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.
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.
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.
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:
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:
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
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.