Slug: industry focus CPG
Consumer goods organizations have spent decades applying Lean management techniques and principles to every facet of their global supply chains. But today, they find themselves squeezed tighter than ever before by customer expectations for more inexpensive, customized, and rapidly supplied goods. The effort now required to achieve further process improvements is akin to drawing blood from a stone.
To stay competitive, consumer goods companies are seeking new customers in new markets, and to cater to them, they are providing a dizzying array of local product variations, using a complex network of outsourced manufacturing partners. To compound the challenge, customers are now demanding smaller lot sizes and more frequent deliveries through third-party logistics providers (3PLs). These consumer-driven requirements have introduced an unprecedented level of complexity into the production and distribution of their products.
Indeed, the 2015 MHI Annual Industry Report indicates that the top concerns of supply chain professionals are: customer pricing pressure (51 percent), demands for faster response times (50 percent), and increased customer service expectations (49 percent).[1] Smart companies are responding to these challenges by building collaborative business networks that merge visibility, collaboration and process execution. Using cloud computing platforms powered by advanced analytics enables these information-rich networks to connect suppliers to manufacturing partners to customers by simplifying process orchestration, planning, and risk management.
In addition to increased complexity, globalization has caused inventory levels to soar while reducing margins and much-needed working capital. Companies are looking for ways to bridge internal silos while optimizing supply and improving customer satisfaction.
To build in agility and ensure that supply and demand are in better alignment, there are four supply chain challenges that today’s leading consumer goods companies must address:
- Lack of End-to-End Visibility and Collaboration
Actionable, real-time supply chain information is hard to come by in today’s highly volatile, complex, and outsourced consumer goods marketplace. Multi-tier visibility can address this challenge by making forecasts and orders visible to all parties sooner and allowing bi-directional collaboration between partners. Having data on actual shipments and receipts as they happen provides insight into stock-in-channel inventory and point of sale (POS) trends, which gives brand owners the ability to proactively manage volatile demand.
- Inability to Link Product Design, Manufacturing, and Fulfillment
Successful consumer goods companies are increasingly competing on new product innovation and customer service through supply chain segmentation. Close coordination with contract manufacturing partners during a new product launch around formulations, product specifications, and POS packaging can make or break market acceptance.
- Conflicting Performance Indicators Weaken Supply Chain Management
Business intelligence is not just fancy charts and graphs, but rather, it is actionable insight gained by integrating data across the entire value chain to understand how demand patterns form, operations respond, and the customer experiences the buying process. To make the most of this powerful insight, key players in the supply chain must be aligned in terms of what is measured, the tools they’re using, and how to interpret the information. A shared planning and execution process layer combined with the right business analytics gets everyone in sync and is the key to effective supply chain orchestration and risk management.
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Lack of Real-Time Data Leads to Poorly Coordinated Planning
Committing with confidence to customer orders requires demand planning and collaboration across multiple tiers of the supply chain to ensure that the right materials are delivered to the right locations at the right times. Nevertheless, many companies are still unable to synchronize supply and demand because they do not have access to timely, accurate data from all supply chain participants. Too often, they are forced into “dumpster diving” within online portals lacking real-time data and visibility into tasks and activities.
Collaborative Frameworks are Smarter, Faster, and More Competitive
When it comes down to it, the four challenges above can all be traced back to the same core need for improved visibility and connectivity to get everyone on the same page, extending from multiple tiers of suppliers, up through multiple customer fulfillment channels. So how do you bring all of these parties together? The answer is simple: a shared, information-based business network.
A business network can provide true multi-tier process orchestration through collaborative planning and execution that empowers network participants, including retailers, distributors, contract manufacturers (CMs), and component suppliers, to make better business decisions to serve the consumer.
Building such a framework empowers businesses to leverage the collective brainpower of their partners, including CMs, by continuously responding to changes in supply, demand, and new product launches. Once connected to the network, businesses are better equipped to handle timely, seamless transactions, and network-wide planning and response across enterprises. This close level of connectivity also makes brand owners and their CM partners Leaner and more responsive within their distributed and outsourced manufacturing environments.
Business networks are fundamentally changing the ways that consumer goods companies launch new products and use supply chain information to separate their products and services from the rest of the pack in volatile consumer goods markets.
Today, successful companies are reaching beyond their four walls of the enterprise and are integrating cloud-based business network technologies to create value chains that serve customers better while lowering costs and reducing complexity. As a result, the end of enterprise-centric planning and fulfilment isolation is foreseeable. The MHI report shows that more than 35 percent of the industry leaders surveyed are maturing into significant adoption of inventory and network optimization tools.[2] These early adopters are better positioned to keep up with customer expectations and the rapid pace of innovation needed to win market share. Establishing a marked competitive advantage will create a capability gap that will quickly become too wide for companies with more traditional supply chains to close. As forward-thinking companies leverage frameworks that provide deep, collaborative connectivity, they will make the previously invisible visible and the lean even leaner, and will begin to define the new age of consumer goods business networks.
Rich Becks is the General Manager, Industry Value Chains at E2open, delivering strategic, cloud-based solutions for brand owners managing business across global trading partner networks. He has more than 27 years of experience in materials and supply chain management, working for large multinational data storage companies. While at Seagate Technology, he implemented many of E2open's software-as-a-service solutions, helping Seagate to become known as an industry leader in supply chain practices.
[1] Deloitte and MHI, “The 2015 MHI Annual Industry Report: Supply chain innovation – Making the impossible possible,” p. 5, http://www.businesswire.com/news/home/20150325005023/en/Traditional-Supply-Chains-Undergo-Radical-Transformation-2025#.VTfPXk1JCpp.
[2] Ibid. p. 9.
