Transforming the Supply Chain into a Growth Driver
The supply chain is now far more than just a support function — gone are the days when it was simply about driving efficiencies or reducing direct costs to the business.
Today, leading consumer goods companies see their supply chains as a source of differentiation and growth. They understand that, by elevating the significance of the supply chain and making it a key part of business strategy, and then applying the latest intelligent technologies to transform it into a flexible network of capabilities, they can tap into new business opportunities.
Companies are finding that they can use innovative new IT — automation, artificial intelligence/ machine learning, cloud infrastructure, advanced analytics, and now blockchain — to redefine their linear value chains and virtually eliminate functional siloes, poor response times, and conflicting or inefficient fulfillment models.
As they do so, they’re creating intelligent supply chains that are agile, service-oriented, and even self-learning and self-healing. That, in turn, brings new abilities to continuously adapt to consumer trends — or even create new ones.
Take Coca-Cola’s Freestyle soda fountains. These innovative vending machines provide consumers with a huge range of customizable product options, all from a single source at the point of sale. What’s more, they’re managed and replenished in a completely automated way, leveraging the breadth of the company’s intelligent supply chain capabilities.
It’s not just a new and exciting consumer experience; it’s evidence of how a reimagined value chain can support new business revenues.
The risk of missed opportunity
However, research in a new report from Accenture "Driving Your Own Disruption") points out that some consumer goods companies may be missing out on these kinds of opportunities. While many (49%) clearly understand the intrinsic value in applying new IT to enhance supply chain functions, some haven’t mastered how to prioritize a growth-led agenda over a cost-led one, and investments therefore are often spread too thinly.
It seems many companies are hedging their bets, making smaller-scale investments across a wide range of supply chain technologies rather than focusing on the high-impact use cases. So, for example, there appears to be a lack of priority given to robotics and virtual reality technologies despite their potential to transform the efficiency of warehouse management.
Or consider big data analytics and cognitive computing. Applying these capabilities in areas like planning, fulfillment, sourcing and procurement can have a multiplier effect on a business — improving service levels and boosting growth as well as lowering costs. Yet research suggests companies are not focusing their investments in these areas.
The risk is that, by spreading investments too widely, a company becomes "jack of all trades but master of none." And that the inherent value in the supply chain remains trapped and out of reach.
Unlocking the value
To free that value, a company first needs to understand the challenge in unlocking it. Almost half of consumer goods companies told Accenture their principal difficulty is the absence of a business case for integrating new supply chain IT. Similar numbers said a lack of IT skills and compatibility issues with legacy systems were holding them back.
That suggests some obvious areas to target. By shifting the emphasis of IT business cases from cost-reduction to growth and differentiation, companies can more accurately measure the return on their investments. Additionally, by taking a hard look at existing skill sets, identifying capability gaps, and using the breadth of their ecosystems to acquire new talent or outsource intelligently, companies can create workforces with greater end-to-end functional knowledge of these critical new technologies.
But perhaps the most important step is to adopt the right mindset. And here, there are positive signs. While a large majority of consumer goods companies told Accenture they still view the supply chain as a support function, more than half also said they see it as a growth enabler with the potential to help improve customer service. In fact, almost half said the supply chain will become a competitive differentiator over the next two years.
New IT for a new era
Being smart about technology is a key part of making that happen. Companies need to leverage their supply chains to capture, sense, and act on consumer insights and external demand signals. They need to shorten their lead times while exploring new direct-to-consumer channels. They must move to become a modern CPG by gaining greater flexibility and responsiveness in their supply models and greater visibility across their partner ecosystems, including non-traditional logistics providers.
With investment strategies based on genuine business priorities, companies can focus their adoption of new IT in the high-impact areas that will really make a difference. By leveraging the best of their ecosystems and creating workforces fit for the future, they’ll position themselves to maximize the value of their supply chains – and deliver differentiated brand experiences that fuel new growth.
About the Author
John Zealley is senior managing director and global industry lead for consumer goods & services at Accenture.