors and manufacturers alike.
• Organization: Typically, the retail merchandising organization shrinks to reflect its new role, organizes by channel (or geography) to parallel the outsourcer’s organizational alignment, and rebalances its staff to include a planning coordinator and analyst resources.
• Analytics: High standards of retail effectiveness require in-depth assessments of segmentation, deployment modeling, and target setting.
• Systems: The data collected by merchandisers during store visits feeds the analytical engine that supports the cycle-planning process and enables the measurement of vendor performance.
For most organizations, building all of these capabilities means transforming the current sales organization model. Some manufacturers might fear that they are investing to build the capabilities of a third-party contractor who could someday use those capabilities on behalf of competitors. But the most important capabilities are those of the manufacturers themselves: to choose vendors effectively, synchronize processes, garner the loyalty of vendors, track their results, and manage the whole process. Once developed and internalized, these are capabilities that no competitor can borrow or steal.
Edward Landry (firstname.lastname@example.org) is a vice president with Booz Allen Hamilton in New York. He focuses on strategy and sales and marketing effectiveness for consumer packaged-goods and health-care companies.
Jaya Pandrangi (email@example.com) is a senior associate with Booz Allen Hamilton in Cleveland. Her work focuses on strategy and sales and marketing effectiveness for consumer packaged-goods companies.