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PA OPINION

More responsive, more resilient: how smart supply chains can help consumer goods companies thrive

Consumer goods companies have been building digital technologies into their supply chains for some time. The focus for many is on discrete interventions to increase operational efficiency and reduce production costs. Investment decisions have historically taken place largely at site level and, to proceed, must have shown a clear and early return. Our research of over 100 global supply chain leaders shows that more than 50 per cent of smart supply chain initiatives in the consumer goods sector are like this – driven by individual business units or implemented on an ad-hoc and experimental basis.

But this approach has a major drawback in that it limits opportunities to increase operational agility. It often makes little contribution to the extra responsiveness consumer goods companies need to meet their customers’ changing demands for shorter lead times, customised products and greater engagement via e-commerce channels. And with the COVID-19 pandemic driving a huge surge in customers moving to online channels, effecting major high street retailers such as Boots and John Lewis, this evolution in expectations is only likely to accelerate.

To compete successfully going forward, consumer goods companies must take a more strategic approach to adopting digital supply chain capabilities, and shape a vision for an end-to-end smart supply chain that delivers against existing and future responsiveness and resilience challenges. The winners will be those that can react more rapidly than their competition to secure supply of key materials and seamlessly flex to meet changing demand.

Shaping a smart supply chain vision

The benefits of adopting a more strategic approach go far beyond the cost reductions that are currently the prime driver for the development of digital supply chain capabilities among consumer goods companies. A fully integrated smart supply chain enables greater responsiveness by providing real-time visibility of current demand, as well as insights into future demand through predictive capabilities. As a result, companies can align operations, from procurement to distribution, to meet demand more precisely and efficiently, while significantly improving their days on-hand stock position and capital asset utilisation.

An integrated smart supply chain can also build resilience – something that has been given new emphasis by the pandemic and the risks associated with complex global supply chains. Building digital capabilities across the supply chain allows companies to consolidate and integrate data – which can both flag supply issues early and make it easier to manage a more diverse ecosystem of suppliers, thereby reducing the risks from disruption. Just look at how Unilever’s digital transformation enabled it to respond in an agile way to pandemic-induced disruption, adapting to sourcing, using data-generated insight to decide when to bring back stock keeping units placed on hold, and responding to a 600% increase in demand for cleaning supplies.

Aligning tactical investments with strategic intent

Having a clear vision for the future offers other practical benefits. Any strategically-considered digital solutions implemented now will be easier to integrate across the wider organisation as the smart supply chain matures.

A vision also helps with breaking down the siloed approach that has historically worked against agility, enabling companies to transition from an environment driven by individual functions to one focused on the overall business value proposition. As a result, the case for smart supply chain investment becomes easier because the broader opportunities created across the supply chain are taken into account.

Where to start with your vision

Developing a vision for a fully-fledged smart supply chain can be daunting and not all companies are starting from the same point. We’ve identified three archetypes that can help with vision and strategy development, and reflect different ambitions and stages of maturity:

  • the performance-led archetype: companies targeting this archetype adopt digital technologies into supply chains functions with the primary aim of improving performance in key metrics that measure day-to-day operation. This is where 23 per cent of consumer goods companies are
  • the connectivity-led archetype: companies targeting this archetype drive transformation by using technology to make connections from the customer, through the enterprise and out to suppliers
  • the agility-led archetype: companies targeting this archetype put customers right at the heart of the supply chain. They embed a culture of innovation and flexibility to allow for rapid response to demand in fast-changing markets. Only 12 per cent of consumer goods companies are at this stage.

A stepping-stone or the final destination?

As you develop your smart supply chain vision and strategy, it’s worth considering each of these archetypes. Which one is right for your organisation now? And where are you heading in the future? Any one of the three can be your final destination but more often each will serve as a stepping-stone towards a business-wide, digitally enabled organisation.

As you plan your future strategy, it’ll be vital to ask:

  • do I have complete visibility of existing and planned smart supply chain activities within my business?
  • how are smart supply chain decisions taken and work planned, and is this appropriately coordinated within and across functions?
  • how can I create recognised value for existing customers through an enhanced end to end supply chain vision?
  • would a change to supply chain performance open up access to new markets and sectors?
  • how can my corporate responsibility commitments be accelerated though a smarter supply chain?

A leading FMCG organisation wanted to deliver more value to their customers and create an Internet of Things strategy that would improve and optimise their operations locally, regionally and globally. We helped shape their thinking and defined an approach that identified and delivered the right solutions and implementation partners. The organisation is now using a breadth of advanced data science and analytics to unearth previously hidden opportunities.

Planning the development of your smart supply chain as a strategic journey will provide clarity on direction. With the end point in mind, you can select and realise local solutions that can gradually be brought together in a coherent manner. Seeing the bigger picture will enable you to avoid investments and localised technology platforms that are misaligned with the overall business ambition and could constrain you in the future.

Unlock value from your supply chain

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Investing with vision to augment agility

As consumer goods companies ask how they can become more responsive to customers’ changing demands, the smart supply chain can provide many of the answers.

Making investments now in the context of a wider vision for the whole supply chain is key to developing assets that will augment, not constrain, future agility.

Contact the author

Smart Supply Chain

George Marinos

George Marinos

Ruan Jones

Ruan Jones

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