I recently heard a presentation at the AME Lean Conference that was given by representatives from Hershey Foods and K-Mart (part of Sears Holdings) about customer-supplier collaboration. A K-Mart General Manager and a Hershey Foods sales executive discussed how the two companies worked together on special in-store programs that delivered very strong financial results for both companies. Hershey’s developed special programs, packaging and in-store displays especially for K-Mart, no simple matter for a chain with 1368 stores. At Hershey, the program involved category managers, packaging, logistics, and manufacturing to implement. An example of one of these programs was the Heroes at Home Kisses, which raised money for military families. There are multiple challenges to implementing such a program, such as, for example, shipping constraints, inventory, financial issues, display space in stores, and the overall challenge of new product development and sales. Both companies had to put significant resources behind the programs to ensure success. Hershey needed to invest in dedicated resources, advertising support, specific promotions, customer events, sampling. Sears Holdings had to provide resource support, merchandising, television advertising and invest in new product launches and marketing initiatives.
The programs paid off, with sales at Hershey attributable to these programs rising 7% in the first year of the program and continuing to increase yearly thereafter. Hershey Kisses alone increasing by over 48% from one of these programs. Both companies felt that these collaborative programs contributed to strong and sustainable growth.
Implementing such programs has paid off for Hershey Foods and Sears Holdings. But this type of collaboration is the exception rather than the rule. It seems resource-intense and very risky. How do a manufacturer and a retailer really pull off such a successful collaboration? The secret was trust. It was all about developing a good customer-supplier relationship, not just between a GM and a Sales Manager, which is where it initially began, but among multiple functions in each company working together and across company boundaries. Building upon the trust and the relationships, success bred success. Both teams became energized and mobilized and made the collaboration work.
I asked whether either company has more than one such relationship with a customer or supplier. You can probably guess the answer.
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