Guo Zhenqun: Retailer-Supplier Relationship Is Shifting from 'Trading Counterparties' to 'Joint Business Partners'

【Ebrun Original】On August 28, at the "2026 Brand Supply Chain Innovation Private Board Meeting & 'ZTO Cloud Warehouse Night' Brand Salon", Guo Zhenqun, former General Manager of Omnichannel Retail at Procter & Gamble, delivered a speech titled FMCG Brand Full-Value Chain Co-Creation Practices.

Guo noted that while competition between retailers and suppliers has always existed, its focus has shifted from profit distribution rights and channel dominance to the ability to understand consumer data and demands. Meanwhile, each side has irreplaceable strengths across product innovation, large-scale production, consumer reach, and last-mile fulfillment, forming an interdependent symbiotic relationship.

As a result, today's retailer-supplier dynamic is evolving from a traditional negotiation and transaction-based relationship to that of "joint business partners" collaborating around shared consumer groups. The core of supply chain value co-creation is not simply cutting costs for one party, but unlocking new value pools across the entire value chain through the coordination of products, packaging, inventory, warehousing, and fulfillment models.

This article is compiled from the guest's on-site speech, with minor edits made without altering the original intent.

The full speech transcript is as follows:

Good afternoon, everyone. It is a great honor to attend today's supply chain innovation conference.

I am a sales professional with many years of experience in the field, having spent half of my career on the front line of omnichannel retail, driving business innovation alongside clients.

I know exactly what retailers want, and I also understand what brands are willing and unwilling to provide, as well as what they can and cannot deliver. As a bridge between the two sides, my role is to align the strategies of brands and retailers as much as possible, identify the most valuable "gold mines" in the value chain, and turn those opportunities into tangible results.

Today, I would like to share how to uncover value creation opportunities in the supply chain within the current retailer-supplier relationship.

01

The Retailer-Supplier Relationship Is Shifting from "Trading Counterparties" to "Joint Business Partners"

First, we need to clearly recognize how the retailer-supplier relationship has evolved today. Put simply, there has always been a competitive dynamic between retailers and suppliers. For a long time, the core of this competition across the value chain centered on profit distribution rights and data ownership.

When I first started my career, large brands held significant sway in the market — I use the term "sway" in quotes here, with no negative connotation. Back then, as long as a brand ran effective advertising and captured consumer mindshare, a single supply chain system could meet the needs of all channels.

Later, the industry entered the "channel is king" era, where some retailers generated revenue through listing fees, barcode fees, and other charges, giving channels stronger bargaining power.

Today, both of those eras are behind us.

The current competition is shifting to algorithm and data capabilities. Retailers hold POS data and membership data, while brands own marketing data, social media data, DTC data, and direct consumer connection data.

Whoever can more accurately understand end consumers will gain greater initiative in cooperation and negotiation, securing better terms and resources.

Yet no matter how intense the competition, neither side can escape their foundational symbiosis. Retailers excel at connecting with consumers, handling end-user reach and fulfillment, while brands are responsible for product innovation, large-scale centralized procurement, and mass production. Without brands, retail stores would lack merchandise; without retailers, brands would face higher costs to reach consumers and complete final fulfillment.

The two parties complement each other in efficiency, share common business goals, and need to bear risks jointly. Retailers and brands must sit down together to develop category development plans from a longer-term perspective.

As a result, today's retailer-supplier relationship has gradually transformed from transactional counterparts across the negotiation table into joint business partners. Facing the same group of consumers, both sides need to jointly consider: what new value can still be created in the highly competitive value chain? How can this value be passed on to consumers, and in turn drive business growth for both parties?

Without a clear understanding of this new dynamic, any collaborative project will encounter obstacles. Only by first establishing a shared understanding of the bilateral relationship is it possible to further discuss where innovation can originate.

02

Packaging Is Not a Cost Center, but a Starting Point for Value Creation

Next, I would like to share two straightforward supply chain co-creation cases.

The first relates to disposable diapers. The diaper industry requires heavy capital investment, operates in a fiercely competitive market, and consumers are highly price-sensitive to per-unit costs. For both retailers and suppliers, this category rarely delivers ideal profit margins. Diapers also have a unique characteristic: consumers consistently switch to larger sizes as their babies grow, and the user base turns over continuously.

In this case, we found that roughly 4 out of 10 mothers churn when their babies need to move up a diaper size. The reason is not always product quality issues. As babies grow, the original size may no longer fit, leading to leaks, red marks, or skin indentations. Consumers may misattribute these issues to poor brand quality, leading them to switch to other brands. The core problem we needed to solve was: how to improve user retention in a category with rapidly changing consumer needs, and help consumers smoothly transition between sizes?

The product was sold through a leading membership warehouse club, which has three requirements for merchandise: first, high sales per square foot; second, clear value delivery to members; and third, a reasonable contribution margin. This contribution margin refers not just to product gross margin, but also deducts operating expenses such as logistics, warehousing, and home delivery services.

Ultimately, we proposed a very simple solution: add several pieces of the next larger size diaper to existing packaging, allowing consumers to test the size in advance. The price remained unchanged, while consumers received free trial products. Where did this additional cost come from? The answer was unlocking value within the supply chain.

First, we eliminated unnecessary over-packaging.

Second, we redesigned the packaging dimensions. Diaper packaging needs to balance multiple factors: price point, number of units per pack, usage cycle, product dimensions, shelf utilization, pallet stacking height, and truck load rate, among others. The cost saved from these adjustments was reallocated to deliver consumer value.

Consumers could use the larger-size trial packs included in the packaging to determine if their baby was ready to switch sizes, and the brand reduced churn during the size transition phase as a result. In addition to packaging structure, we also adjusted the communication information on the packaging.

The industry follows a "3-2-1 principle": consumers should be able to identify the brand and product type from 3 meters away; see the purchase justification when they are around 2 meters away; and be able to make a purchase decision quickly when they reach 1 meter away.

Therefore, packaging innovation is not just about reducing materials or changing dimensions — it also involves helping consumers understand product value faster, as well as why they should buy from this channel at this time.

Through joint modifications to packaging structure, dimensions, and communication visuals, we both improved supply chain efficiency and enhanced consumer experience and sales performance.

03

Integrated Warehouses and VMI Turn Inventory Space into Collaborative Space

The second case is the integrated warehouse and VMI collaboration we promoted with a leading retailer. VMI stands for Vendor-Managed Inventory. Simply put, this model involves storing a portion of a brand's merchandise in the retailer's warehouse, but the ownership of the goods remains with the brand until the retailer places a formal order.

During peak stocking periods such as Double 11, 618, and holiday seasons, many brands need to rent temporary warehouse space. At the same time, retailers' warehouses operate on a profit-and-loss basis and are under constant pressure to reduce operating costs. These complementary needs created a collaboration opportunity.

We signed a VMI cooperation agreement with the retailer, allocating a dedicated area in its warehouse to store the brand's merchandise, with corresponding minimum rental volumes and cooperation rules set in place. This model first improved replenishment speed. Previously, replenishment happened every two to three days; after adopting the integrated warehouse and VMI model, as soon as an order was generated in the system, the goods could immediately enter the retailer's fulfillment process.

At the same time, the retailer's days of inventory on hand (DOH) were reduced by approximately 5 days. The retailer also earned warehouse rental revenue, while the brand paid less than it would have cost to rent separate external warehouse space. The brand saved costs, the retailer improved warehouse utilization, and merchandise supply speed and service levels also improved simultaneously.

This case seems simple on the surface, but many challenges needed to be resolved for actual implementation.

First is data sharing. Facing different business scenarios such as omnichannel operations and instant retail, both parties needed to collaborate on demand forecasting. Even for a unified inventory pool, inventory parameters cannot be identical across different channels and must be calculated separately to ensure order fulfillment rates.

Second is warehousing standards. The original warehouse standards of the brand and the retailer may not be aligned, requiring re-alignment around requirements for temperature, humidity, pest control, and merchandise management, with both parties agreeing to adopt the higher of the two sets of standards.

Third is joint process development. Every operating procedure needed to be co-developed by both parties and strictly followed during execution.

Fourth is compliance. For large enterprises, all cooperation must be fair, transparent, and compliant with the internal regulatory requirements of both companies.

Only by fully aligning data, standards, processes, and compliance can integrated warehouses and VMI be truly implemented. Every step requires joint input from both teams, and cannot be completed by a single department alone.

04

The Hardest Part of Value Co-Creation Is Not Ideating Solutions, but Breaking Down Organizational Silos

After completing these two cases, I have four key takeaways.

First, defining the actual problem to be solved is the starting point of all innovation. On the surface, companies have many initiatives they could pursue, but there are far fewer projects truly worthy of resource investment. Both parties must clearly identify the problem and reach full consensus on the issue to be addressed.

Second, executives and department heads from both companies must be fully involved. Supply chain co-creation cannot be just a partial trial by frontline teams; the project needs to be elevated to a strategic priority. Very often, the solution itself is not complex. The real difficulty lies in breaking down silos between different departments within an enterprise, as well as challenging existing rules, processes, and performance assessment mechanisms.

Third, accept that failure is a normal part of innovation, and set success criteria in advance. Many projects will eventually be discontinued or cannot be scaled. Therefore, clear success criteria — especially strict financial metrics — should be established before the project launches. Only in this way can companies filter out projects that deliver no real value, and allocate resources to directions that can truly drive scalable value creation.

Fourth, encourage teams from both sides to be fully open and work together on the front line of business. No good idea is generated through desk research in the office. Real innovative inspiration comes from warehouses, stores, online operations, and consumer interviews. Practice yields true insight, and solutions are often hidden in frontline work.

Beyond product packaging, integrated warehouses, and VMI, there are many other directions for supply chain value co-creation.

For example, the two parties can explore vehicle sharing to improve truck load rates; extend dropshipping from e-commerce scenarios to physical retail, providing more flexible fulfillment for high-value, low-frequency products; or use easy-to-display packaging that allows merchandise to be placed directly on shelves after arriving at stores, reducing store operation time and costs.

In instant retail scenarios, unnecessary secondary packaging can also be reduced, saving packaging materials while maintaining consumer experience. Existing eco-friendly packaging technologies and patents held by enterprises can also be opened up for industry-wide use, helping the entire sector reduce costs collectively.

The ultimate outcomes of supply chain innovation should be sales growth, optimized service costs, and improved cash flow. Only when innovation creates value for consumers, retailers, and brands simultaneously can projects be sustainable in the long run.

The path of supply chain innovation is still long. The road ahead is difficult, but progress will come with consistent action. I hope everyone can overcome obstacles, stay committed to execution, and ultimately find collaborative models that deliver genuine value.

Thank you all.

This article was first published on the official Ebrun website.