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Establishing The Centroid Of Magic Triangle - Hitting the Bull's Eye of CMO Engagement

Organizations in the Retails industry envision improving the productivity, robustness and operational efficiency of their Global distribution network. In order to do so they plan to implement standardized processes coupled with integrated infrastructure and systems across all the Contract Manufactures and Packers under a single application ecosystem. As discussed in my earlier blogs contact manufacturing in the retail sector has taken the world by storm and organizations continuously strive to raise their bar each day.

These organizations aim at becoming "An Enterprise of Tomorrow" by using specialized supplier skills in the manufacturing process to help lower packaging and manufacturing costs and increase production quality. What they also aim at is using supplier capacity to increase the overall production capacity. They envision enhancing their stature of "World Class Organization" by reaping the dividends of a successful Contract Manufacturing Organisation (CMO) relationship with its vendors.

There are many benefits that are associated with a successful CMO engagement. Some of these benefits could be:

  • Reduced Investments in capital assets
  • Shift from fixed to variable cost model
  • Buy in specialized knowledge and skills
  • Improved asset utilization
  • Greater degree of freedom to focus on core competencies
  • Spread risk and reduce costs
  • Faster time and access to market

Nevertheless, theses CMO engagements also come bundled with many a challenges, some of which could be:

  • Critical dependence on supplier/vendor
  • Increased financial commitments- Expense and Capital
  • Lack of shared visions and goals
  • Problems associated with supplier evaluation
  • Cultural difference between Own Organization and CMO

The success or failure of an organization's CMO engagement could be well assessed by measuring certain key KPI factors like:

  1. % lowering of manufacturing costs
  2. % lowering of packaging costs
  3. % improvement in process and product quality
  4. An overall % increase in overall production capacity

All said and done there as certain critical pieces of the puzzle that need to be put in place for a CMO engagement to be successful. These critical jig-saw pieces are those related with:

  • Strategic Fit
  • Cultural Fit
  • Technological Fit
  • Organizational Fit

World class organizations are learning and teaching organizations. They engage in a continuous endeavor of learning and teaching each day and that is how Best Practices evolve for the Industry to follow.

A Successful CMO engagement is the outcome of establishing a Centroid of Triangle, the angular points of which are balanced by

  1. Strategic Fulcrum (Long Term Vision)
  2. Tactical Fulcrum (Short Term Mission)
  3. Operational/Executional Fulcrum (Implementation Methodology)

Another best practice that the industry has benchmarked is the standardization of business and system processes for each contract manufacturer, a retail organization deals with. A SPOC at the retail organization is always a preferred choice to make the multi-vendor CMO engagement successful. Once the magic triangle is laid out, the fruits of a CMO engagement are there to reap.

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