Digital Transformation in the Consumer Goods Supply Chain
As a general rule, as soon as you think you’ve solved a problem in the supply chain, the circumstances go and change. It’s especially true in consumer goods, where the retail companies we serve are facing one of the biggest changes in the competitive landscape we’ve ever seen: the rise of the digital consumer.
The way people find, evaluate, and purchase the things they buy has completely changed over the past 10 years. Spurred in part by the rise of online shopping and the proliferation of new competition, consumers today have more influence than they’ve ever had before. And it hasn’t just changed retail. The effects are being felt all the way through the supply chains of the fast-moving consumer goods companies that depend on retailers to sell their goods to the market.
For the longest time, CPG companies thought they had supply chain figured out. The formula involved a large capital investment, high throughput, a focus on cost, and goods that were made based on mass forecasts. Because of the general predictability of demand for specific products, manufacturers could absorb long lead times and anticipate production runs. Online sales never really factored into the equation.
But the business has changed. Retailers are closing more stores than they’re opening, and the stores that are left are being refitted to act as mini distribution centers to meet online demand. Meanwhile, online-only competition like Amazon continues to take a bite out of the bottom line.
At the most fundamental level, this market shift may only appear to be a challenge of distribution. That’s why when so many consumer goods manufacturers brainstorm how to meet this changing demand, it quickly becomes a conversation around transportation management and logistics. However, those who believe a new TMS will give them the tools to meet an uncertain future are wrong.
Improved transportation alone can’t achieve the high service level and strong customer experience a consumer goods company needs to meet the demands of a rapidly changing market. It may improve the movement of goods from suppliers to factories, and from distribution centers to retailers. But it doesn’t solve the deeper challenges that come with heightened market volatility. Rather, it takes deeper transformation throughout the supply chain to deliver the kind of flexibility and responsiveness that will be essential in an increasingly uncertain future.
Digital transformation is the key to unlocking comprehensive network inventory management. It includes initiatives like supply chain visibility, the use of big data and analytics, and cloud technologies to sense and adapt to fluctuations in demand, and to respond accordingly when unexpected changes arise. As retailers continue to grapple with channel shifts and the rise of new online competition, digital initiatives in the consumer goods supply chain will help manufacturers assure the supply is there when they need it and that inventory doesn’t overwhelm warehouses when they don’t. Digital transformation will produce a wealth of real-time information and the ability to see across supply networks to make better business decisions. It connects the physical supply chain to the data supply chain.
A recent study by Capgemini and GT Nexus shows that three in four global retail and manufacturing executives consider digital transformation to be an important initiative. However, most are slow to adopt. Nearly half of all companies are still using traditional methods such as phone calls, faxes, and emails to conduct transactions with supply chain partners.
The technology to connect supply networks and enhance end-to-end visibility already exists. Advanced analytics systems can already show the status of goods in motion and help pinpoint inefficiencies in specific transit lanes. Software distributed across cloud networks is already helping some of the biggest names in consumer goods eliminate wasteful inventory and improve their responsiveness to change. The digital supply chain revolution is not far off. But it requires a shift in mindset that begins with an understanding that traditional supply chain collaboration solutions are ill-equipped to meet demand in today’s world of hyperconnected, demanding consumers.
But much of the industry isn’t there yet.
A recent study by Capgemini and GT Nexus shows that three in four global retail and manufacturing executives consider digital transformation to be an important initiative. However, most are slow to adopt. Nearly half of all companies are still using traditional methods such as phone calls, faxes, and emails to conduct transactions with supply chain partners.
The technology to connect supply networks and enhance end-to-end visibility already exists. Advanced analytics systems can already show the status of goods in motion and help pinpoint inefficiencies in specific transit lanes. Software distributed across cloud networks is already helping some of the biggest names in consumer goods eliminate wasteful inventory and improve their responsiveness to change. The digital supply chain revolution is not far off. But it requires a shift in mindset that begins with an understanding that traditional supply chain collaboration solutions are ill-equipped to meet demand in today’s world of hyperconnected, demanding consumers.
Matthew Gunn is manager of manufacturing industries at GT Nexus, bringing to that role a focus on market strategy and technology to deliver the best possible solutions to manufacturers across several industries. A journalist by training, Matt spent a decade writing for business and general interest publications before joining the enterprise software industry. His background is in finance and technology. He holds a degree from the Metropolitan State University of Denver.