Formerly adversarial relationships between retailers and their suppliers are giving way to cooperative partnerships in which both try to improve merchandise and information flow in the distribution channel system. By cooperating, retailers and suppliers can speed up the replenishment of inventories, improve customer service, reduce the need for markdowns, and cut the cost of bringing goods to the customer. The authors outline the key features of channel partnerships and discuss the reasons for their rapid formation during the 1990s. They describe the changes needed in traditional merchandising and distribution systems to gain the benefits of a partnership and the requirements for a successful channel partnership.
1. Index Alliance, “Channel Partnerships: An Investigation” (Cambridge, Massachusetts: CSC Index, Inc., 1991), pp. 28–31.
3. R. Johnston and P.R. Lawrence, “Beyond Vertical Integration: The Rise of the Value-Adding Partnership,” Harvard Business Review, July–August 1988, pp. 94–101.
4. J.H. Hammond, “Quick Response in Retail/Manufacturing Channels,” in S.P. Bradley, J.A. Hausman, and R.L. Nolan, Globalization, Technology, and Competition (Boston: Harvard Business School Press, 1993), pp. 185–214.
5. R. Bravmen, “Quick Response — An Introduction,” in Quick Response 93 Proceedings (Pittsburgh, Pennsylvania: Automatic Identification Manufacturers, Inc., 1993), pp. 1–8.
6. S.A. Greyser and J. Teopaco, “Crafted With Pride in the U.S.A. Council” (Boston: Harvard Business School, Case No. 9-587-110, 1987).
7. J.D. Blackburn, “The Quick Response Movement in the Apparel Industry: A Case Study in Time-Compressing Supply Chains,” chapter 11 in J.D. Blackburn, ed., Time-Based Competition (Homewood, Illinois: Richard D. Irwin, 1991).
8. Kurt Salmon Associates, “Efficient Consumer Response: Enhancing Consumer Value in the Grocery Industry” (Washington, D.C.: Food Marketing Institute, 1993).
9. G. Whalen, “Crisis vs. Opportunity,” in Quick Response 91 Proceedings (Pittsburgh, Pennsylvania: Automatic Identification Manufacturers, Inc., 1991), pp. 100–106.
10. Kurt Salmon Associates (1993), p. 1.
11. For a detailed description of one manufacturer’s system, see:
R.D. Buzzell, “Vanity Fair Mills: Market Response System” (Boston: Harvard Business School, Case No. N9-593-111, 1993).
12. The probability of being in stock at the time the next order arrives (the service level) can be set at any desired level below 100 percent. The 95 percent in-stock service level has been adopted in many quick response partnerships.
13. See Hammond (1993).
For an example, see:
J. Hammond, “Dore’ Dore’ ” (Boston: Harvard Business School, Case Number 9-692-028, 1993).
14. For a summary of the early tests, see J. Hammond, “Quick Response in the Apparel Industry” (Boston: Harvard Business School, Case No. 9-690-038, 1990).
15. Kurt Salmon Associates (1993).
16. R.D. Buzzell, J.A. Quelch, and W.J. Salmon, “The Costly Bargain of Trade Promotion,” Harvard Business Review, March–April 1990, pp. 141–149.
17. Index Alliance, “Management-by-Fact: Transforming Decision-Making” (Cambridge, Massachusetts: CSC Index, 1992), pp. 14–17.
18. Kurt Salmon Associates (1993).
19. D.A. Cole, P.H. Kowalczyk, and P.G. Brown, “Supplier to Retailer: Streamlining the Inventory Pipeline” (New York: Presentation to the National Retail Federation Conference, 14 January 1992).
This research was supported by the Division of Research, Harvard Business School. The authors are grateful for the assistance of executives in several retail and supplier firms and consultants at Kurt Salmon Associates and CSC Index.