Top supply chain challenges for consumer goods companies

The fast-moving, short life cycle characteristics of consumer goods products make for a very complex supply chain. No matter how complex the manufacturing process, the foremost supply chain challenge is developing a good prediction of customer demand, that is, knowing what customers are going to buy, how much they will buy, and where and when they will buy it. The second challenge, assuming the company first has a good demand plan, is how to optimally manufacture the right product at the right time, and how to optimally get the products to the proper distribution point to meet customer service requirementswhile always considering cost.

To support a demand-driven supply chain, consumer goods companies must employ performance-driven supply chain practices

Creating a demand-driven supply chain
Theres a new supply chain game in town. According to AMR Research, a demand-driven supply network is a system of technologies and processes that senses and responses to real-time demand signals across a network of customers, suppliers and employees.

To support a demand-driven supply chain, consumer goods companies must employ performance-driven supply chain practices, such as continuous business monitoring and proactive alert notification, which give them complete global visibility across their supply networks to adapt to changes in demand and adjust accordingly based on real-time insight into worldwide operations. Additionally, a reliable global demand plan provides the foundation for sales and operations planning (S&OP) which helps consumer goods companies better align daily operational activities with strategic corporate objectives; more effectively balance supply and demand; and make better-informed decisions that impact both the top and bottom lines.

supply chain responsiveness offers a competitive advantage

Choosing between ERP and best-of-breed supply chain solutions
Most consumer goods companies agree that supply chain responsiveness offers a competitive advantage. The key is time-to-benefit, and the questions a consumer goods manufacturer should ask both ERP and best-of-breed vendors are: Whats your average implementation time? Can the solution be easily integrated with my current ERP system? How many resources are needed to implement the system? And, once its up and running, how many people are required to maintain the solution? How well does the system satisfy my current business needs? How flexible is the system to adapt to my changing business needs over time? Do I have to upgrade the entire ERP system in order to take advantage of the latest innovations in supply chain technology?

Using supply chain technology to reduce operating expenses
Supply chain technology helps consumer goods companies reduce inventory investments while maintaining or improving customer service levels. Using supply chain applications, manufacturers can invest in inventory that has the potential to contribute greater profitability while meeting customer expectations. One way is by gaining insight into opportunities related to the tradeoffs of customer service and the corresponding inventory investment requirements. For example, companies can compare the cost of 98 per cent service levels to 97 per cent, or see the impact of leveraging time-phase inventory policies to deliver 99 per cent service levels during peak seasons versus 97 per cent during slower periods. Regardless of the final strategy, the optimal inventory plan is one that reduces inventory investments, avoids stock-outs, minimizes obsolete inventory and provides better visibility of procurement and product needs while improving customer service. Supply chain planning solutions analyse the tradeoffs of various inventory strategies across a wide spectrum of customers, products and distribution centres and consider market factors like seasonality, promotions and new product introductions.

Second, technology helps synchronize and balance the two opposing business objectives of achieving ultimate customer service at a low cost. Most businesses want to have a very high customer service level, but they want to do so at the lowest total cost possible. Supply chain technology can help companies assess tradeoffs to meet their customer's needs, but in a way that allows them to make a profit. Supply chain planning helps dramatically increase forecast accuracy, streamline product introductions, assess promotions and create plans attuned to the market, and supply chain execution provides transportation, warehousing and inventory management to ensure cost-effective order fulfilment and on-time deliveries.

 production optimization starts with a good demand forecast

The third area where supply chain technology can favourably impact operating expense is through production optimization. Companies must make sure that their manufacturing resources are producing the products most likely to sell at the time the consumer wants to buy. Again, production optimization starts with a good demand forecastcompanies must know what products to make, when, how much and in what sequences to manufacture, and where they need to go.

 Jeff Sillett is the Vice President of International Operations for Logility, a leading provider of collaborative, best-of-breed supply chain planning solutions.  He has responsibility for selling and supporting both the direct and indirect channels for Logility Voyager products. He is also President-Directeur General of American Software France. Jeff is married with two children, and when not helping companies better manage their supply chains, is an avid golfer.