Enabling a Future-Proof Supply Chain

A shifting geopolitical climate, accelerating digital transformation, more frequent and intensive weather events — all of these forces and more were prompting consumer goods manufacturers to strengthen their supply chain capabilities even before the pandemic dramatically shifted consumer behaviors and strained sources of supply. Achieving that flexibility and resilience is proving a tall order, thanks to the current state of many CG supply chains. Many now include supplier bases that extend across the globe, increased use of outsourced production, reliance on transportation that is now experiencing capacity constraints, and an expanding web of distribution channels, including direct to consumer. That complexity makes it tough to even document a CG company’s supply chain ecosystem, let alone change it. But it is not impossible. Advances in the capabilities and reach of enabling technology provide a path toward not just getting visibility into the CG ecosystem, but achieving the strong and flexible infrastructure required to respond more efficiently and nimbly to change. Read on and discover how CGs can strengthen their supply chain foundation in an era of constant transformation. According to CGT’s 2020 Supply Chain Report, 62% of respondents were looking to improve their ability to respond to fluctuations in demand, and at least one-quarter planned to continue these efforts in 2021. To get there, they need to take these essential steps: #1. Unify and Normalize Your Data The number of trading partners maintained by the average consumer goods company has mushroomed as they continue to add new suppliers, channels, and supply chain service providers to keep up with trends. Each brings its own systems, data formats, and terminology to the effort of exchanging key data such as inventory levels and status. Many CGs struggle to get their arms around this disparate third-party data, as well as break down data silos within their own organizations. Getting all that data into one place is mission critical to creating a responsive and future-proof supply chain. Standardized, unified inventory data, for example, enables a CG company to gain visibility into where materials and finished products are located across their ecosystem — at a production partner, store, warehouse, distribution center; on a truck, train, or ship; or in transit or at a port. This is key not just for the brand, but for its trading partners performing tasks such as vendor-managed inventory, vendor-managed replenishment, or direct-to-consumer fulfillment, so they can make decisions about how to optimize inventory moves to meet demand while optimizing costs. That need became particularly clear during the unprecedented demand shifts of the pandemic. The sudden shift began straining the supply chain at Rich Products, a family-owned food manufacturer in Buffalo, NY, that sells to restaurants, bakeries, and foodservice companies around the world. Among the first steps the manufacturer took was to deploy a cloud-based planning platform to unify its wide variety of demand and supply data so it could begin creating a more agile supply chain. Unifying and cleansing data requires establishing a central repository, and applying solutions to fix or remove incorrect, corrupted, incorrectly formatted, duplicate, or incomplete data within a dataset. #2. Define and Communicate With Your Ecosystem By some estimates, as many as 80% of business processes at many major CGs are outsourced to other companies including materials and goods suppliers, global trading partners, transportation carriers, and distributors, retailers, and dealers. As more processes expand outside the four walls of the company, data, application usage and collaboration become even more challenging — and important. Rapid change and supply chain disruptions accentuate this need. An appliance manufacturer building washing machines during a chip shortage, for example, needs visibility and communication with its supplier base on where and when units will become available. This is essential not only to its own production planning and forecasting, but to keep all of its sales channels informed, so they can manage consumer expectations and enrich the CX. PepsiCo is accelerating its ability to communicate and collaborate around demand patterns and consumer insights through its Demand Accelerator (DX) initiative, which applies data and analytics to identify the company’s most valuable consumers. The company will use these insights not only to inform their own personalized marketing efforts, but also share them with retail customers to enhance their collaboration on strategies to best meet each retail brand’s specific consumer expectations. #3. Acquire a Network/SCM Platform Because of the technical hurdles, until recently many CG companies integrated with only those 20% or so of their trading partners responsible for 80% of their business. Now, thanks to the emergence of more sophisticated supply chain network platforms and better ways of integrating systems including Application Programming Interfaces (APIs), they can now expand that to a much larger portion of their ecosystems. A well-designed network provides a platform for partners to connect, communicate, and collaborate in near real-time, enabling much-needed visibility into orders, inventory positions, forecasts, and more across the ecosystem. It also provides applications and automated workflows involving multiple business functions, so CG companies can take a more integrated, holistic approach to supply chain planning, execution, and exception management. A CG company with multiple distribution channels, such as specialty distributors, retailers, dealer network, and a direct-to-consumer fulfillment partner, can use a supply chain platform to easily take in POS/transaction data from disparate systems, along with any unstructured data, standardize it, and use it to drive far more accurate demand forecasts and make informed decisions about when to take ownership of inventory. They can then seamlessly share that with their suppliers, so their forecasts and production schedules become more accurate in turn. When ice cream maker High Road Craft Brands faced a logistics logjam as distributors rushed to meet pantry-loading demand in Spring 2020, for example, the company knew it needed a better way to exchange data with its partners so it could see and track its inventory levels. The company deployed a platform to get all of its data in one place, gain visibility into inventory locations, and communicate with its partners. #4. Leverage Advanced Analytics Features As consumers flocked to stock up on goods such as toilet paper and home office supplies in the early days of the pandemic, CG companies found themselves without any historical data or algorithms to rely on to respond to the surging demand. At the same time, many also decided that the moves they were making to accommodate the surges would introduce anomalies into their data, falsely influencing future forecasts. Some were advised by their software developers to turn off the artificial intelligence/machine learning functionality of their forecasting systems to avoid introducing this data. But those that left AI on have now created a blueprint for future disruptions and surges, which analysts say are inevitable. A well-designed platform that uses AI and machine learning can help CG companies through a crisis by optimizing steps such as ordering components, planning production, and moving inventory to optimal locations. It also recognizes the patterns around exceptional events and can recommend actions based on those learnings during future disruptions, without impacting normal forecasts. Early results from Levi’s first-wave test of AI-driven demand forecasting improved the accuracy of those forecasts, prompting the apparel brand to expand its use. “Scaling it should enable more precise inventory investment, lead to less markdowns and clearance, prevent waste, and enhance sustainability, all of which will improve our margins,” said Chip Bergh, Levi’s president and CEO. “This will be powerful in combination with the ongoing work AI has been contributing to pricing and promotion.” Leveraging the advanced features being added to supply chain platforms is important not only to offload routine tasks while human talent focuses on more complex problems, but to help CG companies progress in their competency of using these tools. Many analysts call technologies such as AI, machine learning, and blockchain essential for the future of supply chains. Setting the Stage for Future Disruption The inevitability of change and the importance of digital transformation are consistent themes among consumer goods leaders these days, and for good reason. Smart executives recognize that ensuing a strong technical foundation is essential to drive the analytics, collaboration, flexibility, and resilience their companies will need to thrive. Clean data, effective communication, a strong supply chain management network and access to advanced features are the foundation of next-gen CG businesses.

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