You’ve put in the hard yards negotiating with major retailers and won a contract to get your products on their shelves. Congratulations! Now it’s time to sit back and let the profits flow in, right?
Wrong. Something as a simple as a broken labelling process or wrong barcode has the power to put that contract in jeopardy.
Earlier this month, the inaugural Food & Drink Business Live Forum, which talked about the industry of the future, brought together professionals across the industry to dive into the big issues facing food and drink manufacturers today. Change was the theme of the day, and the experts imparted valuable advice, insights and inspiration on how to ride the changes facing the industry (you can read more on this in part one of our wrap-up blog).
One of the top items on the agenda was how to negotiate the retailer-manufacturer relationship. Former Kellogg Australia MD, Jean-Yves Heude, had some welcome news for manufacturers: you have more power in the retailer relationship than you realise.
Ever since Coles and Woolworths began adopting a European-style retail model five years ago, most food and drink processers and manufacturers have been forced to rely on cutting costs to achieve their targets or survive — a measure that is, frankly, unsustainable.
Adaptation is the answer
According to Jean-Yves Heude, manufacturers need to adapt their commercial strategies to the new environment. In other words, learn how to work with the new business rules, rather than against them.
One tactic we discussed was collaboration. By building collaborative and creative plans with retailers, including product innovation, category management and store execution, manufacturers can build the foundations for a strong, longer-term relationship — that works for both parties.
Beyond the win
But when it comes to the crunch, it’s about more than just winning contracts: manufacturers need to make sure they have everything in place in order to keep those contracts.
Essentially, this comes down to the process. To keep the contract you have worked so hard to win, you need to ensure seamless movement of product from your facility to the customer. And as manufacturers are all too aware, there are lots of potential bottlenecks threatening to hamper the process. Many manufacturers will put a series of checks and balances in place to ensure consistent and reliable product quality, but that’s only one aspect. There is still one critical factor that is too often ignored — the packaging.
At Matthews, we’ve been working with manufacturers for over 30 years, and now more than ever we get frantic calls saying, “I have an audit tomorrow — can you help?”
Compliant labelling isn’t something that can be whipped up on the fly. Manufacturers need to be proactive in making sure the right coding and labelling processes are in place, so they are consistently meeting the minimum requirements of their trading partners and the industry regulators.
Major retailers have extremely clear and stringent guidelines so far as coding and labelling is concerned. And even though barcodes have been in the supply chain for over 30 years, manufacturers still get it wrong. Why?
- Awareness: The manufacturer/processor is not aware of what is required, or not aware of the consequences of non-compliance.
- Out-dated technology: The current technology set-up cannot deliver what is required.
- Incorrect processes/ processes not followed: Either the process isn’t right in the first place, or someone is not doing what they are supposed to be doing.
Much of the problem can be attributed the first factor — awareness. If manufacturers can know and understand the consequences of getting coding and labelling wrong, the rest will follow.
Compliant labelling can be a game-changer
When Woolworths looked at the issues in its distribution centres in 2010, it found that 42% of issues were related to pallet labelling (or logistics unit labelling). In 13 weeks, it recorded 24,133 pallet-label-related issues. That’s 1,856 complaints a week. This was by far the biggest non-compliance problem to Woolworths.
Woolworths’ distribution centres rely heavily on good quality GTINs and carton barcodes and pallet labels. Because they have automated DCs, the GTIN barcode is the only way the system can identify your product on the conveyor, and then assign the product to the right store. An item with no barcode, a damaged barcode or a poorly printed barcode will result in a “no read”. This requires manual intervention — a costly and time-consuming exercise that may mean your item doesn’t make it to the supermarket shelves. It’s a simple as that.
That’s only one example of why compliant labelling is critical to your business success. The consequences of poor product coding and labelling can be potentially huge and far-reaching:
- time wasted for both retailer and supplier
- cost associated with rework for your business
- cost associated with manual intervention for the retailer
- availability (or not) of your product on the shelf
- jeopardising or losing your contract due to non-compliance
Don’t let the small things get in the way
Barcodes and labelling might seem insignificant, but they have the power to rock your relationship with your trading partners. Retailers put a huge focus on compliance these days, more so than ever before. By focusing on understanding the industry standard coding and labelling practices relevant to your business and getting them right, you can make sure your hard-won business is set up for the long term. You will lower end-to-end supply chain costs and your trading partners will reward you for it — usually with more business.
Matthews has a pool of up-to-date articles, brochures and case studies to help you understand the coding and labelling requirements for your specific industry. Check out our blog or contact us to discuss your unique business needs.