Industry consolidation continues rapidly. As such, it would be easy to surmise that acquisition is a preferred path moving forward versus partnering. The actions of many leading companies would suggest otherwise. Partnering is increasingly recognized as a critical source of competitive advantage.
With the speed of supply chain change and disruption intensifying, a nimble partnering approach is gaining momentum. In another article, we discussed the pros and cons of asset-based pallet providers versus non-asset-based providers that deliver based on a network of business partnerships. It is clear that even as the industry consolidation trend intensifies, so does the importance of effective partnering.
“I believe that we are on the cusp of a real change in how OEMs (original equipment manufacturers) engage with their outsourcing partners,” Philip Stoten wrote recently in Forbes. “It’s no longer wise, or even safe, to throw a design over the wall to the cheapest supplier and hope for the best. A brand’s supply chain is now part of the brand itself. It is a reflection of their values, culture and goals. And if it fails, they fail.”
“…it would be easy to surmise that acquisition is a preferred path moving forward versus partnering. The actions of many leading companies would suggest otherwise.”
Well-managed partnerships can help accelerate project rollouts and the creation of new solutions. “It was always about the survival of the most agile and the quickest to adapt,” Stoten continued. In times of extreme disruption—and rest assured, we’re in those times—it’s a case of adapting or risking extinction.”
What’s the best way to grow your cola sales? One classic example of the power of partnering versus acquisition is the enduring partnership between Coca-Cola and McDonald’s versus the Pepsi acquisition of Pizza Hut, Taco Bell, and KFC. It is a case study often cited as an example of how partnering can be more successful than acquisition as a growth strategy. Benefits included avoided investment, mutual growth opportunities, product development collaboration, advertising, and sustainability initiatives.
The urgency to do more with less, and to do it better and faster, has led to a host of partnering activities. Partnering has become so central to corporate strategy formulation that companies are now creating a C-level position focused on partnerships strategy. It has been coined Chief Partners Officer or Chief Ecosystem Officer, among other similar titles.
Introducing the Chief Ecosystem Officer
In July 2022, Nicole Dezen was named Microsoft’s first Chief Partners Officer. “Her new designation as CPO demonstrates our continued investment in our partner strategy and commitment to the importance of the entire partner ecosystem to Microsoft,” one executive commented.
“As chief partner officer, Nicole will have singular accountability for the commercial partner business. She will have a tremendous opportunity to lead, innovate and grow our mutual business with partners.”
So what is the Chief Partnerships or Ecosystem Officer? Think of the network of partnerships required for a company to be nimble enough to respond to challenges, pivot, and grow in today’s complex supply chain. With that comes the responsibility of aligning and coordinating them. From a strategic perspective, managing those relationships is best done at a high organizational level.
According to one article, the Chief Ecosystem Officer “plays an integral role in aligning partnership responsibilities and objectives with the entire organization and driving company-wide results — and they can do it faster than a partnerships leader reporting to sales or marketing could.”
Traditional Outsourcing Versus Partnering
The range of transactional versus partnership relations is on a spectrum. By common consensus, a transactional arrangement would not be identified as a partnership. So, where does true partnering begin? Here are some questions that can help determine whether or not a relationship has the characteristics of a partnership
- Does my supplier approach me to understand my unique needs?
- Does my supplier proactively update me about project delays?
- Are my suppliers looking for opportunities to help you perform your job more easily?
- Does my supplier work with my technical and operations staff?
- Do my suppliers come to you with ideas to improve the relationship?
- Is my supplier flexible?
- Does my supplier accurately fill orders and meet expectations?
Partnerships in the Pallet Services Space
“Bringing fiercely independent entrepreneurial companies around the table for a common goal is still no easy accomplishment. Back in 1995, it was almost unheard of.”
First Alliance Logistics Management (FALM) is an excellent example of partnership in action. Its creation in 1995 was sparked by 20 leading North American pallet companies joining forces to invest in a nationwide pallet management solution – one that was beyond the scope of local pallet makers. That coming together resulted in the creation of FALM.
Bringing fiercely independent entrepreneurial companies around the table for a common goal is still no easy accomplishment. Back in 1995, it was almost unheard of. “It’s really about building and maintaining relationships and how transparent you are,” reflected Glenn Merritt, CEO and President of FALM. “It’s about integrity.”
That bond has been crucial to maintaining its relationship with investors and the network of 225 pallet companies it leverages to meet the needs of pallet users. This national network provides pallet buyers with a single point of contact for their North American supply network. It enables the rapid structuring of individualized pallet programs designed to maximize service and reliability.
Partnerships can be created quickly to respond to new opportunities and built for the long haul. Some partnering initiatives, such as FALM’s joint ventures, were created to serve large retailers and manage the reverse logistics of pallets and distribution residuals such as old corrugated and plastic wrap. Collaboration was essential to executing the game plan for program success.
The pallet industry consolidation trend is ongoing, but don’t underestimate the importance of partnerships. They are crucial for survival in today’s supply chain.