Review & Outlook 2016 : Supply Chain Trends
Speed of change and the need for agility to be driven by analytics is a theme in this section, with an acknowledgement that the infusion of data and analytics will have a profound impact on supply chains throughout the industry. Visibility and reduced out-of-stocks at retail are goals for many.
Andrea Atwell
VP U.S. Supply Chain
L’Oral USA, Luxe Division
Big data has changed the game for CPG companies — the speed and quality of information about the consumer is at the fingertips of professionals across many functions. But with this comes an enormous challenge of filtering the relevant data, getting it into the hands of the right people, and aligning teams across an organization to make the best, most strategic decisions. It’s more than data — it’s how we use it.
The availability of and access to data and superior analytics we now have has driven the need to build a team of supply chain professionals that are big picture thinkers, are influencers and aligners. Exceptional communication skills are no longer a nice to have in traditionally technical and analytical supply chain roles, but a key driver of success and business and brand connection in the field of supply chain.
Creating a brand environment where teams are agile and reacting to marketplace changes based on the best data and analytics available takes an exceptionally talented, strategic team, who can think beyond their own silo. I believe the companies that do this best, with a strong focus on people, team, and talent development, will win!
Jake Barr
CEO
BlueWorld Supply Chain Consulting
“The Here We Go Again Hangover"
Just when you thought your wish for a stable new year might be granted, here comes the chaos again! 2016 will perhaps go down in history as the most trying year for supply chain professionals.
Economic conditions in the developed/developing world; political turmoil causing currency, labor and supply constraints; and a need to lock in lower energy costs will leave you looking for every dollar possible to offset these issues and support your business.
Let’s keep the trends and actions simple. 2016 will see a contraction in transport supply due to market softness. Consolidate suppliers and leverage the pricing game, while protecting service. Allocate the business to those partners who are really investing behind technology to simplify work.
Second, connect everything. Double down on investments to link and achieve visibility for everything that is moving (raw/pack/intermediate/ finished product). Focus on technology that supports predictive operations and analytics, allowing you to know in advance where the disruptions in your demand or supply flows are about to occur. The IoT is real, alive and offering help in both of these areas already.
This will be a year where more companies internalize the fact that the smart move is to lay a cloud-based integration layer over the top of those decade long ERP investments — instead of replacing them again. Be a “commercial champion” this year and listen to the advice. If you want a supply chain that can “rain money,” you need to bite the bullet here to unlock the money. Here’s to your success, or best wishes for a value packed size bottle of Advil.
Gary Barraco
Director of Global Product Marketing
Amber Road
The demand for instant results is seeping into every corner of our lives, and not just virtually. This culture of instant gratification is also impacting the way supply chain operates, or needs to operate to be top of the class.
The complexity of global trade is compounded by each participant’s unique role; and no two participants have identical needs. Global trade requires managing numerous combinations of functional requirements across a trading partner network, with each partner potentially using varied software. This network effect is aptly managed with technology that automates processes, provides real-time (or near) viability and collaboration capabilities to any partner in the supply chain at any time.
This level of connectivity brings with it the need for centralized data. Studies have shown that at times 50 plus data sources from a variety of systems, in multiple formats can feed a consolidated platform that provides cross-functional capabilities — and it isn’t getting easier. The scale, scope and depth of data supply chains are demanding is growing.
John Beckett
CTO and Co-Founder
Retail Velocity
Over several decades, retailers have relentlessly moved forward to increase sales while reducing inventories. Today, empty facings are the bane of retailing and any cushions in the supply chain are shoved back to consumer goods companies who struggle to forecast demand accurately, manage promotions profitably and replenish retailers effectively. Traditional methods of forecasting and replenishment that rely on shipments and sophisticated algorithms are limited in scope and have limited accuracy.
CG companies must extend their demand horizon from their shipping docks to POS at checkout and conversions online. They must also extend inventory management from their own warehouses through their channels of distribution. Traditional DSRs reporting customer-level analytics are being superseded by enterprise-level demand planning systems that provide real-time sales, market and inventory information that can be shared and aligned across manufacturing, marketing, sales, customer logistics and finance departments. The result is more accurate forecasts, faster responsiveness and more profitable operations.
Doug Bethea
VP of Consumer Goods Solutions
Datalliance
Increased availability of data is enabling new ways to drive down retail out-of-stocks. That’s important because, according to the latest FMI/GMA report, they remain at about 8 percent — and even more for highly promoted items. That represents a substantial revenue loss for CG companies already challenged with rising costs to serve the customer.
High quality store-level demand data and greater visibility are becoming more readily available from retailers. Leading CG companies are taking advantage of that data in conjunction with their VMI programs to improve their ability to ‘sense and respond’ to actual consumer demand. The result is increasingly synchronized supply chains. While forecasts are still very important for mid-term and long-term planning, the ability to effectively respond to daily demand is a far more valuable capability for near-term replenishment — and a far more potent weapon for reducing out-of-stocks.
Patrick Bower
Sr. Director, Supply Chain Planning
Combe Inc.
Marketing execution at the speed of thought
Pause — just for a moment.
Now consider the potential for opportunity contained within that lull. It is not too far off from being reality, you know. One of the emerging trends that spans the functional silos of sales, marketing, and supply chain is heightened responsiveness to changes in markets, consumer behavior, or even retailer dynamics. We are fast approaching marketing execution at the speed of thought.
Long gone are the days of waiting for a trend to emerge before taking action, or of wringing ones hands in an attempt to determine an optimal marketing solution, or of extended supply chain lead times. Today, leading consumer goods companies are responding more swiftly than ever to shifts in consumer consumption, leveraging technologies and techniques to exhibit a level of dynamism and agility rarely observed in the past. This includes the use of new and emerging software tools that offer frequent pulse-of-consumer activity and optimal suggestions for supporting the business along with aggressive S&OP gap-closing exercises and expedited supply chain execution.
The tactics used to “trend correct” soft point-of-sale consumption trends may vary from dropping an IRC [instantly redeemable coupon], to amping up social media broadcasts, to adding TPRs, or even changing the pulsing on media spend. Such volume-moving executional responses to rapidly changing dynamics are taking place at breakneck speed, and each of these activities can stress plant operations as well as distribution and transportation flows.
Supply chain agility is now a must-have requirement to compete in the consumer goods space. And the need for rapid-response marketing execution will require not only exceptional supply chain agility but also solid planning processes.
Karin Bursa
Executive Vice President
Logility
The volume of data generated by today’s global supply chains is growing at an exponential rate. CG companies must transform this data into actionable information. Visualization is important — remember a picture paints a thousand words and advanced analytics are much more than online reports. The right combination of visualization and analytics helps you prioritize supply chain engagement to focus on high-value opportunities, and understand how each plan, each scenario compares to your inventory investment, service and forecasting goals.
The increasing pressure on our supply chain teams to stay ahead of changing market conditions mandates they spend time on high-impact opportunities and leverage analytics-based planning solutions that can automate many routine decisions. With the IoT initiatives, data will continue to grow exponentially. Make sure your supply chain solution provides the ability to automate business rules, monitor the latest network needs and prioritize engagement areas for your valuable human resources in order to help evaluate multiple scenarios and make better-informed decisions.
Robert F. Byrne
CEO
Terra Technology
Data and analytics have brought some benefit to the CG industry, but the change is much less than it should be. Although customer teams routinely download retailer data and look for problems, the industry has largely failed to fully leverage the opportunity to fundamentally improve supply chain performance. The big financial potential lies in true supply chain synchronization and automated collaboration. Meaningful change will only come once companies go beyond ad-hoc spreadsheet analysis of specific retailers to adopt systematic analytics that encompass data from the retailers, manufacturer and eventually their suppliers for all items and locations. There are however some bright spots, with leaders using automated algorithms to minimize the bullwhip effect, improve demand prediction and cut unproductive stock while improving service. For example, one multinational CG manufacturer used automated algorithms to help cut 13 days of inventory over six years. With each day costing more than $100 million, this represents a significant financial advantage.
Jim Carroll
Futurist, Trends & Innovation Expert
For me, the question isn’t how it’s changing strategies — it’s the fact that if you don’t have deep data and analytics, you can’t properly manage your supply chain in an era of accelerating change. These are the trends that are impacting every CG company. Rapidly collapsing product lifecycles and an accelerated pace of product innovation, with an overall requirement for faster time to market. This is happening at a time of continual advances in the ideas and methodologies of rapid prototyping and development, partly in response to faster changing consumer preferences. Add to this the impact of the arrival of hyper connectivity with the Internet of Things, which will fundamentally provide for the redefinition of every single type of process and product — in the CG space, that means intelligent, connected packaging. Add to that the increasing emphasis on same day delivery (led by Amazon Prime), and you’ve got a lot of change going on. If you can’t properly understand it, you’ll definitely fall behind.
Lora Cecere
Founder
Supply Chain Insights
There are three major barriers for companies: executive understanding of supply chain, the ability to get to data, and alignment on the metrics that matter. These three barriers are tightly interwoven. The movement from functional excellence to end-to-end supply chain strategy requires companies to rethink many norms. In parallel, the evolution of new data forms and technologies shakes many paradigms. To win with data and best use analytics, consumer products companies need to question base assumptions:
1. Project Definition. What is a Project? Analytics projects are small and evolving. The companies that implement analytics technologies the best have small, scrappy teams of cross-functional resources that test and learn how to use the technology and then teach and enable core groups. This is very different than a project like Enterprise Resource Planning or Advanced Planning where there is a definitive ROI. Much of the work in analytics project is about testing and learning.
2. A Definitive ROI? While the financial team wants a definitive ROI, this pressure will stall your progress. The analogy that I would use is that if we had the burden of justifying all of the desktop computers and mobile phones, we would still be writing with pencils. In the same manner that companies embraced personal computers, they need to set aside funds to test and learn with analytics. Many clients that I work with are self-funding analytics based upon continuous improvement programs where they set-aside 15 percent to 20 percent of what they save.
3. Rethink Process Definition. In traditional process thinking, the team determines and defines an as is state and maps the processes to a to be state. This is not the case with the analytics projects. The projects start with the definition of data and the data strategy. The focus is then on business goals and the processes are defined from the data up using the technologies.
4. Embrace Data Variety. Supply chain leaders are hard-wired to think in rows and columns and linear optimization. As companies start to embrace data variety they will want to test and learn from unstructured text mining in sentiment analysis, cognitive learning and the building of rules-based ontologies, and streaming sensor data. The techniques to harness insights from transactional, streaming and time-phased data are different. The building of solutions using unstructured data — maps, images, weather data, GPS data, warranty/recall and quality data and social data — requires the adoption of non-relational databases and the investment in new technologies for data mining. This transition will take some time, but it is worth the trip.
5. Build a Diverse Team. The best teams are cross-functional. An analytics project should never be implemented by an IT team in isolation.
The world of analytics is exciting, and growing even more compelling. The brightest future lies ahead for those that learn about the new technology and question the basic norms of implementation.
Fabio Duque
Global Head Of Consumer
APL Logistics
CG companies have always been strategic about the collection of customer data. But today the emphasis is less on merely generating that data and more about figuring out the most meaningful ways to share and leverage it — at least among the true market leaders.
The supply chain has been a huge beneficiary of this change in thinking, because companies are beginning to understand that much of the information collected for marketing or manufacturing purposes is just as helpful for logistics — and perhaps even more so.
As companies have become more willing to share greater levels of detail with their logistics departments or 3PLs, it’s opened the door to considerably better logistics network planning, smarter transportation flows and better-informed inventory deployment decisions. This is the kind of strategic value supply chain professionals have been striving to deliver all along; but thanks to big data, we can now do it better, smarter and faster.
Alan Lipson
Global Retail & CPG Marketing Manager
SAS
The availability of more and diverse forms of data has never been greater than it is today. Lower computing and data storage costs have increased our ability to analyze this data bounty more quickly. The first — and perhaps best — benefit of this combination is that users throughout an enterprise now can gain access to a single source of truth that eliminates discussions about data accuracy. Using these diverse data sources helps create better forecasts based on shipment and sales data.
Combining more accurate forecasts with marketing program data helps make stronger real-time digital connections with consumers so they receive the right product at the right time in the right place at the right price. The expansion and importance of IoT data sources will continue. That’s a given. Where CPG companies can excel is by establishing a strong analytics foundation to capitalize on that data to stay ahead of the competition.
Amy Mayo
Customer Service Manager
Mondelez International
The availability of data for the CG industry has been game changing and created business transformations that can spur revenue growth and develop strong customer bonds. The possibilities created by this data analysis can spark innovation in business processes, and the insights can help shape business strategies. Companies are increasingly using data technology to drive their customer relationships. This has led to more accurate targeting of products and promotion execution and has proven to drive better business decisions which are objective versus subjective.
Mondelez International uses historical point-of-sale and promotional data, integrated with real-time data, to predict store demand which then maximizes sales and profitability. A Lean Six Sigma Process defining roles, responsibilities and timelines has been developed and implemented with the utilization of the data as the guide. Using this demand-driven strategy has improved service levels, minimized inventory levels and reduced out-of-stocks. As the business continues to grow and change, the data continues to help define the path on how the process should also evolve. Owning this process has greatly driven a stronger relationship with the customer. Due to the great success of this process, Mondelez International was awarded the CGT Dick Clark Supply Chain Award.
Mondelez International and its customers understand that they must be adaptable and nimble in this process – always testing and learning from the data. Being agile will only drive better business decisions which results in revenue growth. In today’s business world, the use of big data analytics is no longer just an experiment. It is a tool used to reach real results and deliver value — a competitive advantage that companies need to have if they want to win big!
Ransom S. Stafford
President & CEO
LumiData
Out-of-stocks are a serious problem. If a SKU isn’t there when a customer expects it to be, both retailer and supplier lose a potential sale and are at risk of damaging brand loyalty. That means a loss of future sales too. Supply chain operations line managers need a powerful business analytics solution to maintain a healthy on-shelf-availability (OSA) position with all retailers on a daily and weekly basis. BI users take POS, order and forecast data to evaluate the effectiveness of prior decisions, correct current product flow issues and forecast with greater accuracy to drive sales and improve efficient inventory utilization. Exceptional supply chain management is a coordinated, collaborative team effort between C-level and retail team sales, marketing, supply chain and production personnel, so to operate as a strategic team you need an exceptional demand data analytics solution — one that provides the same data at the same time in the same format to automate and fill any gaps in the supply chain process.
Dan Woo
Director, B2B and Supply Chain Technology
Nestle USA
The availability of data and having the means to access newer sources of data has helped to drive accountability in our industry. Visibility into what is happening at all points in the value chain drives accountability internally and externally with partners.
With this visibility, opportunities can be addressed faster and justified with facts. Real-time demand signals can enable the ability to flex and adjust execution plans to drive optimal sell-through. Areas of visibility not ‘traditionally’ covered can be crowd-sourced or employee-sourced with the extended team. Also the investments made to drive growth can be measured and assessed with much more granularity and timeliness to improve ROI and choices that are made in the future.
Keys to unlock the power of the data and analytics will reside with the companies who invest in the resources and build the capabilities to drive process changes needed to quickly leverage the insights. Smart companies can get the insights, but the winners will quickly leverage the insights to execute a nimble and effective response.
At Nestle USA, we are seeing that the combination of advanced analytics with our Nestl Continuous Excellence process, lean thinking the “Nestle way,” enables the ability to apply the insights to deliver results and help drive value creation.