The food & beverage industry has fragmented. Instead of buying and selling products & brands, the business now focuses on buying the lowest cost of goods, and selling assets through mergers and acquisitions. With cost accounting and asset management controlling operations for most distributors ($1 million +), supply chain management offers the challenge of accountability for manufacturers and brokers.

Ultimate accountability for everything from inventory control, logistics, procurement and deductions to new product development, information technologies, private label, and brand building is now the most important aspect of the foodservice industry. Manufacturers and brokers must re-evaluate their corporate goals, capabilities, organizational strategies, competition, and leveragable resources to attain financial security.

Large manufacturers too often grow distributor private label programs at the expense of their own brands. Distributors often use smaller private label packers to compete against brand manufacturers at the expense of market share, innovative product lines and profitable consumer relationships for their own brands.

Short-term survival tactics cost business
Distributors, manufacturers and brokers no longer create profitable relationships through an integrated supply chain. Instead, distributors are focused on lowering cost of goods, encouraging rebate programs, and leveraging broker services. They have created an operating environment that controls both the manufacturer and broker.

Unfortunately, partnering with distributors doesn't guarantee manufacturers and brokers a profitable ROI. The fact that the distributor community continues to leverage the collective strength of manufacturers and brokers through private label participation and less brand support is a dangerous sign that cost and price, rather than value-added products or services, impact decision-making. If this continues, here's what you can expect:

• The lowest cost manufacturer or most powerful brand will prevail.
• Foodservice distributors will continue to be more operations than market-driven.
• Small & mid-size branded companies will not be able to effectively compete.
• Profitability in foodservice will remain questionable.

Manufacturers & brokers must integrate and manage the supply chain.
Manufacturers and their brokers must define their value chains-that go-to-market approach that defines how and why companies' products/brands succeed, and how they can facilitate profitable customer relationships. The value-chain should indicate the supply chain profile that best represents the goals for companies' products and brands. In addition, the value-chain should offer an added-value resource to targeted distributors to influence the development of a collaborative, profitable supply chain.

The value-chain and supply-chain are interdependent support functions.
Integrated, these two chains promote collaborative planning among distributors, manufacturers and brokers. Separately, they create an autonomous environment that creates factions, and breeds risks.

Manufacturers and brokers must assess their resource-sharing capabilities and targeted distributor profile to develop truly collaborative partnerships. A distributor is only as effective as the resources he works with. It's up to the manufacturers and brokers to integrate resources, and provide full-service supply chain solutions for their products and brands to stimulate real category management and distributor growth. Working together they can create a stronger, more stable industry with less fragmentation.

The process: assess measurable, attainable, calculated risk through a joint business plan. The result: a supply chain that breeds profitability.
Everyone loses when there's no accountability, no ROI performance measurement. A manufacturer must provide profitable business development solutions fast, free, now… or his competition will. For a manufacturer and his brokers, who they partner with, how successfully they integrate their value-chain with their distributor's supply-chain will ultimately determine success or failure.

Glenn Llopis, President of Power Insights, specializes in business development strategies.