Board directors are asking CEOs detailed questions on what they are doing to support recovery, identify opportunities, and mitigate the risk associated with their supply chains.
View the article published in CPGmatters here.
The current global situation has laid bare the fragilities of global supply chains. With uncertainties around the economy, business environment, unemployment, and of course, the pandemic, it’s perhaps only natural that many in the CPG industry are asking themselves, “What’s the next step?”
What we do know is our current situation has underscored the need for a new long-term strategy. The vulnerability of extended supply chains, the risks associated with those supply chains, the dependencies of other countries and nations, and the long, thought-out JIT strategies, postponement strategies, and disintermediation strategies are all on the table for discussion, not just to survive the current situation, but to address what comes next.
Board directors are asking CEOs detailed questions on what they are doing to support recovery, identify opportunities, and mitigate the risk associated with their supply chains. They want to know how the organization plans to rapidly develop transparency, visibility, and data-driven demand planning to fulfill the new requirements of B2B, B2C and the needs of the actual buyer.
Not All Bad News
It is easy to take a negative view when every day we read stories about loss of revenue and major cost fluctuations, channel disruption, historic swings in volume, shortages and over-supply, often within the same product and channel. Yet there are also stories of growth where there wasn’t growth before.
The pandemic has certainly hit businesses hard, but the challenges may also come with opportunities if you know where to look. We have seen a dramatic and immediate shift in buying patterns that may be permanent. Those companies that are able to adapt to these new patterns may see some hidden opportunities to re-patriate manufacturing, get better acquainted with clients and customers, and get better control and accountability by going more consumer direct and business direct. This may be an opportune moment to expedite the new product development process, design new products and shrink flow paths to accelerate the design to fulfillment. During this time, it is more important than ever to take steps to gain full supply chain visibility and use data analytics to make productive adjustments on the fly.
Realign to Meet New Challenges
As companies move to create a more efficient and compact supply chain, there will be some disintermediation. If you are a middleman, your position may be at risk, Now is the time to define the value you bring to the consumer and understand how your value is appreciated.
In some cases, the Amazons and Alibabas of the world may become a formidable channel. For manufacturers and retailers, consumer direct and business direct will become 30-40 percent of your revenue and your business. You will no longer need all inventory in all locations as the fight for market share shifts from the brick-and-mortar store to the web and the driveway. New battle lines will be drawn over who owns the “shelf space” on a consumer’s front porch. Your company, whether B2B or B2C, will be doing more “eaches” (individual consumer units) than parcels and pallets. Your order sizes will be smaller and, most important, you will get used to hearing, “I’ll buy it tonight and expect it tomorrow.”
Retailers will have the opportunity to have showrooms with consolidated stock at central locations to be delivered to the store or home. Manufacturers will need to develop drop-shipping, last mile and density mapping capabilities concurrent with complete real-time visibility across the entire supply chain.
If you don’t add value, you will become obsolete. Are you questioning your distribution models and consolidators? Are there companies in your supply chain which hold inventory but do not provide value on behalf of the manufacturer, retailer, or customer?
The world is not falling apart. We simply need to stabilize, recover, and rebalance. The virus is the catastrophic event that has enabled us to live with less and seek more value. With ten years of change in ten weeks, we need to adapt to our environment and hold on to the changes. The urgency remains, but there’s still time to gain a competitive advantage.
What to Do Next?
- Prepare for the board to be asking those very detailed questions and challenging you about your plan going forward.
- Develop a detailed plan of action to adjust to the new environment and support direct-to-consumer, direct-to-business, and legacy.
- Reevaluate your organization’s understanding of the supply chain. Is it a strategic weapon or a cost of doing business?
- Create a robust data analytics strategy, process technology, and organization that continuously monitors and improves every aspect of the supply chain.
- Provide full-line visibility to your customers’ customers and your suppliers’ suppliers.
- Invest in this new model sooner rather than later, or your competitors will reap the benefits.
- It’s time to gain the advantage, in the new world of supply chain awareness with less risk, more EBITDA, cash and growth
- This is the shakeup you have been waiting for. It is the new opportunity to win the consumer war.
Burton (Burt) White is EVP CPG & Retail at Maine Pointe, a global supply chain and operations consultancy. Stephen Delano, PMP is a Market Specialist with Maine Pointe in the CPG and Retail markets.