In my previous columns, we’ve discussed what makes a successful partnership between co-man/co-packs and their customers. This month, I had intended to write about capacity. I never imagined by the time of this column we’d be facing such a volatile and uncertain environment. So, though I still want to discuss capacity here, let’s first recap some of today’s realities as a prelude.
The supply chain disruptions that began at the end of Q1 of 2020 have extended into and beyond some of the most critical lockdown periods that COVID thrust upon us. Moreover, the responses by individuals and even companies to recent increases, or spikes, in COVID cases, remain even more mixed, if not muted, versus the responses put in place in 2020. Maybe more recent responses are due to an improved assessment of risk. Maybe they’re due to a better understanding of the virus and the remedies or treatments involved. Personally, I believe at least some of the more limited response is because individuals and companies have simply learned much about how to cope in the more recent phases of the pandemic.
|Read related article, "The Pandemic is Shaping the Future Supply Chain"|
However, even with an overall improving personal and local backdrop, with so many linkages across the globe, the worldwide supply chain continues to mostly push and pull against itself in the areas of supply, transportation, pricing, scarcity, and many others. And, we don’t have space or time to even get started on cost inflation! I’m poorly qualified, and I won’t waste your time with facts on this topic as you can find plenty of material written about what’s going on and what to expect. Instead, I’d like to focus on how we talk about this with our CP/CM partners, especially when we are all experiencing many of the same issues as those mentioned above. For the purposes of this column, we’ll wrap this into another area of importance in a CP/CM partnership arrangement. Of course, I’m talking about capacity.
Just as with some of the other areas we’ve addressed in this space, capacity has many factors in play in CP/CM arrangements. The demand expected by a client is one of the earliest questions asked in an inquiry into capabilities and project fit. While this is often to help a CP/CM decide the value of a potential project, it’s also crucial to developing common expectations as an agreement comes together and a partnership is formed. Now, as a CP/CM provider, you may think you want all the volume someone is willing to give you. But, if there ever was a “careful what you wish for” moment, this could be it! In these volatile times, your own assessment of what you can handle is subject to certain criteria and context that is likely not entirely stable. This makes your appetite for business volume difficult to manage if you’re not careful and honest in your self-assessments.
Meanwhile, brand owners and other customers of CP/CM companies have plenty of their own issues to address when determining the size of an opportunity and how realistic they are being. This is nothing new to the current environment volatility, but it has become even more important that “size-of-prize” estimates for an opportunity are well grounded. In fact, scenario planning, “what-if” ideating, and even contingency discussions may never have been more important than they are right now.
|Read Martin's previous column, "Exclusivity Within a CP/CM, Customer Relationship"|
I say all this to emphasize one primary point: Honest, realistic, and fair thinking must be applied to new business opportunities by both partners more right now than ever before. There is a phrase that comes to mind that says, “Hold onto things of importance loosely.” If you can grasp the meaning of that phrase, the idea that the most important things need to be allowed to find their most appropriate level of place in the space of a business partnership or project engagement, then you can make room for both parties to identify and work together to manage the complexity and volatility of today’s environment.
One further note to consider: Capacity availability for manufacturing is always a topic of discussion. But, I would advise that you make sure you understand how your project affects other critical aspects of a potential partner’s business “balance” or portfolio. Knowing when a good arrangement could become a troublesome arrangement—for either of you—is a key to long-term success. For instance, I once had a CP/CM share with me that if we reached a certain size, he would have concerns about his own portfolio “balance.” However, in telling me this, he also shared that he knew others who could take on the excess, and that he would help us go there and get the product up and running! Now, I don’t know about your thinking, but that seemed like a true element of someone wanting to partner. Perhaps a partnering mentality has never been more important than right, now, hmmm?
Robby Martin is Engineering Specialist for Bush Brothers & Company.