The Promise Remains

Dec. 21, 2004
CPG value chain inches toward b2b e-commerce, but trading partners remain committed.

Few manufacturers would argue that strong value-chain relationships make for a stronger company. Trading partners working together to improve quality, increase speed to market and lower costs is an ideal worth striving for. Few also would argue that electronic technologies -- particularly Web-based technologies -- have the potential to strengthen that collaborative effort. As tools, these technologies hold much promise in the business-to-business marketplace. They also promote a fair amount of confusion. New products are introduced with relentless regularity. Security issues, costs and a host of other matters must be considered when embarking on a journey to B2B e-commerce. Even so, the move toward a more e-connected world is inexorable. How is the consumer-packaged-goods (CPG) value chain succeeding in its efforts to reap the benefits of B2B e-commerce? Two studies help answer that question. The more recently released research was conducted by Roland Berger Strategy Consultants for the Grocery Manufacturers of America (GMA), Washington, an association of food, beverage and consumer-product companies. There's much that's interesting about the study. The global consulting firm conducted more than 200 interviews with executives and managers from retailer, wholesaler, broker and manufacturing organizations to gauge the "e-readiness" of the CPG value chain. Forty-six manufacturing companies and 42 retailers participated. A report on the study's results, "B2B E-Readiness Report: Assessing Manufacturer-Retailer Capabilities" was released in December. Overall, manufacturers are more ready for B2B e-commerce than retailers. CPG manufacturers, the study says, are "dedicating significant internal resources to prepare the organization and to set up an e-commerce structure..." Retailers have committed fewer internal resources but have more operational experience, the study notes. That may explain why retailers are ahead of manufacturers in terms of actually using e-commerce applications. While 47% of retailers in the study said they would use one or more B2B applications with a manufacturing trading partner in the next six months, the majority (78%) of manufacturers indicated they were still in the planning phase of applying B2B e-commerce capabilities. Not surprisingly, both CPG manufacturers and retailers told researchers that a lack of trust between trading partners is a major barrier to B2B e-commerce. Additional research show that manufacturers' and retailers' objectives don't necessarily align all that closely when it comes to determining top B2B e-commerce priorities. Misaligned objectives among trading partners would seem to hinder the collaborative effort required for successful B2B e-commerce. Still, the report indicates, both manufacturers and retailers remain committed to B2B e-commerce. More research that lends insight into how CPG manufacturers view and use electronic technologies is IndustryWeek's fifth annual Census of Manufacturers, conducted in association with PwC Consulting. Data were collected during the first half of 2001. According to IW Census data, CPG manufacturers showed little use of Web-based technologies to connect with their trading partners at the plant level and rely more on electronic data interchange in instances where they do communicate electronically. From a corporate standpoint, CPG manufacturers' outlook on electronic technologies is harder to assess because the IW Census executive-level survey results cannot be broken out by value-chain. However, 42% of the 19 food-and-kindred-products manufacturing executives who answered the survey said strengthening trading-partner relationships was the most compelling reason to adopt or expand e-business initiatives, followed by improving customer service. How do these IW Census results for CPG manufacturers compare with responses given by all manufacturers who answered the surveys that comprise this annual effort? They're surprisingly similar. CPG manufacturers clearly are not alone in their challenge to capture the promise of electronic technologies.

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