As with other industries, the COVID-19 pandemic crippled consumer goods supply chains. Customers became unsettled because common products disappeared off shelves with no promise of a restocking date. From toilet paper, hair dye and meat to exercise equipment, the list of items impacted seemed never ending, and the uncertainty of accessibility drove shoppers to extreme behavior, including hoarding and robbery.
Consumer goods companies became rattled, realizing how fragile their supply chains can be and the dawning awareness that once they come out on the other side of COVID-19, they might not be prepared for the next crisis. In today’s supply chain, it’s not a matter of if another disruptive event will strike, it’s when.
There will also likely be lasting effects from the COVID-19 pandemic on supply chains, meaning that CG companies not only need to be prepared for the next disruption, but pivot now to respond to the crisis at hand.
However, there is a silver lining for the consumer goods industry if companies are willing to take action and consider the lessons learned from the pandemic. The message is clear: CG companies need to strengthen and protect their supply chains to deliver on the promise of product availability.
As COVID-19 has shown, there has never been a better time to upend processes to embark on a digital transformation journey. To strengthen supply chains, CG supply chain planners should look to implement the following strategies:
1. Look within the organization
Before diving in to develop a new supply chain process, planners should evaluate the current state. Similar to renovating a house, contractors need to look at the foundation and find the structural weaknesses that need strengthening before adding on.
Similarly, planners should practice internal process mapping to find gaps, bottlenecks and stress points, both across technology and people, that need to be addressed to then determine where improvements can be made.
2. Build a plan … backwards
One mistake companies make is implementing new technology, thinking it will be the silver-bullet solution. But by doing so, companies waste time and money since they need to first identify the business problem that needs to be solved. Planners should use the results from the process mapping exercise to design an end-to-end plan closing the gaps between the “as is” with the “to be” states.
It’s important to outline all business needs and objectives to internal stakeholders and then work backwards from the ideal “to be” and agree on the required (and often staggered) steps to get there. Supply chain leaders may think about enlisting the expertise of experienced professional services organizations to help with the updated supply chain design.
Once the supply chain has been designed, planners should create a realistic timeline to guide them over the course of an implementation. Undertaking a digital transformation process can take several months, if not multiple years, so it’s important to measure success in increments.
3. Invest in the necessary components
To build a resilient, responsive digital supply chain, business leaders will need to invest in the components necessary to support a growing, often unpredictable, consumer products business. Planning software alone isn’t the answer to effectively respond to disruptions. It will include pieces like hardware, IT security and people working together from a single platform that will enable planners to respond quickly and confidently to the next crisis.
4. Clean the data
Consumer products companies gather lots of data from different sources like the Internet of Things (IoT), sales performance, suppliers, distribution and social media. Even though companies have all this data, it doesn’t mean it’s useful, or even usable. With so much fluctuation in consumer demand, the right data becomes an asset to understanding the situation and making the right decision to improve business health.
For example, if reducing SKU complexity is a goal, planners should identify the fast and slow movers in the portfolio and use external variables to pinpoint which SKUs to eliminate with the least impact to customers and biggest impact to bottom line. This insight into the right data reduces the risk of planners making the wrong decisions.
5. Prepare for new markets
A recent Kinaxis-sponsored IDC study of 1,800 global supply chain professionals identified that for consumer products companies, the top priority for future supply chain capabilities is supporting new market entry. The study also found that more resilient companies do better at entering new markets, making an end-to-end, agile and collaborative supply chain more foundational to success than ever before.
By undertaking a detailed, strategic approach, consumer goods companies will be well positioned to quickly manage demand and supply requirements in new markets, run potential scenarios to best respond to minor disruptions across the network and build the foundation to withstand global events like hurricanes, pandemics or IT attacks.
From supplier disruption and production constraints to shifting customer demand, 2020 has challenged every aspect of consumer products supply chains. Companies with strong supply chain foundations were able to execute their contingency plans much faster and fare better.
For companies that weren’t prepared, and have not been forced to shutter operations, now is the time to prepare for the next crisis by taking the lessons learned from this experience to transform supply chain operations. After aligning the best tools, data and people, consumer products companies can thrive in the new normal of the CG supply chain.
Alison Crawford is senior manager, industry and solutions at Kinaxis.