Share the risks and rewards

Despite all the recent talk about the need for true partnerships between retailers and their private label suppliers, the traditional buyer-seller relationship hasn't fundamentally changed in a thousand years — it's still largely a transactional relationship. Yet retailers and suppliers that are able to transform that transactional into a true partnership stand to reap significant financial benefits, according to Wesley Bean, vice president, global supply chain for APR Energy LLC, Jacksonville, Fla.

Speaking at Store Brands' 2015 Collaboration Summit on October 12, Bean — who formerly served as vice president of own brands strategy and procurement for Winn-Dixie Stores Inc., and then led the integration of the Winn-Dixie's and Bi-Lo's private label programs after Bi-Lo Holdings LLC (now Southeastern Grocers) acquired Winn-Dixie in 2012 — noted that such partnerships require both parties to be committed to visibility, transparency, trust and more. And they also must be willing to share the risk.

That said, not every private label supplier is a candidate for partnership, he said. Retailers first need to understand their supply base and determine which of their store brand suppliers actually could become strategic partners.

"It's important to define the nature of the relationship," Bean stated.

When it comes down to it, it requires retailer own-brand teams to assess and determine which supplier relationships should remain transactional/commodity-based and which ones potentially could be based on innovation.

To identify potential strategic partners when he was leading an own-brands team, Bean said he looked for capability, efficiency, a willingness to take risks and a willingness to "expose themselves" in terms of financial transparency. And to move the partnerships forward, both sides had to be willing to realign their structure.

In execution with one strategic supplier partner, Bean's organization altered its structure so the supplier had one global point of contact instead of multiple points of contact — and asked the supplier to do the same. Also critical to creating a win-win partnership here was identifying the right data and the right metrics, Bean added.

Under the partnership, both Bean's company and the supplier company were able to achieve significant category growth. In fact, the supplier realized 450 percent year-over-year growth, he said.

"It's not easy," he stressed. "We all focus on our financial expectations, but it's very different to think about what the other party gets."