July 31, 2023
Is end-to-end Supply Chain Planning the next Step for the Consumer Goods Industry?
The consumer goods industry has been through a major transformation in the last few decades. The rapid growth of e-commerce has highlighted the persistent challenges in this industry from product portfolio complexity to the full inventory spectrum from stockouts and excess. All these issues directly impact customer experience. And although fast-moving consumer goods companies have been investing significantly in technology, service levels haven’t improved at the same pace.
Value chains continued becoming more global up until the COVID-19 pandemic, which pushed companies to focus on their resilience and business-continuity plans. As a matter of fact, according to a recent study by McKinsey, 93% of 60 senior supply chain executives from different industries and geographical regions believed increasing supply chain resilience is the need of the hour. For many leaders, the pandemic was also a reminder to rethink how supply chains operate and how they can be made more responsive to adversities without hampering customer experience. This accelerated a shift away from seeing the supply chain as a purely logistics function in most companies, toward an independent strategic function known as Supply Chain Management.
Of course, the pandemic wasn’t only felt in board rooms. It also caused drastic shifts in purchasing behavior. The lockdowns and closures of brick-and-mortar stores increased online shopping, and stimulus checks and changes in behavior lead to 50.5% growth in online sales from 2019-2021. The challenge of servicing this demand highlighted the need to have more agile and transparent end-to-end planning for businesses, especially sectors such as retail, pharmaceuticals and consumer-packaged goods.
By looking at the results of the below McKinsey survey, you can see some of the vulnerabilities supply chains in the consumer-goods industry have recently been exposed to:
These factors only further emphasize the fact that a major digital transformation is required, as many of the topics are related to data availability, quality, and analysis.
Although organizations have invested in IT transformations to have a better understanding of the vast amounts of data that they possess, many have been unsuccessful at drawing actionable insights from the data or increasing the planning accuracy or agility. As a result, they have lost out on taking advantage of valuable business insights to provide better or more reliable customer experience.
Therefore, it can be said that a lot more will be expected from managers of global supply chains and delivery that requires reimagining supply chain operations and company processes. One answer to these problems is “end-to-end planning.”
End-to-end planning, as the name suggests, includes the entire supply chain process. It begins with product design, followed by procurement of raw materials, scheduling, production and finally, delivery of the final product to the end customer. It may also include the after-sales service depending on the nature of the business. For many companies, these functions operate in silos, only focusing on their processes, ignorant of the other functions and their processes. But with advanced technology and more sophisticated business operations, dynamic end-to-end planning encompasses all business functions working together in harmony.
Specifically, achieving end-to-end planning requires working on the following key areas:
Cross-functional integration can be defined as an ongoing process where different areas of supply chains, such as demand planning, production and scheduling, work in cohesion and communicate throughout in order to maximize results and produce better value chain decisions. To achieve cross-functional integration, organizations must define their problem areas and design a solution in collaboration with the different functions. Oftentimes they are working in separate systems and using different data structures and formats, which prohibits making decisions from a shared viewpoint. To solve this issue, information sharing and visibility among functional decision-makers needs to be set as the new norm.
For example, a leading provider of construction products with fifty manufacturing sites worldwide was facing difficulties and high costs to keep up its excellent delivery standards in times of market fluctuations and global disruptions in supply chains. By visualizing purchase orders and volume forecast by route through Logward dashboards, the customer was able to choose cost- and time-efficient routes while planning transport. Additionally, through the platform the company can provide its customers with live ETA updates. This operational model allows the regional office to monitor and control activity and order fulfillment in several countries. Read more.
There has recently been a shift to a ‘demand-driven paradigm’ which means that consumers order more frequently and expect faster delivery with access to real-time data such as tracking their order deliveries. The legacy processes and systems cannot compete with these high levels of demand. Automation of data-related processes not only helps increase the efficiency of the supply chain but also helps the business scale.
For example, data entry is a very time-consuming task and sometimes can be the root cause of bottlenecks given that the purchase of a single item might require several distinct documents, from invoices to purchase and sales orders or shipping notes. Automating document generation and recording has the potential to remove several manual processes.
With Logward’s Invoice Reader functionality users extract information from digital or scanned documents in a short span of time. This saves time which can then be utilized on more important business decisions.
Full supply chain visibility
Access to real-time data and prior notice of potential delays or deviations along the supply chain help organizations get a clear view of available inventory, mitigate customer service risk, and build countermeasures. When such data is available to multiple stakeholders within an organization, problem solving can begin.
Building an end-to-end planning transformation is a complex process. Organizations need to take a moment and re-think how they want their business to grow and start identifying their strategic business priorities. To have true end-to-end planning, they need to focus on all the key areas mentioned above across the different functions and the organization. If you are a consumer goods company’s CEO, then end-to-end supply chain planning needs to be at the top of your agenda in 2023 as it will take you far ahead of your competitors and benefit your bottom line. However, the challenge doesn’t stop in 2023. Leaders should think of supply chain digitization as a long-term transformation. There are quick wins to be had, but the real impact requires investment of not just technology and money, but also time and effort.
Logward is a Hamburg & Bangalore based logistics technology company.
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