Are Manufacturers Lagging in Innovation?

Manufacturers are becoming more diverse in their product mixes and geographic reach. But they haven't necessarily responded with the kind of initiatives that drive total integration across the supply chain, says Ben Yokell, principal for demand planning with Chainalytics.

Two big trends are evident, says Yokell: a marked change in consumer appetite, and increasing pressure on consumer markets. The rise of mobile technology has done more than boost demand, he says – it’s given way to a variety of offerings, and the expectation of more choices by the buyer.

In addition, the gradual economic recovery is forcing merchandisers to adapt new strategies to cope with growth in demand. As they fight harder for the consumer’s dollar, Yokell says, they ramp up trade-promotion spend and new-product introductions. “They don’t seem to be going back to pre-downturn behavior,” he says. “Spending is back on the rise, and it seems to have just added more fuel to the fire that’s already been lit.”

Manufacturers and retailers need to respond with better forecasting methods, even as product portfolios become more complex. Demand is becoming more fragmented, says Yokell. As companies struggle to meet the requirements of today’s consumers, inventory levels begin to creep back up, and capacity utilization slips. In the process, companies find it increasingly difficult to practice agility in supply-chain planning and responsiveness.

“It’s a different business state,” says Yokell, “and it requires a different level of investment.” Unfortunately, there’s a gap in the dialogue between portfolio management and supply chain. Many companies today lack an understanding of how much has to change with alterations and expansions of the product mix.

Planners should be able to measure demand volatility, so that they can “reset expectations around performance and the requirements of the supply chain,” Yokell says. Many supply chains remain stuck in a reactive mode. Still, he says, “we’re at the edge of being able to have a better dialogue.”

To view the video in its entirety, click here

Two big trends are evident, says Yokell: a marked change in consumer appetite, and increasing pressure on consumer markets. The rise of mobile technology has done more than boost demand, he says – it’s given way to a variety of offerings, and the expectation of more choices by the buyer.

In addition, the gradual economic recovery is forcing merchandisers to adapt new strategies to cope with growth in demand. As they fight harder for the consumer’s dollar, Yokell says, they ramp up trade-promotion spend and new-product introductions. “They don’t seem to be going back to pre-downturn behavior,” he says. “Spending is back on the rise, and it seems to have just added more fuel to the fire that’s already been lit.”

Manufacturers and retailers need to respond with better forecasting methods, even as product portfolios become more complex. Demand is becoming more fragmented, says Yokell. As companies struggle to meet the requirements of today’s consumers, inventory levels begin to creep back up, and capacity utilization slips. In the process, companies find it increasingly difficult to practice agility in supply-chain planning and responsiveness.

“It’s a different business state,” says Yokell, “and it requires a different level of investment.” Unfortunately, there’s a gap in the dialogue between portfolio management and supply chain. Many companies today lack an understanding of how much has to change with alterations and expansions of the product mix.

Planners should be able to measure demand volatility, so that they can “reset expectations around performance and the requirements of the supply chain,” Yokell says. Many supply chains remain stuck in a reactive mode. Still, he says, “we’re at the edge of being able to have a better dialogue.”

To view the video in its entirety, click here