WHAT HAPPENS WHEN IT WORKS?
Byline: Don Kaplan
NEW YORK — Sometimes a strategic alliance is right on the money.
As a direct result of a lucrative agreement between Sara Lee Intimates and Wal-Mart, the manufacturer has grown its eight-year relationship with the retailer from an initial $134 million account to a $1 billion partnership.
Despite its execution through a series of simple initiatives, this strategic alliance has evolved into a perfect example of how a retailer and manufacturer can develop an extremely profitable relationship by working together towards the same end.
“A strategic alliance can work if both sides have shared goals, and there’s a commitment at the top that is then sold to both organizations,” said Lee Chaden, chief executive officer of Sara Lee Intimates, a division of Sara Lee Corp., and one of the engineers behind the partnership.
“We’ve tried to replicate that with other major accounts with varying degrees of success,” the executive said. “When I look at where it’s worked, or where it’s not worked, my conclusion is that the most significant factor that will determine the success or failure of a strategic alliance is that there must be an honest-to-god commitment from their retailer’s top management that this alliance is going to exist. Wal-Mart got it.”
In this case, the alliance was initiated at both Wal-Mart and Sara Lee through several teams made up of key players at each organization. In order to facilitate clear communication on both the shipping and receiving ends, for every team a mirror image counterpart was created at the partner company.”
All the teams meet regularly with their counterparts to facilitate a smooth operation within the partnership.
“Sara Lee has a team that is dedicated to Wal-Mart,” Chaden said. “The team basically has a senior person heading it up who is responsible for the Wal-Mart apparel business. We have front-end categories managers and apparel category managers. Basically for each of the businesses we’re in, we have a category manager.”
Chaden noted that besides the apparel people the team is also comprised of executives who are singularly responsible for logistics.
“We have MIS people as well as a distribution person on the team who is dedicated to only dealing with the Wal-Mart team,” he said.
Once the teams were in place, three levels of interaction were established.
“The first is the day-to-day, which is the normal buying and selling that we deal with in the normal course of business,” Chaden explained. “These decisions are made in an environment of pre-established rules that show that we’re committed to working and growing with [our partner] in ways that we’ve already agreed to.”
The second level of interaction involves quarterly team meetings.
“This is sort of the divisional merchandise manager level,” Chaden said. “The logistics people and our sales people get together to review market share ideas and the status of various projects. We ask questions like ‘how can we take costs out of our distribution process? How can we take costs out of our transactions and how can we share those costs?’ “
The executive noted that the teams also periodically visit stores together in order to get a good idea on the merchandising aspect of the product.
The third level of interaction takes place annually at what Chaden calls a Vision Meeting.
“We get the top management of both companies to attend,” he said. “It’s a high level meeting but it includes all the other people involved in the [strategic alliance].”
According to Chaden, the focus of the meeting is to examine the partnership’s current status and look at where it’s going in one to three years.
“We also establish market share goals and talk about what major initiatives are going to get us there,” he added.
Despite the apparent success of the partnership, Chaden admits this type of alliance is difficult to maintain and even more difficult to duplicate.
“It’s still very hard to do on this kind of scale,” he said.