By Stuart Wilkinson (pictured) , Industry Director – Consumer Products and Life Sciences, SAP, & Alina Yukhymenko (pictured) , Senior Industry Value Advisor, SAP
We’ve entered a third year in a row of supply chain disruption as organisations around the world are now forced to contend with the economic downturn that follows the macro-economic challenges of the past few years. Recent socio-economic factors such as Brexit, the pandemic and local conflicts have wreaked havoc across consumer-goods supply chains, causing shortages that disrupt an entire production network. 54% of UK businesses have reported that disruption to supplies is the biggest challenge they face, followed by access to labour and rising interest rates and costs for raw materials and goods.
As a result consumer behaviour has shifted. Economic uncertainty has caused heightened price sensitivity, leading to the adoption of new shopping habits such as increased deal-seeking, trading down to cheaper brands or supermarket-own labels, and increasing use of value retailers. And with prices remaining consistently high in the new year, consumer confidence took another hit last month, despite recovering slightly in December.
Having visibility across the supply chain is paramount for consumer-goods businesses to remain resilient during these turbulent times. This way disruption can be anticipated, and businesses can act accordingly, remaining agile to changing market dynamics. But in this environment of economic downturn, what actions do they need to take to actually achieve this?
Digitising the supply chain
Navigating supply chains that are constantly fluctuating requires access to insights and data to spot vulnerabilities and alter operations accordingly. In an economic crisis, disruption is more frequent, whether that’s delayed shipments, labour and inventory shortages, supply volatility or asset breakdowns, so digitising the sharing of live information is key. According to Gartner, the top two business drivers for implementing a digital supply chain strategy are to improve the customer experience (97%) and reduce costs (98%). This is because it gives consumer-goods companies the ability to anticipate and manage ongoing risks, ensuring they can deliver a consistent and reliable service to consumers – key to securing loyalty and driving long term competitiveness.
While there is no magic formula or one-size-fits-all approach to steering a digital supply chain transformation, there are three key principles which can ensure resiliency in the long term.
Ensure one view of your data
How can you decipher everything from early demand signals to third-party transportation issues across a complex supply chain? The key is combining data in one integrated view. Implementing software that enhances visibility across the entire chain allows consumer goods companies to have complete oversight of what’s going on, from raw materials suppliers to products being sold right to the consumer. When each of these different datapoints are brought together, businesses can then better innovate and optimise processes to reduce costs and improve outcomes for the customer.
For example, with insights into the sales data, consumer-goods companies can better assess demand and tailor forecasting in line with this. As such, they can react faster to current market trends and ensure a more accurate and profitable inventory balance. This both helps to reduce costs associated with unprocessed inventory, while also delivering what customers want right now.
Be ready to flex
Traditional consumer goods manufacturers usually supply individual markets from one location in order to optimise costs. However, this model proved inefficient during the pandemic as many couldn’t obtain the materials or products they needed. In today’s unstable environment, consumer goods brands need to be more flexible in order to meet fluctuated demand.
With supply chain software, consumer goods companies can improve their scope for flexibility, while mitigating risk. Many businesses currently lack a clear idea of what is going on in the lower tiers of their supply chain, such as raw materials providers, particularly when these are geographically dispersed or remote. Yet, it’s within these tiers that there is more potential for vulnerabilities to exist. Using supply chain analytics, consumer goods companies can process data from a wide range of sources that allow them to choose and verify the best suppliers and partners, helping them to avoid risk and ensure failures are contained at a local level, preventing them from spreading across the entire organisation.
Focus on building customer trust
Technology has a key role to play in helping companies achieve not only supply chain resilience but building trusted consumer relationships. At a time when consumers are increasingly insecure and reluctant to spend, consumer goods brands need to provide services that can be relied upon. Equally, with more and more consumers looking for special offers to manage ongoing costs, such as next day shipping and discounts, this requires the right insights across the business to be delivered on.
Implementing software that enhances visibility into, and connects, adjacent functions like sales, fulfilment and logistics will ensure businesses deliver on their promises to customers. By linking up the back end to front end of a business’ operations, businesses are able to access and share real time insights into availability of products and speed of shipping. This ensures that customers are provided with the most up-to-date information and that recommendations and services align with what’s happening across the business, helping to avoid disappointment caused by inaccurate stock availability or delayed deliveries.
Disruption isn’t going anywhere, that much is clear. It’s what consumer goods companies do now that will decide their success in the future. Building a digital supply chain strategy will be essential here, which starts with integrating data across the business, being flexible to fluctuating market forces and focusing on building consumer trust. Once consumer goods companies adopt these principles, they’ll be on the path to building resilient supply chains that will help them to navigate the current economic challenges and those in the future.