CPG Supply Chains are adapting to disruption, new research finds

0Online shopping, new digital technologies, and increasing channel fragmentation are intensifying the pressures on US consumer packaged goods (CPG) supply chains.

There are clear steps CPG companies must take in order to prepare, according to a new report authored by The Boston Consulting Group (BCG) and commissioned by the Grocery Manufacturers Association (GMA).

The report, ‘How CPG Supply Chains Are Preparing for Seismic Change’, highlights the top trends affecting CPG supply chains and the effect on CPG companies’ performance.

Among the issues addressed in the report: e-commerce sales growth, service-level performance, channel proliferation, network design, and cash management trends.

The report is based on the 2017 Supply Chain Benchmarking Study, a study of the US units of more than 30 leading CPG companies conducted jointly by BCG and GMA.

“It’s been a turbulent couple of years for the grocery industry, with major disruption and dislocation in the retail landscape,” commented Daniel Triot, senior director of the Trading Partner Alliance of GMA and the Food Marketing Institute.

“Despite the important performance gains in the supply chain in the past two years, CPG companies cannot be complacent. This report aims to provide guidance for CPG companies looking to harness new digital technologies and trends to support continued growth.”

Over the next two years, half the growth in North American grocery sales will come from e-commerce. But only 6% of CPG companies have a dedicated e-commerce supply chain team, and only 3% are able to fully track sales by channel.

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Supply Chain News: Retailers Rethinking Inventory Strategies

Are we starting to see new thinking in retail relative to inventory levels?

The reality is that somewhat under the radar, retail inventories have been rising. The inventory-to-sales (ITS) ratio measures the amount of inventory held as a percentage of one month’s worth of sales. As can be seen in the chart below, while the retail ITS is highly seasonal, the trend since 2010 is definitely up. Now, some stores are once again trying to slay the inventory beast.

For example, Tom Shortt, Home Depot’s senior vice president of supply chain told the Wall Street Journal his new message to the stores is “Get comfortable with days of inventory, not weeks.” The retailer is targeting sales growth of nearly 15% by 2018, but wants to keep inventory levels flat or slightly down – quite an accomplishment versus how retail has historically managed sales growth and inventories.

It is a shift happening across the retail sector, as companies try to figure out ways to profitably serve the growing needs of on-line shoppers while making their networks of brick and mortar outlets generate more cash.

“Chains must predict whether demand will come from the internet or a store visit, and whether they’ll ship online orders from a distribution center or a store,” the Wall Street Journal noted. “Every move of inventory is an added cost that eats away at already thin margins.”

As we reported in the Retail Vendor Performance Bulletin recently, Target stores announced earlier this year it was replacing its existing forecasting and replenishment software with in-house developed applications to manage the complexity of inventory deployment and fulfillment across its omnichannel network.

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Is Flowcasting the Supply Chain Only for the Few?

Flowcasting has often been referred to as ‘the Holy Grail’ of demand driven supply chain planning (and rightly so).

Driving the entire supply chain across multiple enterprises from sales at the store shelf right back to the factory.

So is Flowcasting a retail solution or a manufacturing solution? Many analysts, consultants and solution providers have been positioning Flowcasting as a solution for manufacturers.

They’re wrong.

While it’s true that some manufacturers have achieved success in using data from retailers to help improve and stabilize their production schedule, the simple fact is that manufacturers can’t achieve huge benefits from Flowcasting until they are planning a critical mass of retail stores and DCs where their products are sold and distributed.

For a large consumer packaged goods manufacturer, this means collecting data and planning demand and supply across tens of thousands of stores across multiple retail organizations, all of which have their own ways of managing their internal processes.

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How to Use Big Data to Enhance Employee Performance

Big Data has been one of the most significant and influential aspects of the Information Age as it relates to the enterprise world. Essentially, Big Data is the massive collection, indexing, mining, and implementation of information that emanates from just about any activity that can be monitored and managed electronically. Some of the uses of Big Data include: marketing intelligence, sales automation, strategizing, productivity improvement, and efficient management.

Enhancement of the workforce is one of the exciting and meaningful benefits of Big Data for the business sphere. Recently, human resource managers and analysts have been researching the implementation of Big Data as it relates to employees, and the following trends have emerged:

Employee Intelligence

For many decades, companies and organizations have tried various methods to gain knowledge about what their employees are really like. The productivity that workers can contribute to their employers is based on personal needs as they are balanced against the performance of their duties. With Big Data solutions, both personal needs and performance can be diluted into metrics for efficient analysis.

Modern workplace analytics originates from tracking employee records as well as metrics on their performance, interactions and collaboration. The idea is to focus on the right metrics to create a climate of positive engagement.

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Close the Loop on Supply Chain Risk: 5 Strategies to Move Product, Boost Sales and Automate Efficiency

Supply chain management is a critical function for any small to mid-sized business. Yet, too often companies rely on spreadsheets to manage supply chain activities — a risky prospect that’s labor-intensive and error-prone.

A better option is to bring these activities into your financial management or ERP system. Centralizing tasks such as order filling, inventory management and delivery tracking can positively impact sales, improve cash flow and keep you tax compliant.

Here are five ways that ERP supply chain management benefits your bottom line.

Right-sized Inventory

Getting inventory right can be tricky: too low, you risk losing customers; too high and you’re left holding the bag, so to speak.

Control Quality

Dealing with defective materials or products can be a drain on your business. Not only can it hurt sales, but it can also damage your reputation.

Optimize Shipping

Web sales have made fast, affordable shipping a must-do for all businesses. Keeping track of goods coming and going can become burdensome, not to mention the hassle of dealing with lost or late shipments.

Improve Cash Flow

Invoicing practices can greatly impact your cash flow. Moving from a manual process to automation allows you to process invoices faster and shorten the order-to-cash cycle.

Be Compliant

Navigating complex and ever-changing trade and tax rules can be daunting. Being part of a supply chain compounds that risk.

 

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The Next Revolution in Supply Chain Management

In the first revolution, the concept of supply chain, as opposed to logistics, was put forth. Constraint based optimization tools for the extended supply chain were developed to support the new philosophy. As this was going on, Lean and Six Sigma approaches to improving capabilities, not just at the factory level, but in other internal departments, as well as across the supplier and 3PL base, were gaining in strength.

It took a while, but it was recognized technology was not enough. The key process in SCM is the sales and operations planning (S&OP) process that balances supply with demand intelligently. S&OP itself is going through a second rev and we now talk about integrated business planning (IBP), a form of S&OP that is more closely aligned with finance. A related “revolution” that improves the demand half of S&OP is based on the concept of demand driven supply chains; this is the idea that it is important to not just create a forecast based on historical shipments, but having real visibility to demand at the point of sale to improve demand management.

In recent years, the topic of supply chain risk management has emerged and new processes and ideas have begun to be codified and turned into a distinct discipline. An emerging topic is supply chain sustainability; and indeed in many corporate social responsibility reports the topics of both supply chain risk management and sustainability are addressed.

Read more at The Next Revolution in Supply Chain Management

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