Originally published in Nov. issue of CPGMatters
According to Rex Clothier, Maine Pointe VP CPG, the closing of non-profitable distribution centers is a real risk for CPG companies to consider. Anyone facing these challenges can take steps to mitigate this growing risk. Read his article here.
- Work closely with incumbent distributors to fully understand the specific risks that exist in specific market regions. Operating a “close to the vest” approach increases the risk for all parties in the supply chain. Establishing open and transparent communications with transparent performance metrics and cost metrics is essential to navigate to the best solution for all participants.
- Perform detailed competitive arena assessments and confirm where the highest risk markets are. Distributors must be profitable to remain viable; industry participants must deliver value to consumers and must have a clear assessment of the value that distribution brings to the consumer. All parties have a vested interest in understanding the real costs and working together to optimize those costs.
- Focus on efficiency, performance, and value creation metrics when evaluating optimal flow of goods. Too often relationships and ease of doing business together outweigh the overall contribution to the end consumer. In the long run, consumers will choose where the strongest value is delivered.
- Put focus on efforts that can drive cost out of distributors cost structure with your distributors. Distributors can operate efficiently within supply chain networks as they can achieve consolidated performance across their customer networks. This consolidation effect is generally more efficient, but determining how to better manage the impact of your business within their network means even greater efficiency for both parties.
- Take advantage of technology. New advances in AS/RS (Automated Storage and Retrieval Systems) continues to take cost out of supply chain. Advanced Demand planning solutions provide more efficient management of inventories, operations, logistics and procurement across the end to end supply chain. Increased visibility and transparency allow more efficient management for all parties in the distribution network.