Industry Awakenings: Part 1

awakening3There are new awakenings in the foodservice industry. The practice of monitoring returns on invested capital is alive and well inside manufacturer organizations, but attention is turning towards where, when and how money is flowing into and across the market.

As most manufacturers confirm, revenue gains continue to be outpaced by accumulating costs. If you’re getting less mileage from your commercial resources, you’re not alone. The many tensions from a closed supply system have erupted and produced what is now an open supply system, with dynamic new channels competing for operators who have proven to be very willing to experiment with new sources of value.

In this fragmented environment, broadliners are on alert. The scale of consolidation will continue because not only do their operating models and financial results require it, but the value derived from long distance service and DSR overhead has eroded with the emergence of e-commerce and Cash & Carry, and new gateways such as GPOs and a scaled broker network.

Most manufacturers missed the early signs of this eruption as natural outcomes of a low growth, low innovation and margin-stressed industry. Even now when implications are overtaking them, their go-to-market strategies haven’t changed. For some reason, they continue inserting more marketing dollars of no value-add to operators into the supply system. The transactional practice of trying to engage operators using trade spend and price games was common (though not without pain) in a closed supply system.

But as we said, it’s now open. Wide open. Each new route to the operator runs on a different set of rules. If manufacturers don’t know what these rules are, and are not clear on their purpose, value, cost and return to their business, they are on dangerous ground….as dangerous as continuing to insert non-value-add elements to a supply system that at its core seeks to eliminate non-value-add elements in service to the operator.

And here is where we arrive at new awakenings:

  1. The need for suppliers to understand and manage the money flow and resource application in and across what is now an open supply system,
  2. Making strategy happen with business sophistication proportionate to the complexity and definitions of value this system represents.

As our series continues, we will explore these topics and where they lead: clear-eyed, transformative growth and resource allocation strategies that deliver value back to your organization and the customers you live to serve.

Blueberry is a proud member of the International Foodservice Manufacturers Association. To visit and explore IFMA’s site and this post:

Is Your Operating Model Obsolete?

old modelsSupplier CEOs are beginning to realize that value from traditional business streams is eroding at a faster rate than expected.

Some blame bad strategy or process when results come up short, when it may be more accurate to look to an increasingly obsolete operating model as the culprit.

(An obsolete operating model is usually accompanied by a nostalgic attachment to a very different place and time. Dangerous and irrelevant to today’s environment, something to stay alert to and redirect.)

What to do now begins with re-framing what’s known:

  • The customer–not the manufacturer–appraises the value of the transaction and the engagement. How do we know? Because customers are much more willing to experiment with a variety of options and new means of value creation.
  • Supplier executive teams may be too imbedded and insular to bring about anything but incremental improvements by floating new industry behaviors onto current operating models. But customers are no longer interested or willing to pay for the limited value incrementalism provides.

These truths make it very easy for customers to walk away from established business relationships.

Product innovation and strategies will disappoint without first embracing the possibility that your operating model may need an overhaul.

Systemic innovation must now be on the table. But changes to how the game is played will probably not come from inside your organization.