The consumer products industry has transformed considerably over the last three decades, and it continues to change dramatically. These changes affect planning processes, supply chain management, manufacturing and how consumer products manufacturers operate in general. Unless consumer products manufacturers embrace the trends associated with the transformation and change how they manage their operations, they compromise their ability to compete. There are several key areas that are impacted:
- The Marketplace
- Consumer Behavior
- Regulatory Issues
The marketplace is changing. Megastores, club stores and supercenters have transformed delivery and distribution. Convenience stores have expanded to sell more items. The vending industry has grown from simply candy and soda pop to offering all types of consumer products. The biggest impact is with internet connected devices which has turned any place that offers connectivity into a personal global shopping mall.
Product lifecycles are shrinking due to technological trends and social media. What was in style now could be passé in a week. Today’s consumer is a more educated and less patient buyer. Healthier and portable products both in the food and non-food sectors are trending. The demand for private label and store branded products are increasing as consumers are always looking for value. The connected buyer puts pressure on manufacturers in terms of product design, flexibility and delivery timeliness. The “I want it yesterday” mentality has never been more prevalent than today.
Product safety guideline amendments and new regulations introduced at a rapid rate. All aspects of a product are under regulatory scrutiny, from ingredients to finished products to the shipping containers and labels. Consumer and environmental safety impacts every area of consumer products.
These trends affect supply chains and business operations from top-to-bottom. Adapting to these changes is critical to success and many companies have found that unless their processes and systems are integrated, they will not be successful.
It All Starts with Synchronized Planning
Many consumer products companies still use traditional methods to plan their business. Spreadsheets, manual methods and tools that are not typically interconnected between business function. Each group in the organization has a specific set of goals and objectives. The process begins with a sales forecast disseminated through the company. This typically is a monthly process. This is where the joint collaboration ends and each group works in their specific area to meet their objectives. Demand and supply chains and the processes throughout are not synchronized and communications between departments are not fluid. This leads to lack of synchronicity and can have rippling effects throughout the business and supply chain. Many consumer products companies struggle with demand and supply chains synchronization, due to:
Misaligned Planning: Sales, Operations and Finance may make plans that only address their departmental needs, in silos, rather than the strategic requirements of the company.
Lack of Operational Visibility: Visibility works both ways – from manufacturing to supply chain and vice versa. Inventory, distribution and manufacturing not linked to supply chain processes stress margins.
Not meeting these many challenges may lead to generally weak business performance and unsatisfied customers. Unsynchronized plans impact every aspect of the business, from procurement through delivery, reducing profitability and competitiveness.
There is a new mindset that is enabling manufacturers to change their processes and business approach to better meet today’s market challenges. They are now exploring the use of integrated demand and supply chain planning solutions and processes through collaborative Sales and Operations Planning (S&OP). This mindset, integrates all areas of the business to operating with the same goal and on the same page. The silos are being broken down and through collaboration and integrated processes and systems the market challenges are being met and the company’s goals are being achieved. The results are improved customer service, streamlined operations, improved inventory accuracy, increased profitability and most importantly, the Effective Enterprise.
How Can Consumer Products Companies Compete as Supply Chains Grow in Complexity?
This white paper reviews how consumer products manufacturers can integrate their planning processes and increase profitability.