How AI Is Unlocking Hidden Savings in Consumer Goods Supply Chains

As supply chains evolve and grow increasingly complex, related costs force consumer goods companies to make strategic decisions around their operations. Companies are re-evaluating their cost-to-serve models by using AI to identify savings opportunities and prioritize supply chain investments.In this episode of Expert Exchange, Liz Dominguez, senior editor of CGT, speaks with Tom Gregorchik, global vice president of CPG industry strategies at Blue Yonder, about how AI is unlocking hidden savings in consumer goods supply chains.While costs across the board continue to rise with labor and materials, Gregorchik said that consumer demand is changing just as dramatically as well, making it that much more complex to determine the best cost-to-serve model. As companies rethink their end-to-end strategies, they look to leverage the assets that they have today in terms of labor and machinery, transportation, and logistics. But as demand changes and the consumer changes, they're looking at manufacturing strategies that might actually go externally to a co-manufacturer, potentially optimizing the distribution side as well and evaluating whether it's best to serve that in the company for warehousing and transportation or modify that externally. It's about balancing that dynamic demand, whether things are accomplished internally or externally.One of the tools executives are leaning on is AI within automated scenario planning. Rather than have a single scenario, they are looking at end-to-end comparisons to really evaluate trade-offs. From a tactical standpoint, understanding what those scenarios are, but then from a strategic standpoint, also understanding those competing KPIs.As an example, Gregorchik referenced a company that manufactures potato chips and sodas and was carrying a lot of extra inventory to meet increased demand. They were spending an excessive amount of money in transportation to optimize the outbound. But they would have to stop production because they would run out of seasonings for the potato chips or materials for the packaging. So they invested in full end-to-end collaboration capabilities all the way down to their raw and impact suppliers. As a result, the company stopped having those shutdown issues and was able to achieve a 15% reduction of transportation spend while improving service levels by seven percentage points. The key, he said, is continuous improvement rather than just optimizing one area of the supply chain. Whatever is being promised to owners and shareholders, executives should make sure that the end-to-end is optimized from that standpoint. With AI, they can go through all the different combinations and permutations of scenarios within the guardrail thresholds of how they are running a business and understand what the new optimal solution is when something does change, at any point in the day. With hidden costs in the past, said Gregorchik, executives would just pick a strategy and go with it. Now, however, companies work to better understand how the costs and scenarios impact suppliers, SKUs, customers, etc. He is seeing a lot of consumer goods companies planning for not just volume anymore on the supply chain, but also for financials. It's much more of an integrated approach that works with the commercial, sales, finance and marketing teams.

How AI Is Unlocking Hidden Savings in Consumer Goods Supply Chains

Related Topics

Business Topic