Against a backdrop of underinvestment and significant structural change within the organization, consumer products companies also have to deal with a landscape that is incredibly complex. Supply chains have to balance global and local operations, stability with flexibility, efficiency and security with responsiveness. In essence, today's supply chain must be all things to all stakeholders "” from executives looking to retain historic margins in the face of increasing competition and skyrocketing raw material costs, to shareholders looking for better returns on their investment, to omni-consumers who grow more powerful by the day, demanding what they want, when they want it, on terms that they dictate.
Consumer products companies also have to navigate a culture that is resistant to change. Supply chain executives have been taking the same approach to the same challenges for 20 years or more using essentially the same KPIs and benchmarks. What has changed is the world around them.
In the face of such challenges, consumer products companies don't need to add any more layers of complexity. Rather, they need to simplify, integrate and automate.
Cutting through the complexity starts at the beginning. Strategically, companies should review and identify their core differentiators. What makes me different from my competitors? What should I be focusing on?
With the company's focus trained on the right objectives, it's time to review processes. Where are my customers? Where do my supply chains need to be? Should I have one centralized, global supply chain or do I need local supply chains that enable product customization, with regional hubs that can take advantage of economies of scale?
For underinvested consumer products companies, part of building a supply chain of the future requires an examination of plants and distribution centers. A company needs to analyze which plants it needs, which it can retire, and where it needs to build new plants to address changing product needs consumer demographics. In terms of distribution, the company should consider reviewed opportunities to simplify how it physically distributed products.
Integrating has a lot to do with talent. Do I have the right people with the right skills and competencies in the right positions? Am I using leading practices to guide supply chain execution or am I still using practices developed 20 years ago?
Consumer products companies need to break existing practices down, analyze them against focused objectives, and then create new processes to plan, create and manufacture products for a 21st Century world. Companies should also review competency requirements against these processes and adjust resource levels accordingly.
Automating is about maximizing the power of both existing and emerging technology. It's important to remember, however, that technology is an enabler, not a panacea for all that ails the supply chain. Technology without the right processes behind it won't yield the results many consumer products companies seek. With this in mind, it's important start by reviewing the effectiveness of existing processes and exploring existing technology assets. Am I still using decades-old practices that have simply been masked by technology? Am I maximizing my current investment in ERP or planning tools?
To build a supply chain of the future, consumer products companies need to make use of existing ERP capabilities to improve planning, production, manufacturing and shipping. Where possible, they should also use existing technology to automate the new processes, creating an opportunity to redeploy valuable resources and remove unneeded complexity. Automation can also improve the efficiency and effectiveness of the supply chain to such a degree that some organizations will be able to reduce the number of locations needed to manufacture and distribute products.
The world of consumer products is increasing in its complexity. Commodity costs are rising and margins are stagnating. Investors demand better returns even as consumers demand more customization and availability of products at the lowest price possible. And global competitors are emerging around every corner, disrupting traditional market dynamics. To remain competitive, consumer products supply chains need to radically alter their supply chain operations. Quick fixes and Band-Aid solutions are no longer options. They need to fundamentally rethink its operations from the ground up "” to design a supply chain of the future.
By simplifying, integrating and automating their supply chains, consumer products companies can reach an optimized level of maturity that generates improved performance, sustainable results and long-term value for the organization.
The views expressed herein are those of the author and do not necessarily reflect the views of Ernst & Young LLP.
Source: EY LLP
Keywords: supply chain planning, supply chain optimization, supply chain complexity, supply chin management, logistics & supply chain, CPG
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