Four levers for successful supply chains in FMCG

12 September 2019 Consultancy.com.au

The supply chain landscape in the fast moving consumer goods (FMCG) sector is facing major change, from disruptive technologies and shifting consumer habits to trade volatility and increasing demand for more SKU variety. Oliver North, head of Pollen Consulting Group’s Technology unit, outlines four levers which will help shape successful FMCG supply chains of the future. 

Intelligent fracture

The first is fracturing or splitting the supply chain. Traditional supply chains have a one-size-fits-all mentality. However, in order to ensure the right level of service for ever-disparate customer groups, businesses should look to develop multiple supply chains to meet varied demand. Essentially, by shifting the focus of the supply chain to be more customer-centric and tailored to meet the customer segmentation-demand volatility and needs. 

For example, high-volume low-demand volatility customer can be serviced by more traditional supply chains, where lower volume, higher demand volatility will require a higher skill base ideally situated closer to the end-customer.

Customer-demand volatility against volume is one way to segment customer groups. However, consideration of what requirements the customer demands may drive different segmentation to ensure each segment has a fit-for-purpose supply chain. Understanding customer needs, what drives cost in the supply chain and what affects the ability to meet those demands will help shape how FMCG companies should segment their supply chains.

Four areas for successful supply chains in FMCG

Technology

Embracing the power of new technology is critical to ensure agility and speed to react to changing environments. There is still a significant portion of FMCG professionals who relate technology implementation to historic ERP integration projects taking years and costing millions. This is, however, not the case. There is a host of agile technology software that has been designed as a modular compliment to existing systems, and which can tap into vast computational power and solve or optimise even the most variable and complex supply chain problems. 

Adopting technology in the supply chain first requires a business to forget about technology. The initial step must be to map the end-to-end supply chain process – from suppliers, to customers’ customers and then pain points need to be identified. Only once these areas are identified should solutions in technology be sought. These solutions should be specific and fit for the purpose of solving that problem. 

The ability to rapidly adopt new technologies and leverage their power to influence decisions made by supply chain teams will be critical to surviving in FMCG’s dynamic environment. 

Structural agility

In order to manage and rapidly adopt multiple supply chains across different customer segments, the role of the supply chain management will shift. They will be leaned upon much more to offer flexibility and rapid adoption of technology, and collaborate cross-functionally.

Firstly, the traditional functions of IT and capital project teams will need to be considered holistically. Technology adoption is not just software or machines, it should be across both. Thus, IT and capital project teams will need to consider solutions as a collective. The supply chain function and optimisation will involve multidisciplinary teams rather than single functions. Much more integrated and customer facing, forging inter-functional partnerships rather than siloed thinking. 

The supply chain manager will be more of a supply chain architect, able to wield technology, to embrace change and act nimbly to meet changing demands with a more innovative thought process.

“The supply chain function of the future is multidisciplinary and more integrated and customer facing, forging inter-functional partnerships rather than siloed thinking.”
– Oliver North, Pollen Consulting Group
 

Community

Lastly, probably the largest shift will be the ability for a business to identify partners with other businesses, using shared resources and use of third-party assets to flex and add low-cost adaptability. One example is shared warehousing. Rather than all elements of the supply chain holding a level of stock, retailers, for example, would hold the stock and suppliers would manage the level of stock in that warehouse. This would eliminate the bull-whip effect and lower the overall inventory needing to be held in the supply chain. 

Conclusion

In order to achieve a successful supply chain, FMCG businesses must:

  • Adopt emerging technology;
  • Think big, start small, fail fast;
  • Invest in innovation and collaborative thinkers to lead the supply chain of the future;
  • Consider the pressures caused by different customer segments and consider which segments would be served by differing supply chain strategies;
  • Build partnerships to leverage flexibility, including working with retailers, suppliers and competitors.

This article was previously posted in the ‘It’s not a revolution – It’s evolution white paper from Pollen Consulting Group, an Australian consulting firm specialised in the fast moving consumer goods sector.


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