The Consumer Goods Supply Chain Trifecta
Consumer product companies often strive to compete or differentiate on being really good, cost competitive or very fast. Historically, customers have paid a premium for quality or fast delivery. On the flip side, competing on low-cost was often affiliated with sacrifice in quality or speed of delivery.
But consumer goods companies find themselves facing a dilemma. A major challenge is posed by today’s consumers, who are empowered to dictate their wants and needs, leaving consumer goods companies and retailers scrambling. In most cases, customers are not ready to fully sacrifice any of these three dimensions, creating a quandary for those managing the supply chain.
Customer Centricity vs. Profitability
Manufacturers must meet customers’ expectations to be successful. But they can’t do it at the expense of profit margins and quality standards. It’s a balancing act to find a strategy that settles somewhere between increasing top line revenue through market growth and maintaining reasonable levels of inventory and profitability. Manufacturers are constantly trying to find the perfect mix of good enough, fast enough, and cheap enough to reduce costs and increase service at the same time (See Figure 1). And it’s not enough to find that quality/time/price sweet spot once, they have to create the optimal blend for each individual market served. But finding that winning formula when a great deal of your supply chain is in the dark can prove a costly, difficult endeavor without the right technology.
Turning on the Lights in the Supply Chain
Visibility into complex supply chains can help raise customer service levels dramatically. Some cloud technologies provide real-time data into exactly where inventory is at a given moment, creating a more agile environment where manufacturers don’t have to play guessing games on what they can realistically deliver to customers.
Scrambling to meet holiday demand or dynamic allocation and happy customers?
Let’s consider a typical CPG company for example. Here, product shelf lives are short, customers are fickle, and SKUs are proliferating. Blink and companies miss the entire product lifecycle of a toothpaste stocking-stuffer or a surprising new flavor of yogurt or Superbowl-themed potato chips. Inventory buffering and hedging means companies end up with a lot of inventory that people don’t want. In fact, many of these goods won’t even make it to the retailer. There’s no forecasting crystal ball or solution here–the supply chain must dynamically pull information in from the outside and be flexible enough to pivot to meet those demand signals. It may seem counterintuitive, but being better able to swiftly respond to demand actually results in lower inventory and not stockpiling.
Case Study: Eliminate Risk of Delays and Theft
A leading food provider ships a significant amount of fresh fruit from Mexico. It has short time windows to deliver goods to preserve freshness. The company was being impacted by two major issues that posed direct risk to its cost, speed and quality.
The CPG company leveraged technology to come up with two solutions that brought greater visibility to the supply chain.
The result: The company cut down lost product, ensured fresh quality goods and reduced kidnappings.
Balancing the Trifecta
These scenarios are common and they’re addressable with visibility technology. Supply chain visibility provides the agility required to adjust to unexpected circumstances and quickly capitalize on limited-time opportunities. CPG companies win—happier customers without increased operating costs. And the customer wins on the trifecta: quality, speed, and value.
ABOUT THE AUTHOR
Amanda Hinton is Director of Industry Marketing at GT Nexus, a leading provider of cloud supply chain solutions. She has more than 10 years of experience working with operations, technology and supply chain to drive innovative business models and strategies.
But consumer goods companies find themselves facing a dilemma. A major challenge is posed by today’s consumers, who are empowered to dictate their wants and needs, leaving consumer goods companies and retailers scrambling. In most cases, customers are not ready to fully sacrifice any of these three dimensions, creating a quandary for those managing the supply chain.
Customer Centricity vs. Profitability
Manufacturers must meet customers’ expectations to be successful. But they can’t do it at the expense of profit margins and quality standards. It’s a balancing act to find a strategy that settles somewhere between increasing top line revenue through market growth and maintaining reasonable levels of inventory and profitability. Manufacturers are constantly trying to find the perfect mix of good enough, fast enough, and cheap enough to reduce costs and increase service at the same time (See Figure 1). And it’s not enough to find that quality/time/price sweet spot once, they have to create the optimal blend for each individual market served. But finding that winning formula when a great deal of your supply chain is in the dark can prove a costly, difficult endeavor without the right technology.
Turning on the Lights in the Supply Chain
Visibility into complex supply chains can help raise customer service levels dramatically. Some cloud technologies provide real-time data into exactly where inventory is at a given moment, creating a more agile environment where manufacturers don’t have to play guessing games on what they can realistically deliver to customers.
Scrambling to meet holiday demand or dynamic allocation and happy customers?
Let’s consider a typical CPG company for example. Here, product shelf lives are short, customers are fickle, and SKUs are proliferating. Blink and companies miss the entire product lifecycle of a toothpaste stocking-stuffer or a surprising new flavor of yogurt or Superbowl-themed potato chips. Inventory buffering and hedging means companies end up with a lot of inventory that people don’t want. In fact, many of these goods won’t even make it to the retailer. There’s no forecasting crystal ball or solution here–the supply chain must dynamically pull information in from the outside and be flexible enough to pivot to meet those demand signals. It may seem counterintuitive, but being better able to swiftly respond to demand actually results in lower inventory and not stockpiling.
Case Study: Eliminate Risk of Delays and Theft
A leading food provider ships a significant amount of fresh fruit from Mexico. It has short time windows to deliver goods to preserve freshness. The company was being impacted by two major issues that posed direct risk to its cost, speed and quality.
- Delayed deliveries: When it looked closer into milestone events the company found that all delays were occurring at the U.S. border when trucks went through customs. The delays were having a direct impact on the freshness of goods.
- Missing trucks and drivers: A high percentage of its drivers in Mexico were being kidnapped. The stolen trucks were then being taken across the border.
The CPG company leveraged technology to come up with two solutions that brought greater visibility to the supply chain.
- After identifying that delays were occurring at customs, the company automated the documentation process through a cloud-based supply chain solution. It could feed data directly into customs to get it signed off quickly and avoid delay.
- The company invested in geo-location devices to track each truck. Now, if a truck stops for 5 minutes or goes off route by a certain number of yards, the company is notified immediately. They contact the customs border and tell them to stop and search the lost truck.
The result: The company cut down lost product, ensured fresh quality goods and reduced kidnappings.
Balancing the Trifecta
These scenarios are common and they’re addressable with visibility technology. Supply chain visibility provides the agility required to adjust to unexpected circumstances and quickly capitalize on limited-time opportunities. CPG companies win—happier customers without increased operating costs. And the customer wins on the trifecta: quality, speed, and value.
ABOUT THE AUTHOR
Amanda Hinton is Director of Industry Marketing at GT Nexus, a leading provider of cloud supply chain solutions. She has more than 10 years of experience working with operations, technology and supply chain to drive innovative business models and strategies.